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    KHC
    Earnings call· Jun 2026(Q2 FY26)

    Kraft Heinz Q2 FY26 earnings call KHC

    Aug 5, 2026 Source

    Executive summary

    The Kraft Heinz Company Q2 FY26 — Strong Momentum and Increased Investment

    Kraft Heinz delivered Q2 FY26 results ahead of expectations, demonstrating strong momentum across key segments and improved market share trends. The company is strategically increasing its brand investments, now totaling $700 million for the year, to drive volume-led, sustainable growth and strengthen its position for 2027. Despite ongoing macroeconomic volatility and inflation, management expresses confidence in its ability to manage costs and sustain a robust balance sheet.

    Highlights

    5

    • Organic net sales overdelivered expectations, driven by broad-based performance in U.S. Retail, Global Away From Home, and Emerging Markets.

    • Market share recovery is improving, with 36% of revenue gaining or holding share year-to-date, up from 21% in 2025.

    • The company increased its incremental investment by $100 million to approximately $700 million for FY26, reflecting confidence in early traction.

    • Strong free cash flow generation of approximately $1.7 billion year-to-date, a 10% increase year-over-year, with conversion at 123%.

    • Debt reduction of $1.9 billion in Q2 and an additional $1 billion post-quarter, maintaining a strong balance sheet.

    Concerns

    5

    • Organic net sales declined 1.3% in Q2, primarily due to a decline in U.S. Retail and a 100 basis point headwind from Easter timing.

    • Adjusted operating income declined 18.4% in Q2, reflecting planned increases in marketing investment and higher variable compensation expense.

    • Softness in the meats and meals categories within U.S. Retail continues to require targeted actions.

    • A 100 basis point headwind from declines in SNAP benefits is expected to impact FY26 organic net sales.

    • The inflation outlook for FY27 is projected to be between 4% to 5%, requiring proactive productivity initiatives.

    Guidance & targets

    11
    CategoryTargetConfidence
    Organic net sales
    down 2% to down 0.5%
    high materiality
    High
    Adjusted gross profit margin
    down 50 to down 10 basis points
    medium materiality
    High
    Constant currency adjusted operating income
    decline of 18% to 16%
    high materiality
    High
    Adjusted EPS
    $2.03 to $2.09
    high materiality
    High
    Effective tax rate
    approximately 24.5%
    medium materiality
    High
    Free cash flow conversion
    approximately 110%
    high materiality
    High
    Net leverage
    no higher than 3.3x
    high materiality
    High
    Organic net sales
    down 2.5% to down 1%
    medium materiality
    High
    Adjusted operating income
    decline in the range of down 25% to down 23%
    medium materiality
    High
    Inflation outlook
    between 4% to 5%
    high materiality
    High
    Marketing spend as % of net sales
    at least 6%
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    North America
    Organic net sales declined 2.7% year-over-year. Growth in Canada and Away From Home was offset by declines in U.S. Retail, primarily driven by meats. Adjusted operating income declined 15.8% due to investments in marketing and higher variable compensation.
    		—-2.7%—-15.8%
    International Developed Markets
    Organic net sales declined 0.7%. This was driven by market share pressure following customer negotiations in select regions and promotional phasing. These headwinds were partially offset by growth in Benelux and the U.K., where the company gained share. Adjusted operating income declined 9.1% due to increased marketing investments and higher variable compensation, with strong productivity offsetting inflationary pressures.
    		—-0.7%—-9.1%
    Emerging Markets
    Organic net sales were up 8.5%, with positive contribution from both price and volume/mix. This was driven by solid growth across most countries, partially offset by a 100 basis point impact from the decline in Indonesia. Heinz grew approximately 12% in the quarter. Adjusted operating income increased 6.7% due to strong top line performance, productivity, and a one-time indirect tax recovery, partially offset by inflation and marketing investments. Expected to further accelerate growth in H2 FY26.
    Heinz growth: ~12%Distribution points: up ~4%
    		—+8.5%—+6.7%
    Global Away From Home
    Organic net sales grew 2.9%. This was driven by a return to growth in the U.S. and continued growth in Emerging Markets. Performance included an approximate 150 basis point benefit in the U.S. from World Cup-driven demand and lapping a prior year inventory deload. Outside of these impacts, growth was driven by ongoing net new business wins. Expected continued growth in H2 FY26.
    		—+2.9%——

    Operational metrics

    28
    Organic net sales
    -1.3%YoY
    Q2 FY26

    Consolidated organic net sales decline, with price and volume/mix decomposition.

    Easter timing headwind
    100
    Q2 FY26

    Headwind to organic net sales due to Easter timing shift.

    Inventory pull forward benefit
    80
    Q2 FY26

    Benefit to total Kraft Heinz organic net sales from customer inventory pull forward related to summer grilling and 4th of July.

    SNAP benefits headwind
    100
    FY26

    Expected headwind to organic net sales from declines in SNAP benefits, unchanged from previous outlook.

    Adjusted gross profit margin
    flatYoY
    Q2 FY26

    Adjusted gross profit margin was flat year-over-year, driven by productivity offsetting inflation.

