KHC - The Kraft Heinz Company

Operator: Greetings. Welcome to The Kraft Heinz Company Third Quarter 2025 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Anne-Marie Megela, Head of Investor Relations. Thank you, Anne-Marie. You may now begin. Anne-Marie Megela: Thank you, and hello, everyone. Welcome to the Q&A session for our third quarter 2025 business update. During today's call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts as well as statements regarding the proposed separation of Kraft Heinz into 2 independently traded companies. 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, which accompanies this call as well as our most recent 10-K, 10-Q, and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under News & Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera, for opening comments. Over to you. Carlos Abrams-Rivera: Well, thank you, Anne-Marie, and thank you, everyone, for joining us today. I am encouraged by our progress in the third quarter, recognizing there's more work to do to navigate today's complex environment. We delivered a modest year-over-year recovery in the top line performance, showing progress versus the first half of the year. That said, the operating environment remains challenging with worsening consumer sentiment and ongoing inflation influencing buying behavior around the world. To reflect our third quarter results and the expected continuation of these macro trends, we have updated our 2025 outlook. We remain on track to separate into 2 independent companies in the second half of 2026. And while we manage that transition, our priority is to drive performance today and position both businesses for long-term success. I want to thank our teams for their efforts and our customers, consumers and shareholders for their support. With that, I have Andre joining me, so let's open the call for the Q&A. Operator: [Operator Instructions] And our first question comes from the line of Andrew Lazar with Barclays. Andrew Lazar: Carlos, in light of the weaker consumer sentiment that you've talked about, we are seeing a number of food companies sort of lean in more aggressively on investment spend, both pricing related and broader A&C. I guess I'm curious how much of the '25 profit revision, if any, is due to more aggressive spending behind the brands than initially contemplated versus just the impact of sort of higher costs and volume deleverage. And if there's not significant additional spend, I guess I'm curious why wouldn't more make sense now to help jump-start volume improvement in a still tough consumer environment as you think towards next year? Carlos Abrams-Rivera: Let me have Andre kind of give you a little bit of context how we think about the updated guidance and I kind of fill in some additional information. Andre Maciel: Thanks for the question, Andrew. The profit revision is not linked to incremental investments beyond what we had previously communicated. The profit revision is a function of lower expectation on consumption in the U.S. which we can talk more about that, is a function of elongated recovery on Taste Elevation, which has been improving in a meaningful way, 70% of the revenue now is gaining market share. However, the recovery is still slower than what we anticipated. So there is a mix component to that. And we face incremental inflation in Meat and Coffee, and we didn't price certain elements of it due to competitive dynamics. And we had a few other one-offs affecting our supply chain results in Q3 that should not be expected to repeat in Q4. However, they stick in the year. Remember, though, that for this year, we are increasing promotional investment around $300 million in the U.S. We have $80 million-ish of incremental marketing spending in media. We have more R&D investments, and we have incremental headcount in selected areas, mainly commercial-related functions. So we are adding relevant investments on the business. And we don't think that adding more price at this moment will yield results. The investments we have made already allow us to have opening price points in critical categories to the retailers and to the consumers. We have investments in Meat and Cheese, in Frozen Potatoes, in Mac & Cheese and a few others. We don't believe adding more marketing at this point. Remember that the entire marketing investment increase is concentrated in the second half of the year. So we don't think going even further beyond that would deliver returns at this point. However, we are open in the future to add more marketing as we continue to go deeper in our brand assessments. But at this point, we don't think it's a matter of putting more investments. Carlos Abrams-Rivera: I think the one thing I would add, Andrew, is, I mean, listen, we think about this at our company as a very much a consumer-centric brand-driven company. So for us, what is important is that we're building brand for the long term. So when we think about stepping up investments, we are thinking in terms of the -- what Andre mentioned in R&D, in marketing, continue to drive the renovation of our products because I think that is going to be the way for us to be successful over the long term. I think the fact that we have concentrated our effort