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Yahoo Finance Presents: Kraft Heinz CEO Miguel Patricio

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On this episode of Yahoo Finance Presents Miguel Patricio, CEO of Kraft Heinz, joins Brian Sozzi to discuss the impact of coronavirus on the food industry and how Kraft Heinz is keeping grocery stores stocked.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Miguel Patricio, the CEO of Kraft Heinz. Thanks for taking a few minutes for Yahoo Finance. We appreciate it.

MIGUEL PATRICIO: Well, it's my pleasure to be with you.

BRIAN SOZZI: Kraft Heinz came out with a business update. Walk us through some of the trends you're seeing in your business. We've talked to a lot of players in big food. They're seeing a lot of stock up because people are home because of the coronavirus. What are you seeing in your business?

MIGUEL PATRICIO: Well, there were two moments. The first moment, people were just stocking up at home. And they were buying non-perishable goods, things like Kraft Mac & Cheese, or fruit juices.

But at a certain moment, when the schools closed, and offices closed, so everybody's at home, now there's far more people having a regular breakfast. Then there is a lunch. There's a lunch, and there's a dinner that people have from home.

The place to buy these goods is grocery. So sales in grocery are booming. They're very high. On the other hand, as you can imagine, on the food service part, that-- where we serve restaurants is down, right? Overall, I think food is growing.

BRIAN SOZZI: Within your brands, Oscar Meyer, Kraft Mac & Cheese, what brands are people graving to-- gravitating to. As to your point, they're cooking from home, spending a lot more time with their families.

MIGUEL PATRICIO: Yes, people are cooking from home. And I tell you, sales of almost all brands, not to say all brands, are up. The champs-- the champions, for sure, is Kraft Mac & Cheese, Oscar Meyer, Classico pasta sauce, fruit juices, Philadelphia Cream Cheese.

So a lot of products, very popular-- that in moments like these, people are looking for comfort, for familiarity. And so these are all brands that have been with consumers for a long time, and brands that they love.

BRIAN SOZZI: What does this say about the state of big food? It feels as though the past year or two, all I've heard in big food is that organic, health, and wellness. And I get those trends. But in this type of environment, we've seen not just with Kraft Heinz, a lot of consumers go back to brands they remember as a kid.

MIGUEL PATRICIO: You're absolutely right. People are looking for comfort. Nostalgia plays a big, big role, and brands that they can rely on. It's a moment to buy also brands that please the whole family. So brands like Heinz, brands like Kraft, like Oscar Meyer, like Philadelphia, like Capri Sun, like Planters-- old brands that are very familiar to consumers. And so that's why sales are up.

BRIAN SOZZI: Miguel, there are a lot of people across the country really struggling. They have been laid off from their job. They're now even more paycheck-to-paycheck. A lot of concern out there in the economy.

Have you seen trade down in the food aisle? Do you see consumers-- yes, reaching for big brands that they know or trust, but also maybe navigating towards private label goods?

MIGUEL PATRICIO: I don't have any data with me showing that there was an explosion or a burst in private label. I don't think that the market share has changed dramatically. I think that the industry overall has grown.

BRIAN SOZZI: Are you having any--

MIGUEL PATRICIO: But--

BRIAN SOZZI: I was just going to say, are you having any difficulty keeping things like Mac & Cheese in stock at this point? I'm in these supermarkets a good bit right now, buying stuff for myself. And there are a lot of out of stocks out there at the moment.

MIGUEL PATRICIO: Yeah, there are a lot of out of stocks-- not a lot of out of stocks, but there are out of stocks. But keep in mind that the problem is not necessarily the manufacturing part. You first have to manufacture, then you have to send this product to distribution centers. And from the distribution centers, bring them to grocery.

So right now, there's, of course, far more trucks delivering product to grocery. So the distribution centers are full, and supermarkets with these trucks arriving as well. So we are all working very hard-- grocery, distribution, and manufacturers-- to keep the shelves, to avoid them to be empty.

BRIAN SOZZI: Now you have I believe 40 manufacturing plants in the United States. What's the status on those? I think a lot of folks in the food industry got a wake-up call earlier this week, with Tyson closing some of its plants-- I believe some of its chicken plants. What's the status of your plants?

