By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
KHC is showing early signs of recovery with improved consumption and moderating market share losses, but the sustainability of these gains and the ability to protect margins in 2027 are key concerns.
Risk: The ability to maintain margin expansion in 2027 despite inflation re-acceleration and potential retailer pressure.
Opportunity: The potential for marketing spend to drive lasting share gains and convert consumption negative-to-flat.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
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Friday, Aug. 7, 2026 at 9:00 a.m. ET
Operator: Greetings, and welcome to the Kraft Heinz Company Q2 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne-Marie Megela. Thank you. You may begin.
Anne-Marie Megela: Thank you, and thank you all for joining us today. Welcome to the Q&A session for our second quarter 2026 business update. During today's call, we may make forward-looking statements regarding our expectations for the future. These statements are based on how we see things today, and actual results may differ materially due to risks and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SEC filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures.
Please refer to today's earnings release and the non-GAAP information available on our website for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Joining me today to answer your questions is our Chief Executive Officer, Steve Cahillane, and our Chief Financial Officer, Andre Maciel. Operator, please open the call for the first question.
Operator: [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays.
Andrew Lazar: It's encouraging to see some of the incremental investments starting to pay off. I know much can still change by the time we get to 2027. In the prepared remarks, you mentioned expected inflation next year in a 4% to 5% range and that Kraft will try and offset as much as possible through incremental productivity. I know you had mentioned previously that '26 would also be the margin trough year. So I'm trying to get a sense of whether we should read that inflation commentary for next year, maybe is implying that perhaps this year won't be the margin trough.
And I guess some of the incremental investment now planned for next -- for the second half of this year will also have to [ lap ] in the first half of next year, too. So I'm just trying to get a sense of how we should sort of read the commentary about next year in the prepared remarks?
Steven Cahillane: Yes, Andrew, this is Steve. Thanks for the question. I think what we were trying to get across in those comments was that despite the macroeconomic uncertainty, despite all the challenges that we're facing, that the inflation outlook for next year is not anything that we're fearful of. In fact, we can absolutely manage it. But as always, our first line of defense is productivity. If we could cover all of the inflation with productivity, we would do that. But we are looking to maintain and strengthen our margins over time. So that's the way we're looking at it. It's a manageable year next year despite all of that. We like the way we've set ourselves up.
It's more than halfway through the year with this incremental investment coming in. We like the setup. We like the momentum, and we like the way we're setting ourselves up for 2027, including on the COGS line.
Operator: Our next question comes from the line of Peter Galbo with Bank of America.
Peter Galbo: I wanted to ask a little bit about just the consumption rates. I know there's a bit of noise with the inventory pull forward in Q2 that's also kind of disrupting Q3. But I think if I back all that out, your consumption was something like down 2% in the second quarter. I think the 3Q guidance implies it improves to something like down 1% in 3Q. So I just want to make sure I understand that cadence correctly. And then maybe just as a follow-up, like what that says about how you feel about the exit rate on the year from consumption? So are we going from this down 2% to down 1% to something improved in Q4?
I know there's comparables to think about. So there's a lot in there, but maybe you can just speak to the consumption more broadly and the cadence over the balance of the year.
Steven Cahillane: Yes. Thanks for the question, Pete. I'll start and Andre can certainly fill in. But you're reading it right. We had obviously first quarter that was flattered by Easter, second quarter that reversed. We had snowstorms that we tried to adjust for in the first quarter as well. But by and large, the consumption rate is improving. And the amount of our business that is maintaining or holding share is also improving. And we're seeing real green shoots in part of our Taste Elevation portfolio, certainly in Capri Sun, even in Mac & Cheese in terms of consumption rates.
And so we hope to exit the year with the best consumption rates in the fourth quarter and enter 2027 with real momentum. Now it's too early to give guidance, obviously, and talk about 2027, but you're reading the consumption puts and takes exactly right. And the momentum is growing. Nobody is doing a victory lap that we're declining less than we anticipated, but it is moving in the right direction, and that's what gives us the confidence to invest even more to double down on improving consumption and improve on our share performance.
Andre Maciel: Yes. I think just to complement, Peter, I think directionally, you are right in Q2, with about 2.5% decline on the consumption. As we are ramping up -- starting to ramp up investments at the end of Q2 and now we're going to be a lot more intense in the second half. We do expect a gradual step-up. I don't want to set up an expectation about the specific sellout we're going to be in Q3 and Q4, but we should expect an improvement in Q3 and then a further sequential improvement in Q4. July, just to put in perspective, we were about minus 1%.