behind our Brand Growth System to make sure that we are continuing to bring distinct attributes that consumers value, that's going to be the way we continue to be able to be successful over the long term. And by the way, I think some of the pricing that we have done strategically in terms of promotions have worked. If you look at our back-to-school campaign, we were able to actually be successful in able to drive great returns behind the key brands that we focused during the back-to-school campaign, Capri Sun, Lunchables, Jell-O. So I think we are going to continue to be tactical in our investments, but really building our brand for the long term. Thanks for the question. Operator: The next question is from the line of Peter Galbo with Bank of America. Peter Galbo: I wanted to ask maybe a more conceptual question around the spin. And really, if I think about it, one of your CPG peers is going through a similar dynamic right now in terms of kind of a split and you're living kind of parallel lives, I guess, for lack of a better word. In the case of your peer, right, there was an announcement, the market responded the way that it did, and there's been a pivot on their behalf, not in terms of pursuing the split, but in terms of how they're going about it, right? There's been an alteration in terms of the path forward. I wonder just as you've solicited feedback from investors and as you've heard from investors since your announcement, has there been any thought as to a pivot for Kraft Heinz, whether that means the leadership isn't the way that you thought it would pan out, the brands that you announced at the spin now, maybe some of them move from one to the other. Just any thoughts, again, as you've heard feedback that you may potentially pivot versus the initial announcement? Carlos Abrams-Rivera: Well, thank you for the question. And listen, I think that -- let me give you a little bit of the context of how we ended up with the decision. We have spent a number of months working with our Board of Directors to make sure we felt that we were going to do something that was going to be unlocking shareholder value. And we believe in the fact that we create 2 stronger companies that can be more focused for us to drive that unlock the shareholder value. And if you think about our 2 companies, I think we have already shown that we have a playbook that we have focused on in a part of our business that will be part of the Global Taste Elevation. In fact, if you look at our Taste Elevation progress in the Q3, you are seeing already that, that playbook is working, that, in fact, we are improving our dollar sales that we're improving our share position. And in fact, in September, we gained share in 70% of the U.S. Taste Elevation business. So the playbook that we have has been working, and we want to apply it now to both companies with the right amount of resources and support. Having said that, we also have said that we are going to continue to look at opportunity for us to think what is the right way to support this with the right amount of experience, capabilities and technical resources. So I think that's something that we'll continue to do as we think about the announcements that we'll have ahead of the second half of the year with the management teams and the way we're going to create the right operating model for us to grow. So our focus remains on us doing the right thing by us creating these 2 companies. And really, in every situation, and you picked a particular peer that you had in mind, the reality is that there's many other examples of people who have done this. For us, what we're trying to do is, well, it's the right thing to do for both Kraft Heinz and our shareholders. Andre Maciel: The other thing I'll add is, look, comments on perimeter and balance sheet. On the perimeter front, we -- as we said before, we decide this perimeter: one, to allow focus; two, based on growth history and growth potential of the different brands, the margin profile and the synergies. So as we go deeper now, we're doing all the bottom-up work. There's a lot of work going on, as you can imagine. If at any moment, we think it might create more value to shareholders to have some adjustments, we will. But at this point, we think we did the right thing because we put a lot of thought before that. The second, the balance sheet. I know there was initially some maybe misunderstanding about what we intend to do with both companies, and we try to clarify that in the subsequent forums. So we said we are targeting both companies to be investment grade. We are committed to ensure that we keep the net debt at reasonable levels. We put -- even the prepared remarks, we were very clear. Our capital allocation priorities have not changed. And the second one after organic investments is to maintain the net debt at or close to 3x, and we're committed to do that, which should allow both companies to have good balance sheets with optionality. And a clarification, when you say we want to have company investment grade, for us, net debt is below 4x. And obviously, the specifics, we're going to be still discussing in the coming months and discussing greatly in agencies, but we are committed for that as well. Operator: