Kraft Heinz to leverage global scale and local agility: ‘That can unleash a lot of growth’
Kraft Heinz has set long-term growth targets including organic sales growth of 1-2%. The company’s international business unit plans to grow at a faster clip.
“Globally the strategy is to grow low-single digits. For international, we are looking to grow mid-single digits with a big push into the emerging markets,” Rafa Oliveira, the international zone’s chief, revealed.
Gains will be propelled by the emerging markets, where the company believes it can deliver high-single digit expansion. In the ‘key’ developing markets of Russia, China and Brazil, Kraft Heinz is looking for revenue to grow in the double digits. “Our key emerging markets are Russia, Brazil and China. Those three countries are larger and offer us a greater opportunity as a company, so we are putting extra emphasis on those three countries.”
Much of the international growth will be propelled by innovation and Kraft Heinz has placed the consumer at the centre of its plans. “Growth will come from innovation, market expansion, distribution gains… but definitely through innovations that are consumer focused,” Oliveira explained.
Combining scale and agility: ‘It can be very powerful’
Kraft Heinz has reorganised its portfolio around six ‘consumer-driven’ platforms including easy meals made better, real food snacking, fast fresh meals, easy indulgent desserts and flavourful hydration. For international, the most important platform is what the company describes as ‘taste elevation’.
Innovation in this space will rely on Kraft Heinz’s efforts to get closer to the consumer, understanding their evolving needs and drivers. “We have the insights, the capabilities, the know-how to be close to consumers and provide them with the best possible products,” Oliveira claimed.
Oliveira believes this can best be achieved by leveraging Kraft Heinz’s global scale alongside its local understanding of consumer preferences.
“The changes we are making in Kraft Heinz are to be a consumer centric company, driving organic growth and creating a very agile organisation. We are one of the largest food companies in the world, so we have the scale that few other food companies have. If we can combine this with agility, it can be very powerful.
“Globally we are trying to expand the opportunities around the world and leverage proven best practice. We can use our scale as a big company with the agility of our local presence, understanding the local consumer, that can unleash a lot of growth.”
What does this look like in practice?
The international business lead explained it means maintaining the connection to consumers in the local market while also capturing best practice and scaling this up rapidly in new markets.
He pointed to the direct-to-consumer model that the company developed in the UK as ‘proof’ of agility. The D2C platform, Heinz to Home, was rolled out at the beginning of the COVID-19 pandemic, in just three weeks from conception to launch. Significantly, Oliveira said, the learnings from the UK were then taken and rapidly applied to additional markets.
“We saw this was very interesting. Australia went on and copied the platform. In two weeks they had their own direct-to-consumer platform. We are doing the same in Italy now. That is the scale you can get by leveraging best practices.”
Placing consumers at the heart of innovation
As a sales channel, direct-to-consumer absolutely exploded this year as COVID-19 restrictions saw consumers around the world confined to their homes. In the space of months, the coronavirus pandemic fostered a maturity in the direct-to-consumer channel that it would have taken five- or ten-years to develop under normal circumstances, Oliveira observed.
However, the actual route-to-market is just one benefit of Kraft Heinz’s D2C operations. Of greater import are the relationships and insight it supports.
“We are keen to be close to the consumer. To develop products and channels that can make us consumer centric. Do I think [D2C] is going to grow? Yes. But this is not only a sales channel. The most important thing is getting close to the consumer, the insights we gain and the communities we build, where we understand what they want, the benefits they see in products. So we can drive much more agility in our innovations.”
Within the innovation space, Kraft Heinz again intends to test concepts at a local level and quickly scale up those that have broader appeal.
In the UK, the business’ most developed international market, Kraft Heinz has created a group to test new ventures. “It is a group to test ideas in a fast and agile way, learn what’s working and what’s not. Then we scale up,” Oliveira explained.
“This group has been working since the beginning of the year and we have a large pipeline of ideas. The challenge is not ideas, there are a lot of ideas. The challenge is narrowing down to things that will make an impact with consumers.”
Tapping the trends: Exploration, health and sustainability
Kraft Heinz has invested in insight that allows it to ‘be present in the conversation’ and understand what consumers are looking for.
Within the ‘taste elevation’ platform, the company sees flavour exploration as a key trend. And, like much of the food space, health is an important driver.
For Kraft Heinz, the health agenda includes both innovation and renovation. Reformulation to reduce salt and sugar in its products is a journey that the company has been on for a decade or more. It has already rolled out SKUs with 50% less salt and sugar in ketchup and beans as well as a ‘NASS’ – no added salt and sugar – alternative.
“It is a journey we continue to go on. It takes time. You want to keep taste. You want to provide the most healthy, sustainable products for consumers but with taste,” Oliveira explained.
In NPD, Kraft Heinz wants to offer healthy products that appeal to the growing number of vegan and flexitarian shoppers. “That connects also to our sustainability commitments,” Oliveira noted.
Kraft Heinz has committed to the use of 100% free range eggs in Europe by the end of 2020 and cage-free globally by the end of 2025. “That’s a sustainability commitment but also in products that are connected to health. Trying to combine all these things is very important. We are trying to develop products in this space.”
Oliveira sees concerns around food production and sustainability as increasingly important to consumers. “It’s growing everywhere, in some countries more than others. There are some countries that lead the trend, mostly European countries with Australia and NZ having a strong stance on it as well. It is a trend that is happening across the globe, not only in niche brands. It is becoming a mainstream trend and we believe it will continue. We don’t think it will revert.”
The company laid out a number of commitments in its recently updated ESG goals based on the concepts of environmental stewardship, responsible sourcing and healthy living. These include 100% sustainably sourced tomatoes by 2025, and sustainable and traceable palm oil by 2022. The group has also targeted a 15% reduction in energy use across its manufacturing facilities; a 15% reduction in water use; and 100% recyclable, reusable or compostable packaging by 2025.
“We are going to continue to drive our sustainability agenda. We believe in it. We are investing in it,” Oliveira said. “That is part of our role as a sustainable company and our brands play a part in it because our brands are connected to the consumers.”
Blockbuster and breakthrough brands
And brands remain at the heart of the group’s strategy to capitalise on the might of its innovation engine-house.
“We are fortunate to have Heinz in our portfolio, which is a super iconic brand,” Oliveira reflected. “We would be crazy if we were not nourishing this brand. We are investing more on the brand, developing more fun things to make sure consumers engage with the brand. That involves innovation around the brand.”
That said, the company also has smaller brands with strong potential in its stable. Oliveira pointed to Lea and Perrins, an ‘extremely traditional’ brand that is almost 200 years old. It is a ‘fantastic brand’ with ‘more opportunities’, he believes. Elsewhere, brands like Bull’s-Eye is a ‘younger brand’ that appeals to ‘the fun, the exploration of cooking’.
As Kraft Heinz innovates to grow its brands, the company is looking to explore more in the adjacencies. “A key part of our pillars strategy is the adjacencies we are going to explore, starting with the UK.”
Reflecting the ‘test and learn approach’, the UK market will play an important role as a testing ground for new products. “We will then use our scale in an agile way to drive to other places,” Oliveira predicted.
“We are looking for products that [deliver] exploration for health-conscious consumers that are sustainably sourced or have an angle of sustainability,” the executive revealed.
“We are building a consumer-driven company, taking advantage of scale and agility, with sustainability. Those are the things that will really drive our company going forward.”
