Dive Brief:
- The supply chain overhaul needed at Kraft Heinz will take years, said CEO Miguel Patricio Thursday on his third earnings call in the position. In the fourth quarter, the company achieved its first net reduction of U.S. supply chain costs in two years, though other detractors kept the savings from showing up in the final results.
- The official turnaround plan will consist of three stages and started with the new 2020 fiscal year, according to Patricio. Kraft Heinz continues a massive SKU-reduction effort, which Patricio detailed on his November earnings call. For the first quarter, however, onlookers shouldn't expect much improvement in the numbers just yet, said the CEO. Net sales and EBITDA were down year-over-year in Q4 2019 and executives expect similar trends in Q1.
- Patricio said he would delay the presentation of his master turnaround plan from March until Kraft Heinz's Investor Day conference in May, in part to give time for his new head of the U.S. market to add input.
Dive Insight:
Patricio said people have been his number one priority in his first six months as CEO. After all, individual behavior and incentives caused a major procurement debacle for the company last year that brought on an SEC investigation and caused the company to restate years of earnings.
People made the mess at Kraft Heinz, and the right people will clean it up.
Patricio recently hired two key executives: one to head the U.S. market and one to lead global operations. Since he came on in June, Patricio has been handling the U.S. market himself. Effective Feb. 3, he brought in Carlos Abrams-Rivera to take over as U.S. Zone President.
"The U.S. represents the majority of our company’s overall business, so this is an enormously important role," said Patricio in a statement announcing the appointment. He added that Abrams-Rivera has a track record of bringing brands back to life.
Abrams-Rivera most recently spent four and a half years at Campbell — leaving with the title of Executive Vice President of Campbell Snacks. Before that he held similar roles at Mondelez and Kraft Foods.
New Head of Global Operations Flavio Torres came to Kraft Heinz in January after consulting for the company for six months. Before that, he worked for Anheuser-Busch InBev where he served in several positions managing global operations alongside Patricio in his time as CMO of the beverage giant.
Patricio said Torres' strength is in generating consistent improvement in the everyday work of teams he manages.
With his top leadership in place, Patricio said he also has a plan for the lower tiers of the organization. (The company eventually placed the blame for bad procurement practices on mid-level management and low-level staff.)
Turnover below the top tiers is a major problem for Kraft Heinz, said the CEO. Thus he has identified 60 "critical roles" throughout the company for which he will personally focus on retaining top talent.
"These 60 people, I have to know them by heart and by soul, and of course, be sure that they have the right incentives to continue in the company," he said.