Next questions are from the line of Tom Palmer with JPMorgan. Thomas Palmer: I wanted to just ask on Emerging Markets. It seems like excluding Indonesia, trends were more encouraging. I guess, one, and you did provide some commentary here on Indonesia from a sales overhang. But how big is Indonesia within Emerging Markets? And then when we think about the fourth quarter, the mid-single-digit growth guidance for Emerging Markets, what does that assume kind of for the business ex-Indonesia and Indonesia in terms of potentially seeing some improvement? Carlos Abrams-Rivera: Well, thanks for the question. Let me start, I guess, with the point of the context of Emerging Markets. You're correct. There is great progress outside of Indonesia, and we have continued to see the -- not only the success in terms of growth, but also the continued improvement in terms of that growth. I think for me, what it also gives me confidence is the fact that we think about the $1 billion that we have in the Emerging Markets, that actually is accelerating and is accelerating because of our key brands like Heinz, where it continues to show a tremendous amount of growth. In fact, in emerging markets, our Heinz brand year-to-date is growing 13%. So I think for us is we continue to see that as a value piece of our portfolio and one of our key growth drivers as we think about the future. In the case of Indonesia, top line is about $0.5 billion business. And frankly, what we have seen is a meaningful decline in consumer sentiment that has led then to the softening of demand. In fact, I think that the consumer sentiment in Indonesia year-over-year is about down almost 10 points in terms of consumer sentiment. So that has led to the sellout -- reducing the sell-out growth expectations and some of the challenges that we have seen in terms of our distributor -- particular distributor in the country and also how that has disrupted the overall our own business. At the same time, this is something now we're taking actions to make sure that this is only something that we can correct into the future. So we are rightsizing the inventory to the right levels. We are transitioning to a new distributor, and we're also making sure that we're reducing the pricing stability that happen in the country, while we continue to invest in Indonesia in terms of our marketing of our brand and ABC is the largest brand that we have. And we believe that us continue to drive superiority on the brand equity, making sure we continue to drive the -- also penetration in a meaningful way is going to be the best way for us to getting Indonesia back to where we wanted to be in terms of contributing the growth to the business. Andre Maciel: Just to add to that, we -- Emerging Markets aside from Indonesia grew 9.2%. So it did accelerate in a relevant way compared to the first half of the year, as we have said before. Indonesia, just maybe a little more specific, is close to $300 million revenue. So it's like 12% of the emerging markets business. So still relevant, but not massive. And we do expect the recovery in the P&L only to happen in the second half of next year because we still have adjustments to do into Q4. In Q1, there is Ramadan, which is very important for Indonesia, a big seasonality in that business, so -- which will affect Q1. So we really head into Q3, end of Q2, Q3, we're going to see the recovery there. Yes, but I think what is good is we invested a lot in this business in the past 2, 3 years. There was a lot of marketing investment to put the ABC brand, which is the leading brand in several categories in a very good spot. So market share standpoint, things are doing well, but we have to make the adjustments on the distribution network. Operator: Our next question is from the line of Steve Powers with Deutsche Bank. Stephen Robert Powers: I don't -- Carlos, I don't believe I saw it anywhere this morning, and apologies if I missed the relevant disclosure, but are you able to frame maybe pro forma the performance of Global Taste Elevation Co. versus North American Grocery Co. in the third quarter? And then also update us on how you see those businesses progressing into the fourth quarter, just so we can better assess momentum into '26 and eventual separation. And maybe alongside that, Andre, I don't know if you -- where you're -- sort of where you are in this process. But as you think ahead towards separation, I'm just curious if you have a more formal estimate around any onetime restructuring costs or cash costs that Kraft Heinz is likely to incur in preparation for the split? I'm just trying to see how we should handicap those dynamics over the next 3 or 4 quarters. Andre Maciel: Sure. Thanks for the question. Look, both companies -- both 2 big companies pro forma declined low single digits in the quarter. We see the Global Taste Elevation trajectory improving and in the very low single-digit territory at this point. And the expectation is for Q4 that to continue. So our main priority is to put the Global Taste Elevation back to growth in 2026 as it has grown for several of the last 15 years. And so that's the priority #1 to us. The North American Grocery Company had a significant improvement in trends in the third