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Kraft-Heinz posts huge loss

27/02/2019 - François-Xavier Branthôme - Read in French
Consumers shy away from Kraft Heinz and sink company results

Ketchup, salted snacks, mac & cheese... constantly increasing ranges of ultra-processed products that are known to be "bad for health" are being snubbed by consumers, particularly in the United States, and companies that make these products are paying the price.

US food giant Kraft Heinz, famous for its ketchup and its salted snack biscuits, has revealed massive depreciation that has sent its accounts plunging into the red as fourth term results are published, while revealing that an inquiry from the SEC (Securities and Exchanges Commission) – the US markets watchdog – has been taking an interest in the company's trade practices and its accounts.
This information has dragged down its stock value by 27.46% on Wall Street, to USD 34.85, which is its lowest level since the merger between Kraft Foods and Heinz mid-2015. It is the groups worst stock market performance in almost four years. 

The American group published its quarterly results on February 21, indicating that it had recorded an impairment charge of USD 15.4 billion for two of its flagship brands, Kraft and Oscar Mayer processed meats. 

This depreciation reflects a change in the tastes of consumers, who are increasingly concerned about health issues and are frequently turning to fresh products instead of processed ones. 

Kraft has built its reputation on products like ready-to-eat mac & cheese and cheddar cheese sauces and dips, while Oscar Mayer is known for its cooked meats and hotdogs. The group was born out of the merger of Heinz and Kraft Foods and it includes controlling shareholders like US billionaire Warren Buffet and Swiss-Brazilian Jorge Paulo Lemann (head of the 3G investment fund). 

In a corporate attempt to respond to the increasing environmental concerns of consumers, Kraft Heinz had announced last year that it expects to make all its packaging recyclable and reusable by 2025. Today, the cost-reduction strategy by the 3G shareholder is being singled out.

This massive depreciation has resulted in losses of USD 12.6 billion, dropping quarterly profits well below the levels predicted by analysts. As for turnover, it has recorded a weak progression of 0.7%, to USD 6.9 billion, for the last three months of 2018. 

"Our profitability has turned out to be lower than we had forecast, due to the unexpected inflation of certain costs, combined with lower savings than anticipated," stated the group's CEO, Bernardo Hees, in a press release about results.


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