    Adjusted operating income
    -18.4%YoY
    Q2 FY26

    Consolidated adjusted operating income decline.

    Marketing investment impact on Adjusted Operating Income
    >8
    Q2 FY26

    Portion of the adjusted operating income decline driven by increased marketing investment.

    Variable compensation impact on Adjusted Operating Income
    ~7
    Q2 FY26

    Portion of the adjusted operating income decline driven by higher variable compensation expense.

    Revenue gaining or holding share
    36%vs 21% in 2025
    YTD FY26

    Overall percentage of company revenue gaining or holding market share.

    Win Big portfolio revenue gaining or holding share
    45%
    YTD FY26

    Percentage of revenue in the 'Win Big' portfolio group gaining or holding share.

    U.S. Retail revenue gaining or holding share
    30%vs 12% in 2025
    YTD FY26

    Percentage of U.S. Retail revenue gaining or holding market share.

    E-commerce growth
    ~14%YoY
    YTD through May

    Growth in e-commerce sales.

    Marketing spend
    +36%vs prior year
    H1 FY26

    Increase in marketing spend in the first half of the year.

    Return on ad spend
    +6globally
    Q2 FY26

    Improvement in global return on ad spend based on latest data.

    R&D spend
    +22%vs prior year
    H1 FY26

    Increase in R&D spend in the first half of the year, in line with full year expectation.

    Inflation outlook
    slightly above 4%
    FY26

    Full year 2026 inflation outlook, reflecting macroeconomic volatility and geopolitical conflicts.

    Productivity / gross efficiencies
    $330M
    YTD FY26

    Gross efficiencies delivered year-to-date, expected to continue throughout the year.

    Adjusted EPS
    $0.56vs $0.69 in Q2 2025
    Q2 FY26

    Adjusted EPS for the second quarter, declined approximately 18.8% or $0.13.

    Free cash flow conversion
    123%+27 percentage points YoY
    YTD FY26

    Free cash flow conversion rate, driven by improvements in working capital.

    Debt paid down
    $1.9B
    Q2 FY26

    Debt paid down at June maturity.

    Debt paid down
    $1B
    post-Q2 FY26

    Additional debt repaid due in 2027 after the quarter closed.

    Q3 inventory pull forward headwind
    80
    Q3 FY26

    Expected headwind to consolidated organic net sales in Q3 from inventory pull forward in Q2.

    PowerMac distribution
    35,000
    Q2 FY26

    Number of stores carrying Kraft Mac & Cheese PowerMac nationwide.

    Global Away From Home World Cup benefit
    150
    Q2 FY26

    Benefit to U.S. Global Away From Home growth from World Cup-driven demand.

    Consumption rate
    -2.5%
    Q2 FY26

    Consumption rate decline in Q2.

    Consumption rate
    -1%
    July FY26

    Consumption rate decline in July, showing improvement from Q2.

    Market share trend
    -30
    H1 FY26

    Market share trend in the first half, improved from -90 bps in early 2025.

    Market share trend
    -20
    recent weeks

    Market share trend in recent weeks, showing further improvement.

    Industry KPIs

    8
    MetricValueDetails
    Gross marginflat%
    Brand platform growth45%%
    Organic net revenue growth-1.3%%
    Adjusted EPS operating income$0.56USD
    Retailer trade negotiation statusMarket share pressure
    Volume mix vs pricing decompositionPrice +1.3 percentage points, Volume/mix -2.6 percentage pointspercentage points
    Elasticity consumer response commentaryConsumers prioritizing value and affordability
    Category growth benchmark channel shift dataIndustry still a bit volatile

    Product announcements

    4
    ProductTypeDetails
    Kraft Mac & Cheese PowerMaclaunch
    Capri Sun Hydratelaunch
    Philadelphia Lactose Free Cream Cheeselaunch
    Heinz Zero ketchuplaunch

    Deals & partnerships

    3
    The Walt Disney CompanyLandmark multiyear strategic alliance for co-branding, merchandising, licensing, and activations.multiyear

    Brands like Heinz, Philadelphia, and Kraft Mac & Cheese will be integrated into moments tied to Disney's iconic franchises, including parks, cruise lines, and hotels. Aims to drive consumer emotional connections.

    NFLStrategic partnership to drive consumer emotional connections.

    Mentioned as another strategic partnership, alongside Disney, to engage consumers and retailers in a different way.

    America250Sponsorship for a portfolio campaign.

    Unveiled 'United Tastes of America', the largest portfolio campaign ever, featuring multiple brands in a single creative and limited-time innovations at retailers nationwide.

    Capital programs

    1
    Incremental Investment Programunderway$700M
    Period spend: $100M additional in H2 FY26
    Spent to date: 1/3 of $600M in H1 FY26
    Funding: Strong balance sheet and robust free cash flow
    Start: FY26

    Benefit: Building brand equity, supporting innovation, driving volume-led sustainable growth, positioning for stronger 2027

    The company increased its planned incremental spend by $100 million, bringing the total to approximately $700 million for FY26. This additional investment is an opportunistic acceleration, concentrated in marketing, building brand equity, and supporting innovation. Approximately one-third of the initial $600 million was spent in the first half, with the remaining two-thirds, plus the additional $100 million, to be deployed in the second half.