quarter compared to the first half, but also declining low single digits, though more than the Global Taste Elevation Company. But the priority #1 for the North American Grocery Company now is to ensure that we have stable cash flows heading into '26. And -- but in parallel, we're working hard to make sure that this company also has the prospects of growing low single digits into the future. In terms of one-off costs, I think it's [ a case ] to talk about that. There is a lot of work in motion right now. We are committed to be very, very disciplined with the use of cash like we have been. So you can see our results despite the EBITDA decline, our cash flow is up year-over-year, and it's going to continue to be the case here to go. So count on us to be very disciplined and do the right type of investments that are needed to put those 2 companies set up for success. Carlos Abrams-Rivera: Yes. Let me just add then particularly as we think about the North America grocery company. I think if you look at our history, we have proven that we can be an efficient operator. So as we think about our separation, we're going to have the same level of efficiency as we think about how do we actually drive both of those companies. And I think that beyond that, we also have been a great and a confident company in terms of delivering strong cash flow for our shareholders. Now I would also point out the fact that I mentioned earlier that we have a playbook that has worked. Some of that playbook, we actually already have deployed to some of the key brands that will be part of North American Grocery. So if you think back to Q3 and our results on Lunchables, on Capri Sun, those are brands that now in the future will be part of North American Grocery, and we were able to return to growth. What will happen as we go into these 2 separate companies and we can create 2 more focused companies, we can then put the right level of attention and resources to allow both of those companies and to fulfill their true potential. So I think as we go into the -- going forward, the attention of management remains in us making sure that we continue to see the progress of the company because that will support both companies as we exit into the second half of 2026. Operator: The next question is from the line of David Palmer with Evercore ISI. David Palmer: Great. In your slide presentation, you noted several of those key categories where you're clearly improving in terms of market share. Your guidance for the fourth quarter doesn't imply much improvement. And I just wanted to get your thoughts about maybe offsets. Is it categories that you're in? Are they slowing? Maybe there's some offsetting brands where you're seeing a little bit of deterioration? And then separately, there's that story of the promotion spending that you -- those investments, the $280 million that you're making. that's maybe 2% of North America retail sales. When we track in scanner data, I know these are audited numbers, but it only shows like that your volume on promotion is only up -- is only down, I'm sorry, 1%, basically unchanged. I'm just wondering what is going on with your promotions? Maybe you could tell us better than what the data is showing us, which doesn't show us much in terms of what activity you are doing? Andre Maciel: Sure. Thanks for the question. So first, regarding Q4, you are right. The outlook implies revenue in Q4 worse than revenue in Q3, about 100, 110, 120 basis points. We have inventory phasing in -- especially in North America, especially in the U.S. So we do expect this headwind of inventory to be north of 100 bps for the total company. It's a combination of inventory phasing Q4 last year to January given some timing of promotion and some September, October. We also do expect lower consumption in Q4. And that's -- so the inventory has been in our outlook for a while. There's nothing new. The different aspect that also was one of the reasons why we adjusted the expectation for sales down year to go is related to the softness in consumption. So we saw throughout Q3, the industry decelerating further in the U.S. In October, aside from hurricane noise, it also started soft. So we do expect the market share to continue to improve, especially in Taste Elevation, but we should expect share to improve, but we expect the industry to get worse. So that results in the consumption overall in the U.S. to be relatively flat to Q3, but with the inventory then headwind impacting us. The second part of your question? David Palmer: The promotions. Andre Maciel: On the promotions. So we concentrate promotion mostly about the key holidays. So our highest market share in the year historically is in Thanksgiving and Christmas. So we do have a lot more promotion activity around this upcoming holiday. Part of the investments we have made, they were to secure incremental distribution. So that's part of joint business plans that we do every year with the retailers, and we were very intentional in some cases to ensure that we expand distribution, which we have been generally getting. And in some other cases, we did invest deeper than what we would normally do during back-to-school to ensure that we can accelerate consumers trying the