Kraft Heinz will be looking to redeploy media “inefficiencies” in agency fees, production, research, product development, according to CEO Miguel Patricio in a earnings call transcript seen by Marketing. Additionally, he said the company can “do a much better job” on the investment in core brands.
Stressing the need to better balance spending and marketing as well as innovations versus core brand support, Patricio said the way to do so its not just about cutting costs, but also about becoming more efficient. This include focusing investments on core brands instead of diluting them among a lot of small ones.
“Do more innovation on big brands instead of launching too many new brands. Having innovation is more incremental and not dilutive. I think we did a lot of brand extensions but not enough of accretive innovation,” he said. On this point, he cited the communication success of Heinz Ketchup, which innovated to “premiumise” the brand image. The launch of organic versions with no added sugar has allowed the company to charge more and have higher margins.
While the company has spent US$300 million last year in areas such as people, go-to-market capabilities, marketing and innovation, Patricio said it is still too early for him to tell which investments will generate the returns the company expects. “My experience tells me that whenever there are a lot of big investments in such a short period of time it’s difficult to see all of them working at once. It’s therefore critical that we prioritise the ones that are working and that stick the strategic agenda that we’re currently developing,” he added.
Therefore, before going after new investments, he plans to look at the “possibility of inefficiencies” in the system so he can reorganise and redeploy those investments. One of the areas brought up during the earnings call was goal for the company to become more “consumer obsessed” so it can better predict their behaviour. This will require changes in the product development process to be faster and more customer-centric with new products, according to Patricio.
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Meanwhile, in terms of retail-channel development, Kraft Heinz has grown rapidly and has had strong share performance in eCommerce. However, Patricio said the company needs to take a step back and develop a longer-term outlook for the channel growth.
Patricio, who assumed the role as CEO last month, said he had established three immediate goals with the board: getting to get to know the business, consumers, customers and his colleagues; execute the company’s existing 2019 business plan; and conduct a comprehensive review to develop a new strategic agenda for the next three to five years.
He said: “It is critical that we get the organisation to concentrate on setting our strategic directions, and laying the foundation for our future, now. We need to ask ourselves the hard questions about our business, not speaking about the short-term or the next quarter.”