    Risks & headwinds

    6
    Macroeconomic uncertainty and volatilityFY26, FY27

    Inflation outlook for FY26 slightly above 4%, FY27 between 4% to 5%.

    Mitigation: Proactive ramping of productivity initiatives, hedging on energy and edible oils (most of 2026), resins and metals (through mid-Q3).

    Declines in SNAP benefitsFY26

    100 basis point headwind to organic net sales.

    Mitigation: Offsetting share pressure through increased investments and improved market share performance.

    Softness in meats and meals categoriesOngoing

    Primary driver of U.S. Retail declines.

    Mitigation: Targeted actions including price, product, and packaging investments across Oscar Mayer, stepping up innovation and media across Kraft Mac & Cheese.

    Market share pressure in International Developed MarketsQ2 FY26

    Organic net sales declined 0.7% in Q2.

    Mitigation: Offset by growth and share gains in Benelux and the U.K.; strong productivity offsetting inflationary pressures.

    Inventory pull forward impacting Q3Q3 FY26

    80 basis point headwind to consolidated organic net sales.

    Mitigation: Anticipated and factored into Q3 guidance.

    Promotional timingQ3 FY26

    Headwind to Q3 adjusted operating income.

    Mitigation: Reflects planned step-up in investments and increased investments in price.

    What to watch in Q3 FY26

    5

    Consumption rate improvement

    Q3/Q4 FY26
    Current-1% in July
    TargetBest consumption rates in Q4

    Why it matters

    Indicates underlying consumer demand and effectiveness of investments in driving sell-through.

    July, they should put a perspective, we were about minus 1%. So there is already an improvement that observed in July and the market share even more important. We were in the first half last 30 bps, which is, in a way, it's good because we go back to the historical levels.

    Q&A highlights

    5

    Given the 4-5% inflation outlook for FY27, does this imply FY26 might not be the margin trough year, and how should we interpret the commentary on managing inflation?

    Management views the FY27 inflation outlook as manageable, not fearful. The primary defense is productivity, and the goal is to maintain and strengthen margins over time. The company feels well-positioned for 2027 due to current investments and momentum.

    “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.”

    asked by Andrew Lazar · answered by Steven Cahillane

    2 min read6 chapters

    Detailed Narrative

    01

    Investment Strategy and Early Traction

    Kraft Heinz is increasing its total incremental investment for FY26 by $100 million to approximately $700 million, concentrated in marketing, brand equity, and innovation. This decision stems from overdelivering expectations in the first half and seeing early green shoots of improved performance. The company aims to position itself for volume-led, sustainable, and profitable growth in 2027, with the bulk of these investments deployed in the second half of 2026.

    02

    Market Share Recovery and U.S. Business Turnaround

    The percentage of revenue gaining or holding market share has improved from 21% in 2025 to 36% year-to-date, with 45% of the 'Win Big' portfolio achieving this. In U.S. Retail, share performance improved from 12% in 2025 to 30% year-to-date, driven by investments in Taste Elevation, hydration, and desserts. While meats and meals still require work, targeted actions and innovations like PowerMac and Oscar Mayer packaging are showing encouraging early signs.

    03

    International and Away From Home Momentum

    International markets, particularly Emerging Markets, are a key growth engine, with organic net sales up 8.5% in Q2 and Heinz growing approximately 12%. The company is expanding distribution and tailoring products to local preferences, such as Heinz Zero ketchup in Brazil. Global Away From Home also returned to growth, up 2.9%, and is considered a strategic channel for future expansion beyond ketchup and into non-commercial sectors.

    04

    Innovation Driving Incremental Growth

    Recent innovations are performing strongly. Kraft Mac & Cheese PowerMac, launched nationwide, has achieved top quartile velocities and is highly incremental. Capri Sun Hydrate is the fastest-turning innovation in kids' single-serve beverages. Philadelphia Lactose Free Cream Cheese is shipping with strong sell-in, targeting new consumers and expected to be highly incremental. These launches are supported by increased R&D and marketing investments.

    05

    Capital Allocation and Financial Strength

    The company maintains a strong balance sheet and robust free cash flow, generating $1.7 billion year-to-date with a 123% conversion rate. This financial strength supports increased investments, dividend payments, and debt reduction. Kraft Heinz repaid $1.9 billion of debt in Q2 and an additional $1 billion post-quarter, along with a successful euro debt refinancing, targeting net leverage no higher than 3.3x by FY26.

    06

    Inflation Management and Productivity

    Despite an inflation outlook of slightly above 4% for FY26 and 4-5% for FY27, management is confident in its ability to manage costs. The company is driving strong productivity initiatives, delivering over $330 million year-to-date, representing approximately 4% of COGS. Hedging strategies are in place for energy, edible oils, resins, and metals to mitigate volatility.

    AI-generated summary of the company’s earnings call. Not investment advice.