renovated products. So we focus a lot on trying to drive units to have those household penetrations coming in. And the expectation that this will eventually generate repeat purchases, which will help with the sales in the future. Remember, we said that at the beginning in the last quarter that we will try to do different tactics to accelerate this consumer trial of the new products. So we see that. The ROIs of those are not good, to be honest, the lifts are low. And maybe that's why when you look at the syndicated data, you have this perception. Carlos Abrams-Rivera: But I think let me add a couple of things. I think, first of all, we talked quite a bit about the U.S. because if you think about our total company, the reality is that while we're seeing some pressure in Europe in terms of the consumer, particularly in the U.K., we actually are holding our share in a moment in which the U.K. consumer also is seeing some challenges. And I mentioned earlier, Emerging Markets, where we've seen actually strong growth, whether it's in Brazil, the recovery in Mexico that we feel great about, the stability in China and really is Indonesia aspect that has been kind of holding us back in terms of getting to the double-digit growth that we can see in Emerging Markets into the future. So I think from that perspective, it is why we spent quite a bit of time talking about the U.S. And if I do a double-click on what some of the things Andre mentioned, the reality is that we are seeing some inventory pull back from customers. And I think that's a response to what they're seeing in terms of the consumer sentiment. So the fact that we have now one of the worst consumer sentiments we have seen in decades, as we go into even a holiday season, we're already seeing how customers are pulling back on inventory, and that's reflected in our guidance as well, too. So it is a unique moment right now in which this is getting -- the consumer negativity and the sentiment is extending longer than we had originally expected. And we are seeing already on top of that, that customers are also adjusting their own level of inventory to accommodate for that. Operator: The next question is from the line of John Baumgartner with Mizuho Securities. John Baumgartner: Just sticking with the promotional environment in U.S. retail. Despite the joint programming with retailers that you mentioned, Andre, and the larger investment dollars and the improving analytics, weak promos seem to be a theme right now across the center of the store. And Carlos, you mentioned some success with your lips around back-to-school, but lips have also been weaker in other parts of your portfolio as well. So I'm curious what you're finding that's working differently in the areas where the lips are stronger. Is there a distinction there? And then what changes are you making, if any, to your promo approach into '26 given the consumer environment? Carlos Abrams-Rivera: I think there were about 3 different questions in there. So let me take one. I think there's a part of it you were getting at is some of the success we've seen in back-to-school. And for us, I think one of the things that we were playing in back-to-school, and I think we did that effectively is how do we make sure we are winning in those key moments in which consumers are going disproportionately to stores. So back-to-school was actually one of our first pilot in which we kind of created a whole more executional approach of how we leverage the entire brands together during that particular moment. So what you saw is an improved in-store display and increased investment both in marketing, but also in the promotional aspects inside of the retail environment. And that actually helped us make sure that we have a cross-selling where brands cross-shopping purchase improved by 60 bps. We also saw that improving in base velocity as a result of the investments that we make in back-to-school so that when consumers were going to the store, I mentioned the fact that we have brands like Lunchables and Capri Sun. So when they go to a back-to-school time period, they were actually experiencing a product that we had now renovated in both Lunchables and Capri Sun. So that actually helps us for us to the long term to make sure we continue to build a stronger base volume as we go into the future. And I think those are key learnings that we'll take as we go into the holidays as we go into key also moments into the future. I think that was one of your questions. Andre, I think you want to address some of the other pieces. Andre Maciel: And maybe just to complement. So what you have seen working better generally is more on higher frequency than deeper discounts. So -- and we see overall lifts coming down year-over-year. The ROIs are lower than they were last year, generally in part because of higher overall incremental activity, which dilutes the lift across different players, but also in our case, as I mentioned before, because we're going deeper in certain occasions to drive household penetration. As we head into next year, we have a lot of tests running in selected places to see different type of tactics that could work well, including in some case, cross-merchandising and bundling products, putting -- adding more events in e-commerce, trying to maybe go less deep and less focus on key holidays and maybe spread these resources around in a more harmonic way throughout the year. So there are a set of different things that the teams are currently assessing to make sure that we can improve those returns into next year again. Carlos? Carlos Abrams-Rivera: Yes. The one thing just to complete the thought on your question is, I think right now, we're also seeing some challenges with the consumer. But I think what we are looking to do and the game that we're playing for the long term here is to make sure we continue to invest behind our brands to drive superiority from a consumer experience perspective. I do think that right now, the challenges we're facing are more cyclical in nature. So for us, it's important that as we get out of this particular era in which consumers are feeling with a down sentiment that we come out of it with a much stronger portfolio with stronger brands. So I do think that we are preparing ourselves not to just be victims of the moment, but actually stronger -- building a stronger company for the long term. Operator: Our next question is from the line of Robert Moskow with TD Cowen. Robert Moskow: I wanted to drill in a little bit on the commoditized categories, Carlos, like Coffee and Meats. And I guess, Cheese to some extent, these 3 categories are going to be like 40% of the sales of North American Grocery. And as you can see in your results here, Sliced Meats and Coffee have become really problematic. I guess I wanted to know, have you started rolling out the Brand Growth System to these categories? Is it harder to implement it in these than it is in the others? In your CAGNY presentation, you yourself said that you have a much lower right to win in coffee and meat. And as a result, does that make it harder to get traction with Brand Growth System than the others? Hello? [Technical Difficulty] Operator: Please stand by ladies and gentlemen, we'll resume momentarily. Ladies and gentlemen, please stand by. We are experiencing technical difficulties. We will resume momentarily. Thank you. [Technical Difficulty]

Operator: Greetings, and welcome to the Kraft Heinz Company Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Anne-Marie Megela, Global Head of IR. Anne-Marie Megela: Thank you, and hello, everyone. Welcome to the Q&A session for our second quarter 2025 business update. During today's call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com, under News and Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera, for opening comments. Carlos A. Abrams-Rivera: Well, thank you, Anne-Marie, and thank you, everyone, for joining us today. Listen, I'm pleased to report that our second quarter results came in line with our expectations, with an improvement in year-over-year top line performance. Our investments in product superiority, manufacturing capabilities and key areas of our business are starting to pay off. It's driving momentum and giving us confidence to reiterate our 2025 full year outlook. And while we don't have any new news to report today in our consideration of strategic transactions, I do want to assure you that we are actively progressing on our evaluation, with a focus on unlocking long-term shareholder value. With that, I have Andre joining me, so let's open the call for Q&A. Operator: [Operator Instructions] Our first question is from Andrew Lazar with Barclays. Andrew Lazar: Carlos, during the quarter, Kraft Heinz put out a release that the company was considering various strategic transactions to create value. As there's nothing specific from the company yet, perhaps maybe we can talk a little bit more in generalities. There is obviously a report from the Wall Street Journal about potential business separation. I know you can't comment on specifics. But I guess, how would you respond to investors that would say, such actions oftentimes can be nothing more than financial engineering moves that come with higher costs and dis-synergies rather than sort of unlocking value. I'm really just trying to provide maybe a forum where you can talk a little bit about these sorts of things maybe more in general as Kraft looks at a lot of different possibilities, right, to try and unlock value. Carlos A. Abrams-Rivera: Well, thank you, Andrew. Always great to hear from you. As I said, our Board is working with urgency on an evaluation of those strategic options to unlock, as you said, long-term strategic value creation. And what I will say also is, and I'll remind our investors, is that we will operate with the same financial discipline you have come to expect from us. And so any actions, if any, will be consistent with that goal of unlocking that long-term shareholder value. And that's essentially all I can say at this time. But thank you for your question. Operator: Our next question is from Peter Galbo with Bank of America. Peter Thomas Galbo: Andre, maybe a bit more of a technical one. But there was a pretty sizable impairment that was taken in the quarter. And I was just hoping to get a little bit more detail. It seemed like it was maybe more at the enterprise level, but I didn't know if that flow down to any of the brands in