Just a few months ago, the food giant Kraft Heinz had a plan to boost sales: It would split into two separate companies.
On Wednesday, executives at Kraft Heinz unveiled a new plan to boost sales: The company would remain a single entity, for now.
The chief executive, Steve Cahillane, who joined Kraft Heinz in early January to guide the company through the split, said the business needed to be put on firmer ground first.
He told Wall Street analysts and investors on an earnings call early Wednesday that the split was postponed because it wanted to focus on “returning the company to growth and not be distracted” by the work required to break it up.
He said there were a number of brands that, with a little investment, could see a growth in sales. In an effort to propel that growth, Mr. Cahillane said the company would spend $600 million on several moves, such as offering price promotions and adding more sales and marketing staff.
For consumers, the strategy will likely mean a reduction in prices for some Kraft Heinz products. Mr. Cahillane said the company would look for ways to bring prices down on some of its products to lure consumers back, echoing plans announced last week by executives at PepsiCo to cut prices on some of its snacks.
Mr. Cahillane said that over the last few years, the industry, responding to commodity inflation, “busted through four or five levels of price points in a very accelerated fashion.” He added: “The consumer was left very disappointed in that, and that’s been very well understood and obvious.”
He said that in 2027, Kraft Heinz would revisit the proposal to split the company.
Still, Mr. Cahillane faces an uphill battle. The company warned that sales would likely fall again this year by as much as 3.5 percent, noting, among other challenges, cuts to the federal food stamp program. Purchases from customers using food stamps make up about 13 percent of its business.
Kraft Heinz’s stock was flat at $24.93 in midday trading.
Like the entire packaged food industry, Kraft Heinz is facing extreme pressure on multiple fronts.
The rising use of weight-loss drugs, attacks on highly processed foods by federal and state regulators, cuts in food-stamp programs, the expansion of store brands, and relentless price increases in recent years have resulted in falling demand for its foods, beverages and snacks.
Kraft Heinz, with $25 billion in revenue, has been struggling for years.
The company came together in 2015 in a merger orchestrated by the Brazilian investment firm 3G Capital and Warren Buffett’s Berkshire Hathaway. But aggressive cost cutting helped cause many of the company’s offerings to fade just as grocery stores were expanding their own brands.
“We know the history of Kraft Heinz over the last 10 years,” Mr. Cahillane said on the call. “So I came in with the expectation that I would find under investment. And indeed, I did find under investments, but I also found a lot of opportunities.”
Kraft Heinz said fourth-quarter sales fell 3.4 percent to $6.3 billion with lower volumes, a measure of demand, driven by declines in coffee, cold cuts, bacon and Ore-Ida frozen potatoes.
At the same time, profits were squeezed by a combination of inflationary pressures in some commodities, manufacturing costs and higher advertising expenses. Adjusted operating income fell nearly 16 percent in the quarter, to $1.2 billion.
When Mr. Cahillane was hired late last year, he was supposed to guide Kraft Heinz through a split already approved by its board of directors. He would then have become the chief executive of a newly spun out entity called Global Taste Innovation, which would have included the faster-growing brands within Kraft Heinz’s portfolio, including Heinz ketchup and Kraft Mac & Cheese. The remaining company would have held slower-growing brands like Oscar Mayer, Kraft Singles and Lunchables.
The plan was not universally embraced by analysts or investors, many of whom worried that the costs would outweigh any financial benefits, and that neither side had a clear path to grow market share or sales.
Mr. Cahillane said that in the few short weeks he has been at Kraft Heinz, he found opportunities for the company to increase sales and recapture market share in certain categories.
“When I was in discussions with the board of directors to come here, I came with eyes wide open,” Mr. Cahillane said. “What I’ve since learned is how much opportunity there is to fix the business in the short term and to turn the business around in a more positive trajectory.”
Julie Creswell is a business reporter covering the food industry for The Times, writing about all aspects of food, including farming, food inflation, supply-chain disruptions and climate change.
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