So there is already an improvement that we observed in July and the market share, even more important. We were in the first half, we lost 30 bps, which is, in a way, is good because we go back to the historical levels. Remember that in 2025, at some point, we're losing 90 bps of market share at the beginning of the year. So it's a very significant improvement. Look at the most recent weeks, we are now 20 bps, even a little bit better. So it's good to see that things are moving in the right direction.
Operator: Our next question comes from the line of Steve Powers with Deutsche Bank.
Stephen Robert Powers: Great. Actually, I want to kind of follow up on that and just get a better sense of how you're thinking about the market share progression? Because as you say, Andre, down 30 bps in the first half, certainly improved versus where we were in '25. But if I compare kind of where you were coming out of the first quarter, it looks like there wasn't a whole lot of progress made in the second quarter. And certainly, percentage of WIN BIG gaining or holding share went down, especially versus the March exit rates that you shared coming out of 1Q. So just maybe a little bit more perspective on how you're seeing progression.
And then as we look to the back half, if there are specific pockets of the business where you expect to see the most traction that we should look for as specific proof points, that would be helpful to be able to highlight.
Andre Maciel: Yes. And you are correct. The share trend Q2 and Q1 is similar. And if you remember the last earnings call, we already anticipated that. We said that we do not expect in part because, as we said, we built into the year 100 bps headwind from SNAP and part of that would be a share pressure. So in a way, it's good that we were able to offset that share pressure coming out of SNAP because we are seeing the SNAP headwinds, and we were able to protect the share as we anticipated.
Now as the investments ramp up and have all the innovations that we put in market getting traction, you saw in prepared remarks, I think there is very encouraging early signs coming out of Capri Sun Hydrate, out of the PowerMac & Cheese, out of Ore-Ida Shapes. So there's good momentum there. And I think that's also contributing for the share improvement we are seeing. So you should expect Mac & Cheese to continue to improve. We should expect Taste Elevation in general to continue to improve from where we are right now. We should expect momentum on the desserts business.
We should expect cold cuts to start to improve the trends given now that we're going to lap the decline that started in July last year. So all those things would be signs of progress.
Steven Cahillane: And if I just build on that, and Andre mentioned this, if you look at the last 4 weeks, we are seeing proof of that. So we're seeing that. And only 1/3 of our incremental first $600 million has been spent. So we still have a lot in market to go, including the additional $100 million that we announced this morning.
Operator: Our next question comes from the line of Scott Marks with Jefferies.
Scott Marks: I wanted to just dive in a little bit on the meats and meals side of the business. That's one area where you specifically called out plenty of work to do, talked about the targeted actions. Just wondering if you can kind of help us understand how you're approaching those actions and what we can expect in terms of timing for the improvements beyond just the lapping dynamic that you mentioned.
Steven Cahillane: Yes. So I'll start, and again, Andre can build on it. One of the biggest issues that we've had are with our Oscar Mayer brand and specifically in Deli Fresh. We have new packaging, which is almost now completely in the market, and we're seeing better performance based on that. And some of that has to do with lapping the big declines that we saw. So we know we have work to do clearly on the Oscar Mayer front, but the new packaging is in place and early signs are encouraging. And we want to plug that leaky bucket for sure. On bacon and hotdogs, better performances, better -- much better than Deli Fresh.
So it's really isolated around Deli Fresh. Lunchables, we've also had some innovations coming in the market, Lunchables Snackables. We made some product improvements in Lunchables as well, which is showing early encouraging signs as well. And you mentioned meals. So Mac & Cheese, obviously, we already mentioned, is showing improved consumption -- significant improved consumption. And PowerMac is -- continues to be off to a good start. I think we mentioned on the last call, terrific distribution, 35,000 stores out there with PowerMac and its consumption is in the first quartile of innovation. So feeling very good about that. And the early read is it is very, very incremental to us and to the category.
So retailers have been quite pleased with that. So all in, work to do, but progress being made.
Operator: Our next question comes from the line of Michael Lavery with Piper Sandler.
Michael Lavery: Just was wondering if you could help us understand a little bit of what's working and between some of the product investments, the price investments, the marketing, what are you seeing the most effective that's running ahead of your expectations? How much can you transfer it across brands and categories? And how does it inform how you deploy the incremental $100 million?
