Kraft Heinz (NASDAQ:KHC) outlined a plan to return to “volume-led, sustainable, and profitable” growth in 2026 after what management described as a challenging 2025 marked by declines in sales, profits, and market share pressure, particularly in U.S. retail. In its fourth-quarter and full-year 2025 business update, the company also said it is pausing work related to a previously announced separation as it prioritizes resources toward executing its operating plan.
2025 results reflected share pressure and margin decline
CEO Steve Cahillane, hosting his first earnings call with the company, said 2025 included a “meaningful year-over-year decline in both top-line and bottom-line results.” Organic net sales were pressured by market share losses, primarily in U.S. retail. Cahillane said efficiencies and limited pricing partially offset inflation and tariffs, but adjusted gross profit margin still declined 120 basis points for the year.
Despite the earnings pressure, Kraft Heinz posted what it characterized as strong cash generation. Cahillane said free cash flow improved by nearly 16% versus the prior year, providing “healthy capital allocation optionality.”
Performance by growth pillar and key category drivers
Management reviewed results through its three strategic growth pillars. Cahillane said organic net sales in North America retail “accelerate platforms” declined 5.2%, driven by a combination of share losses and broader industry headwinds. He attributed most of the decline to three areas: Lunchables, Spoonables, and frozen meals and snacks.
In global away-from-home, organic net sales fell 1.5% in 2025, driven primarily by lower U.S. traffic trends and market share pressure as consumers continued to trade down, especially in the back-of-house business. Cahillane said this was partially offset by growth in international away-from-home markets. He also noted progress in channel diversification, with the share of North America away-from-home sales in non-commercial channels increasing more than 150 basis points in 2025. Emerging markets away-from-home organic net sales rose about 9% for the year, he said.
Emerging markets organic net sales increased 4.6% in 2025, driven by double-digit growth in the company’s LATAM and East regions, partially offset by a decline in Indonesia. Cahillane said growth in emerging markets was coming primarily from the Heinz brand, with organic net sales up nearly 13% year-over-year, supported by distribution expansion via its go-to-market model.
On Indonesia, Cahillane said the decline stemmed from efforts to reset inventory levels with distributors, including issues tied to the financial distress of one of the country’s largest distributors. He said recovery “will take some time,” and the company does not expect meaningful improvement until the second half of 2026.
2026 operating plan: $600 million investment and separation paused
Looking ahead, Cahillane said successful execution of the 2026 operating plan will require approximately $600 million in incremental investment, which he said the company can fund given its balance sheet strength and free cash flow capabilities. He said the company expects to generate “solid market share momentum in the second half of the year,” but emphasized that execution will require companywide focus.
Cahillane said market conditions have become “noticeably more challenging” since the decision last summer to separate the company, citing worsened consumer sentiment, softer industry trends, and increased geopolitical volatility. As a result, Kraft Heinz is “pausing the work related to the separation” to prioritize resources toward executing the operating plan. CFO Andre Maciel later added that because the separation work is paused, the company will not incur any of the $300 million in synergies or meaningful additional one-time costs in 2026.
Cahillane said the portfolio needs to evolve over time, but argued that improving underlying business performance increases optionality for future portfolio optimization and supports the glide path needed for a successful separation.
Investment priorities: R&D, marketing, and pricing/value actions
Management attributed long-running share losses to historical underinvestment and said the 2026 plan is designed to better align brands with consumer preferences, improve commercial execution, and offer a more balanced value equation, including a focus on opening price points.
- R&D: Cahillane said Kraft Heinz will increase R&D investment by about 20% in 2026 versus 2025, with innovation and renovation focused on “nutrition, convenience, and new occasions.” He highlighted Kraft Mac & Cheese Power Mac, positioned around higher protein and fiber, with products expected on shelves in the second quarter.
- Convenience expansion: He said the company will build on traction from Capri Sun single-serve bottles launched in 2025, describing the format as nearly 60% incremental to the category and targeting expansion in channels such as convenience stores and front-end displays.