MIGUEL PATRICIO: No, we have all our plants operating at this moment. Actually, not only in the United States, but in the world. We have 80 plants around the world. And they are all operating-- the food service ones, of course, with less production.

But the vast majority in US working three shifts. We have very tough procedures on sanitation and hygiene, procedures on social distancing, checking temperature of our employees. And at any sign of people feeling not very comfortable, we send them home.

And we've been working on these. So I think that so far, things are OK. A tough situation, tough environment, but they're OK.

I want to tell you that I truly believe that our people are true heroes. They understand that and have a very important duty, a big responsibility. And to feed America, they have to keep working, and work very hard.

People are very proud. The morale is very high, because they understand-- we understand that we have a role in society that is a very important one at this moment.

BRIAN SOZZI: Do you anticipate having to close any facilities?

MIGUEL PATRICIO: No, at this moment, I'm not anticipating to close any of our plants. We had in China-- at the moment, we had plants closed. But they are all operating normally, even in China today.

BRIAN SOZZI: You made a very important point on the last earnings call. I believe it was in mid-February, that Kraft Heinz had gotten to a culture of cutting-- cost cutting. Company is in turnaround mode. Now that things have taken a hit, just from an economic standpoint, how do you balance that?

Do you go back to cutting costs? Or are you still moving forward with marketing increases of 30%, and investing more in some of your top brands?

MIGUEL PATRICIO: It is not our intention to cut any media, any investment in our brands. We have to adapt the message eventually. But it's not our intention to cut the budgets for media this year, not at all.

BRIAN SOZZI: And where do you think you are at in your turnaround? In the press release you came out with, updating your business, you said later this year, you'll have an investor day-- postponing it given the state of the coronavirus. But what should investors expect from that update? Where are some of your big bets going to be?

MIGUEL PATRICIO: Well, the only reason why we postponed that was for obvious reasons, what's going on now. It's impossible to bring people together for a presentation or for a discussion. And we thought that we would lose a lot-- I mean, the analysts, the investors if we would do it just digitally. So we postponed. We are not canceling at all, and just for a couple of months, until we all feel safer to be together.

We want to present our choices and bets, and how we are going to grow the company for the long term. I think we are more proud than ever to be the food-- the food business. We are having a consumption of our products that is unbelievable. Penetration of our core brands are growing in households.

I'm expecting that after this crisis, we'll benefit from that as well. We are bringing back our products and our brands to households of consumers that for some reason had not consumed them for a while. And now they are delighted with our brands again.

BRIAN SOZZI: Awesome. You're new CEO of Kraft Heinz. You took over officially on July 1. What has it been like for you? Because in addition to you, you have also brought in a pretty-- a whole new management team. What is it like as a new CEO managing-- getting their sea legs under them, their CEO sea legs, managing through a situation like this?

MIGUEL PATRICIO: Well, it's been a privilege. I think that being a company like Kraft Heinz with the brands that we have, with the reach that we have-- we are present in 97% before this crisis, in 97% of the households in America. I guess right now, we are in 99%, and with very meaningful brands.

And we are one of the key food companies in the country. The company needs, of course, a turn around. And that is a privilege to be leading the company in that moment.

I think we have a very good team. We brought some people from outside. But the vast majority are people from the company. But in all levels, there is a lot of talent, a lot of passion, a lot of dedication.

Like in a moment like this, the stories that we are hearing from our factories, from our distribution centers about the pride and the duty that our people have, I think in a way, we are-- we are finding our purpose, or reconquering our purpose, which is to feed America, to feed the world.

BRIAN SOZZI: Amidst all this, have you had a chance to catch up with Warren Buffett? Berkshire Hathaway still owns 26%. A lot of people I talk to in the Street that he is-- he has maintained that position as a show of confidence in you.

Have you talked to him? And if so, what type of advice is he giving you, just managing through the situation?

MIGUEL PATRICIO: Warren is not a board member anymore. I've been talking to his team that represents him at our board. Everything that they've shown is confidence. So they've shown a lot of confidence, and belief that we'll make this business a much better business.

BRIAN SOZZI: All right, let's leave it there. Miguel Patricio, CEO of Kraft Heinz. Thanks for taking a few minutes. I'll say this-- through the years, I've eaten a lot, a lot of your products.

MIGUEL PATRICIO: Well, thank you very much.