US sauces and soup major Kraft Heinz remains in negative territory as far as volumes are concerned as cash-strapped consumers look for cheaper options.

The company has also been hit by a “softening” in the foodservice channel in North America.

The Heinz ketchup brand owner narrowly missed Wall Street estimates for its first-quarter sales with net sales increasing by 1.2% year-on-year to $6.41bn, slightly below analysts’ average estimates of $6.43bn.

Volumes fell by 3.2 percentage points in the three months ended 30 March, though this was an improvement on the 4.4 percentage point decline seen in the fourth quarter of 2023. 

In February, Kraft Heinz said it was anticipating a return to “historical activity” volume levels in the latter half of 2024.

Speaking to analysts yesterday (2 May), CEO Carlos Abrams-Rivera reiterated this stance but cautioned more generally “like many companies we continue to navigate through short-term volatility - pressured consumer, persistent inflation, headwinds from SNAP [Supplemental Nutrition Assistance Programme], industry softness in away from home and rising supply chain risks are some of the common themes the industry is currently facing”.

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The US foodservice channel has proved a particular challenge to Kraft Heinz as cost-conscious consumers are eating out less with Abrams-Rivera admitting “these results were impacted by softening markets in the US, especially for restaurants”.

But he added: “Despite the challenges we’re seeing in the restaurant industry, we continue to outpace the industry and capture share in US away from home.”

On the sensitive issue of pricing actions and the impact that has on consumer choices, CFO Andre Maciel said: “We continue our disciplined approach to both pricing and promotions. We have already implemented the majority of price planned for 2024 in North America and international developed markets.

“Pricing will still be needed in emerging markets to offset inflation, particularly in hyperinflationary countries. We remain surgical in our pricing approach, targeting specific parts of the portfolio where commodities have increased recently, such as dairy, sweeteners, and coffee.”

Prices rose 2.7 percentage points across Kraft Heinz's portfolio in Q1.

Kraft Heinz reported first-quarter net income was down 3.9% year-on year at $804m, while adjusted operating income was up 1.7% at $1.26bn.

Looking ahead, the company, which has recently launched film tie-on limited edition products Heinz ‘Barbiecue’ Sauce and Heinz ‘The Godfather’ Pasta Sauce, has reiterated guidance for 2024, expecting to see organic net sales growth of 0% to 2% and adjusted operating income growth of 2% to 4%.

Robert Moskow, an analyst with TD Cowen, said: “The year still looks okay, with the path toward 2%-3% growth by Q4 a bit more complicated, especially if the low-income consumer weakens further.”