particular or if it's at all tied to as you contemplate kind of strategic transactions and you think about moving different pieces like that the reporting change triggered the impairment. And again, it's relatively sizable. So just hoping to get some more detail there. Andre Maciel: Thanks for the question, Peter. So look, we recorded a $9.3 billion noncash impairment charge. And the trigger for that was only the fact that we have a sustained decline in the stock price, and that has reduced the carrying value of our intangible assets. We have been monitoring this for some time. We disclosed in our previously filed 10-Q the risk that this could happen. So it's not really nothing new and nothing beyond that. This does not change the view that we see basic value of the company, including the confidence and direction we have in the strategy. Operator: Our next question is from David Palmer with Evercore ISI. David Sterling Palmer: I am just wondering how you're thinking about your pricing and promotion levels currently. Where do you see perhaps an opportunity to -- or challenge to ramp up promotions or narrow price gaps? And where do you feel like you've taken the steps already that you're comfortable where you are versus your nearing competition, even if that's private label? And then I have a follow-up. Carlos A. Abrams-Rivera: Thank you, David. Let me start, and then I'll hand it off to Andre, if he want to give additional commentary. But I guess I would just say as context, we are a consumer-centric brand, first of all, which means that we are making sure that our brands are going to continue to build for the long term. And what you see from us is that we continue to invest -- make investments across the board. And that -- some of that investment is actually pricing. We're including about 100 bps in pricing year-over-year. And we also are, on top of that, investing another 30 bps in marketing so that we can reach about 4.8% of marketing as a percent of net sales by 2025 -- by the end of 2025, which will be the highest level in nearly a decade. So -- and in terms of pricing, I guess one clarification that I will make is that if you look at pricing in North America, when you exclude the cost inflation, it's actually negative. So that gives you a sense that we're also being thoughtful about how to think about pricing. Andre, anything else you would add? Andre Maciel: Well, as we said before, we have built into the initial plan, about $300 million of investments. We have added a little more towards the second half. We have been concentrating the investments mainly on the key windows. You see more activity now in the third quarter, as we are now at the peak of this summer. There is some investments that we have saved for this moment as we have a lot of product renovations hit in the market and some core innovations hitting right now. So we concentrated the efforts on that. So we can have the new product, the extra marketing and those investments are hitting at the same time to improve the chance of success. So I mean, beyond that, there is nothing to say. Carlos, what do you want to say? Carlos A. Abrams-Rivera: The only thing I would add, David, here is that it's important to note that we are pricing well below inflation. In fact, we expect the inflation to be about 5% to 7% this year. And we're only passing around 1% of the pricing. So we are, in fact, keeping the consumer in mind as we're taking these actions on pricing. I think you had another question, David? David Sterling Palmer: Yes. No. Just one thing I'm thinking about with regard to Kraft Heinz, particularly as you think about strategic actions and presumably, there's parts of the business that might garner a higher multiple than the others. Is this problem we see across food right now where legacy parts of businesses that might be growthier are not doing as well as they might have done over the long term? And I'm wondering how you're thinking about that with regard to whether it's ACCELERATE, PROTECT or BALANCE. We're seeing on average declines continuing in those businesses. What is your prospects, I guess, to make your growth parts growthy in the near term, particularly if you want to shine a good light on those parts of the business as you think about strategic actions. Carlos A. Abrams-Rivera: I guess -- let me go back to the -- our strategy that we have been consistent following for the last 18 months or so, which is we are making investments to make sure that we're growing across in emerging markets, North America retail and Away From Home. And in fact, we are continuing to make investments to drive that growth and return capital to our shareholders. And when you look at our pillars, in fact, in emerging markets, you saw, we grew our top line by around 8% through both price and volume, at the same time expanding margins substantially. In fact, we now in emerging markets have the highest OI margin ever. If you look at North America retail and ACCELERATE platforms, we're actually investing also to power by the brand growth system, and we are executing through agile ways of working. And let me just say that if you look at the Nielsen data, IRI data over the last 4 weeks, in fact, when you exclude cold cuts and