By Savyata Mishra
(Reuters) – Kraft Heinz (NASDAQ:) adjusted its annual forecasts for organic sales and profit on Wednesday due to repeated price hikes impacting demand for the company’s branded products such as Lunchables meal kits and Oscar Mayer cold cuts.
Shares of the company fell more than 3% before the market opened, as it also reported a larger-than-expected decline in revenue for the third quarter.
“Significant declines in certain brands are slowing down overall performance. Lunchables, in particular, has been the biggest factor affecting sales, and Kraft Heinz may need to increase investments to revitalize this segment,” said CFRA Research analyst Arun Sundaram.
After implementing price increases over the past few years, Kraft Heinz has turned to promotions as budget-conscious consumers reduce spending on items like Capri Sun and Mac & Cheese.
Overall volumes at the company decreased by 3.4 percentage points, with prices rising by 1.2 percentage points during the quarter.
“In terms of our U.S. Retail business, we anticipate a slower recovery, driven by specific categories facing ongoing challenges,” CEO Carlos Abrams-Rivera noted.
Consumers have shifted towards more affordable private-label alternatives, leading packaged food manufacturers like Kraft Heinz to lower prices in the U.S. on products such as sauces and mayonnaise.
The company now expects annual organic net sales to be at the lower end of its previous range of flat to down 2% from the previous year, while adjusted profit per share is projected to be at the lower end of its previous range of $3.01 to $3.07.
Inflation in coffee and dairy prompted Kraft Heinz to narrow its adjusted gross profit margin growth target to the lower end of its 75-to-125-basis-point range.
The company reported earnings of 75 cents per share on an adjusted basis in the third quarter, surpassing analysts’ expectations of 74 cents, according to data compiled by LSEG.
Net sales declined by 2.8% to $6.38 billion, falling short of estimates of $6.42 billion.