Steven Cahillane: Yes, I see it's working virtually everywhere we're putting it. And so condiments is probably the first area where we've seen really marked improvement. Heinz is back to growth as it should be, strong growth -- strong consumption growth, which is terrific. So across the board in the U.S., we're seeing better performance. We haven't even mentioned though, emerging markets and what's happening there. Emerging markets had a terrific quarter. Heinz is up 12% in the quarter in emerging markets, driven by distribution and consumption. And so if you look at the totality of our portfolio, we've said the investment is largely in the U.S. to turn around the U.S. business. We're seeing early green shoots on that.
But the rest of the portfolio is performing well in emerging markets, as I already mentioned, and global Away From Home is back to growth as well. That's a very strategic channel for us, one that we were not performing well in last year, and we're performing well now. And so we're investing there in product, in customer and in distribution, and it's paying off.
Andre Maciel: And just a couple of quick complements. Heinz is really having a very strong year. Worldwide, we grew 3% year-to-date and with the expectation to accelerate from where we are right now. Condiments in the U.S., which last year was flat, and that's one of the places where we started the step-up investments in the second half of last year. Condiments in total in the U.S. is also growing 3% year-to-date, which is very good. And again, with prospects to continue to improve.
Operator: Our next question comes from the line of Tom Palmer with JPMorgan.
Thomas Palmer: I wanted to follow up a little bit on Andrew's question on 2027 and maybe focus it a bit more on the investment side. You noted earlier in the call that only around 1/3 of the spend had kind of stepped up in the first half of the year. So I think that would imply like a $200 million step-up, $500 million then comes in the back half of the year. One, any help on kind of how much of that step-up comes in 3Q versus 4Q?
And then when we start thinking about next year, is a reasonable starting point looking at kind of the 4Q run rate and then extrapolating what that would imply for kind of the step-up next year? Or are there more meaningful considerations on top of that?
Steven Cahillane: Yes. Again, I'll start. I think you should think about the third quarter and the fourth quarter being broadly even in terms of how we spend that money. And then as you think about 2027, again, too early to give guidance, but you should think about not necessarily a fourth quarter run rate, but think about 2026 being the base year in terms of getting the investment level right. And we mentioned this in the prepared remarks, but I would like to underscore that we're spending the additional $100 million because we can from a position of strength. And if you're a shareowner, would you rather we spend too much or too little?
And it's not an exactly precise science, but we felt $600 million was the right number, a very good number and a strong number. The fact that we can add $100 million to it really helps us think about 2027 being the year that we've got it really right with a very strong marketing spend in order to drive our volume-led sustainable share type growth. And so we like the way we're setting ourselves up for 2
Four leading AI models discuss this article
"KHC's accelerating investment and tangible sequential improvements in consumption and share position the stock for a re-rating once 2026 trough margins are confirmed and 2027 volume-led growth materializes."
KHC is showing early green shoots: consumption improving from -2.5% in Q2 to -1% in July, market share losses moderating from -90 bps to -20 bps in recent weeks, Heinz condiments growing 3% YTD, emerging markets +12%, and Away-From-Home back to growth. Management is doubling down with an incremental $100M investment (total $700M in 2026) from a position of strength, framing 2026 as the margin trough while guiding manageable 4-5% inflation for 2027 offset largely by productivity. The $600M+ spend is still only one-third deployed, with innovations (PowerMac, Capri Sun Hydrate, Oscar Mayer repack) delivering first-quartile returns and incremental category growth.
Consumption remains negative, share is still declining (even if at a slower pace), and the heavy back-half investment step-up will lap into 2027, pressuring margins exactly when inflation is expected to re-accelerate; history shows Kraft Heinz has repeatedly missed volume recovery targets.
"Kraft Heinz is masking long-term structural volume decay with temporary, high-cost marketing injections that will likely compress margins once the stimulus is withdrawn."
KHC is attempting to pivot from a volume-challenged legacy portfolio to a growth-oriented model, but the reliance on aggressive marketing spend to drive 'green shoots' is a high-stakes gamble. While management highlights a 30 bps market share improvement in H1, this is largely a recovery from a 90 bps decline in 2025, suggesting they are merely stemming the bleeding rather than achieving structural growth. The $700 million total investment ($600M planned + $100M incremental) is significant, but with inflation projected at 4-5% for 2027, the margin expansion story relies entirely on productivity gains that have historically proven difficult for KHC to sustain without eroding brand equity.