- Heinz brand expansion: Cahillane described Heinz as a “$5 billion-plus” brand and outlined efforts to expand it across occasions and geographies, including the Heinz Simply platform, pasta sauce expansion in markets such as the U.K., Brazil, and Chile, and modern condiments aimed at protein categories across Europe, the U.K., Canada, and beyond.
- Marketing and sales capability: Cahillane said teams are “too lean,” limiting consistent execution. The company plans to increase marketing investment to approximately 5.5% of net sales, targeted to its largest growth opportunities, while strengthening sales execution and joint business planning.
- Pricing/value: Cahillane said the company needs to “earn price” after prior inflation-driven pricing actions. He outlined a three-part approach for 2026: improving promotional ROI, emphasizing opening price points to protect distribution, and selectively revisiting base prices to pass savings to consumers on a case-by-case basis.
Maciel said about half of the incremental investment is expected to go toward price, product quality, and packaging, with the remainder directed to SG&A—sales, R&D, and marketing—as well as in-store activation. He said the company will invest more heavily to stabilize brands within the previously defined North American grocery portfolio while continuing to support momentum in Taste Elevation brands.
Fourth-quarter results and 2026 guidance
For the fourth quarter, Maciel said organic net sales declined 4.2%, with price up 0.5 percentage points and volume/mix down 4.7 percentage points. North America organic net sales fell 5.4%, led by U.S. declines in cold cuts and away-from-home, partially offset by growth in Canada. He also noted an inventory de-load impact of about 150 basis points, which management said had been expected and previewed previously.
International developed markets organic net sales declined 2.4%, driven by industry softness in the U.K., particularly meals categories such as soups and beans. Maciel said the company gained 20 basis points of share in the quarter despite the softness. Emerging markets organic net sales rose 2.2%, driven by double-digit growth in LATAM and East regions, partially offset by a 740 basis point impact from Indonesia.
Maciel said adjusted operating income declined 15.9% in the fourth quarter and adjusted operating income margin fell 280 basis points. Adjusted gross profit margin declined 130 basis points, with inflation and tariffs more than offsetting pricing, partially offset by productivity. Adjusted EPS declined about 20% year-over-year, or $0.17, driven by lower operating results, a higher effective tax rate, and higher interest expense, partially offset by other financial income and share repurchases.
For the full year, Maciel said the company delivered gross efficiencies of about $690 million in 2025 and generated $3.7 billion in free cash flow, with free cash flow conversion of 119%. He said the improvement was driven primarily by working capital gains, lower cash taxes, lower capital expenditures, and reduced variable compensation cash outflows. He also said Kraft Heinz returned about $2.3 billion to shareholders in 2025, including $1.9 billion in dividends and about $400 million in share repurchases, and ended the year with net leverage at its target of approximately three times.
For 2026, Kraft Heinz guided to organic net sales down 3.5% to down 1.5%, including an estimated 100 basis point impact from incremental SNAP headwinds. The company expects adjusted gross profit margin to be down 75 to 25 basis points year-over-year. Constant currency adjusted operating income is expected to decline 18% to 14%, including a roughly 3 percentage point impact from lapping lower variable compensation in 2025 and about 13 percentage points from incremental investments. Adjusted EPS is expected in the range of $1.98 to $2.10, based on an effective tax rate of about 25.5%. The company expects free cash flow conversion of approximately 100%.
Maciel said first-quarter organic net sales are expected to benefit about 100 basis points from the Easter shift, and excluding that, top-line results are expected to be relatively flat to the fourth quarter, largely due to lower SNAP benefits. He said the company expects sequential improvement through the year, with more meaningful improvement in the second half as Indonesia becomes a less significant headwind and as investment returns build. Adjusted operating income is expected to decline in the “high-teens” in the first quarter, driven by increased investments, particularly in marketing and price.
About Kraft Heinz (NASDAQ:KHC)
The Kraft Heinz Company (NASDAQ: KHC) is a global food and beverage company formed in 2015 through the merger of Kraft Foods Group and H.J. Heinz Company. The combination created one of the largest packaged-food companies in the world, built around well-known consumer brands. The merger was supported by major investors and established a multi-national platform for branded food products.
Kraft Heinz develops, manufactures, markets and distributes a broad portfolio of branded packaged foods and condiments.