If the $700 million investment cycle successfully shifts the consumption trend from negative to positive, the operating leverage on volume growth could lead to a significant P/E re-rating from current levels.
"KHC's consumption stabilization is real but fragile; the $700M investment bet only pays off if Q4 exit rates and 2027 volume growth prove sustainable, not cyclical."
KHC is executing a classic turnaround playbook: incremental marketing spend ($600M + $100M) is showing early traction (Heinz +3% YTD, condiments +3%, Capri Sun and PowerMac gaining share). Consumption decline narrowing (Q2: -2.5% → July: -1%), market share stabilizing after 90 bps losses in early 2025. Management credibly attributes Q2 share flatness to anticipated SNAP headwinds, not execution failure. The fact they're *adding* $100M mid-year signals confidence, not desperation. However, the real test is Q4 and 2027 — investments must convert to sustainable volume growth, not just offset temporary tailwinds.
Only 1/3 of $600M spent in H1 yet consumption is already improving — this suggests easy comparisons and SNAP cycling, not marketing efficacy. If the $400M H2 spend fails to accelerate the trend materially, KHC has burned $700M on what amounts to temporary category support.
"Durable 2027 margin and growth require sustained, high-ROI share gains, not just accelerated marketing spend."
KHC signals a measured path out of a margin trough, expecting 2026 as the trough and inflation of 4–5% in 2027 offset by productivity plus a roughly $600m marketing push (with an extra $100m). Near-term momentum relies on consumption improvement and share recovery, but several risks exist. A 2% Q2 consumption decline remains a fragile base; incremental spend is front-loaded with uncertain ROI; margin relief depends on price/mix discipline retailers may resist in a softer environment; SNAP headwinds and private-label competition persist. Durable gains depend on lasting market-share gains, not just pilots or one-off product wins.
The strongest countercase is that ROI from marketing may not translate into durable share gains; if inflation lingers or consumer demand weakens, the anticipated 2027 margin rebound could slip.
"Marketing efficacy remains unproven until H2 spend laps; 2027 is the true test when full investment and inflation collide."
Gemini's claim that the 30bps H1 share gain is merely a recovery from 90bps 2025 losses ignores that July data already shows losses moderating to -20bps. The incremental $100M spend is not desperation but a confidence signal while only one-third deployed. Yet the real unmentioned risk is 2027 margin pressure when the full $700M laps exactly as inflation re-accelerates.
"KHC's marketing spend is a defensive necessity against private-label encroachment rather than a catalyst for sustainable, high-margin volume growth."
Claude, you’re glossing over the retail power dynamic. Even if marketing spend drives consumer demand, KHC’s ability to protect margins in 2027 is predicated on productivity gains that assume retailers won't demand lower shelf prices as input inflation eases. If private-label penetration continues to climb—currently at record highs—KHC will be forced to choose between sacrificing volume or margin. The $700M investment is effectively a defensive tax to prevent further delisting, not a growth engine.
"Retail power matters only if KHC fails to move consumption; if marketing works, volume gains restore negotiating position."
Gemini's retail power argument is the hardest to dismiss, but it conflates two separate risks. Private-label gains are real—but they've been climbing *during* KHC's share losses, not after. If marketing spend actually converts consumption negative-to-flat, KHC gains negotiating leverage, not loses it. The 2027 margin squeeze isn't retail pressure; it's the $700M lapping into a year when inflation re-accelerates. That's a timing problem, not a structural one.
"Front-loaded marketing must deliver durable demand and margin leverage; otherwise 2027 margin rebound depends on favorable inflation and cost productivity, risking a deeper trough if ROI fades."
Gemini argues the ROI from the $700M cycle could lift margins via durable volume; I counter that the risk is whether front-loaded marketing actually yields lasting share gains in a high-private-label, inflation-unstable environment. If inflation re-accelerates in 2027 or retailers demand price relief, KHC's margin recovery may hinge more on cost productivity than volume, leaving a pronounced risk of a deeper trough than expected if the ROI fades.
KHC is showing early signs of recovery with improved consumption and moderating market share losses, but the sustainability of these gains and the ability to protect margins in 2027 are key concerns.
The potential for marketing spend to drive lasting share gains and convert consumption negative-to-flat.
The ability to maintain margin expansion in 2027 despite inflation re-acceleration and potential retailer pressure.