bacon that drove about 40% of the decline, the rest of the portfolio in total North America retail actually is improving substantially. In fact, in the latest 4-week ex cold cuts and bacon, we are down 2.7%, year-to-date were down 4%. So you are seeing that the actions we're taking in North America retail are also helping us drive the kind of improvements that we wanted to see in the business. And finally, in Away From Home, we're also expanding into footprint, to distribution and driving new innovation into the marketplace. The last thing I would say is that we're not done. We're going to continue to invest in the business, because we are confident in this strategy. We are making sure we spend -- continue to invest in marketing, like I said earlier. We continue to step our investment in e-commerce, which is helping us also drive our improvements in North America. And frankly, we also have a solid balance sheet that allows -- and a strong cash flow that allows us to continue to make these investments. So we feel very good that when you look deeply into our growth pillars, all those actions and investments we're making are in fact taking shape in order for us to be able to continue to drive the company towards long-term success. Andre Maciel: And I think beyond that, we have -- as we said before, we have a lot of product innovation hitting the market right now behind Mac & Cheese, Lunchables, Mayo, just to name those three. We have 20% market increase year-over-year expected to the second half. So the vast majority of all the meat increases are all happening now in the second semester. We have, as we said, step up some investments on price towards the key windows that are still to come. So there is a lot more happening that we should -- and we should continue to see ACCELERATE part of the portfolio in North America improving gradually throughout the remaining quarters. Operator: Our next question is from Leah Jordan with Goldman Sachs. Leah Dianne Jordan: Just seeing if you could provide more detail on your sales trends across emerging markets? I know there's a big opportunity for distribution gains in Away From Home in the region. So just curious how those gains have tracked versus your expectations so far this year? And how should we think about the pace of those gains in the back half versus the front half? And really what's giving you the confidence in that double-digit exit rate for this year? Carlos A. Abrams-Rivera: Great question. Thank you, Leah. Listen, I mean I mentioned that we, in fact, were very pleased to see that the top line now grew about 8%. I think what -- behind those numbers, though, is the fact that the growth coming from both volume and price. And the fact that we are doing that, we're actually increasing our margins at the same time, give us quite a bit of confidence that as we look at the end of this year, we should be able to be hitting a long-term algorithm of double-digit growth. And for us, we continue to see investment in our business and it's not going to stop. Today already, it represents about $2.5 billion business -- of our business overall. And I think what other things that gives me confidence is the fact that when you look and step back and you look at emerging market, it's really a more simple portfolio. If you focus on Taste Elevation, in particular in our Heinz brand, and we have a strong go-to-market model. So when you look at the double click of Heinz in emerging markets, we actually grew about 18% year-over-year. So it is building on the strength of our key brand in a business that we know how to operate with a model that we now have been able to replicate across markets. So it's something that now we have been building on the success that we have in the past historically. And now we're expanding to make sure that we're growing in LatAm, we're growing in our Middle East Asia and Middle East Africa and Asia. And I think for us, we continue to believe that this is a place where we have tremendous opportunity for now and for the long term. Leah Dianne Jordan: Inflation and promotions that were pushed into the third quarter. Any color on the magnitude of that impact and what drove the timing shift and how you view kind of those cost pressures around inflation today? Carlos A. Abrams-Rivera: Sorry, Leah, you got cut off at the beginning of the question. If you can repeat it? Leah Dianne Jordan: Sure. You had called out incremental inflation and promotions that were pushed from 2Q into 3Q. Just any color on the magnitude of that impact we should think about on a quarterly cadence basis? And then what was the driver of that timing shift for those two items? And how are you thinking about inflationary cost pressures today? Andre Maciel: Look, magnitude is in the range of 30, 40 bps. It's nothing special. It's mostly the recognition like the -- based on the inventory positions and the throughput, that's how these inventories got recognized in the P&L. So that's why it shifted to Q2, Q3. So nothing really beyond that. Operator: Our next question is from Megan Clapp with Morgan Stanley. Megan Christine Alexander: I wanted maybe a follow-up just on the organic sales growth in North America retail. There was a comment in the prepared remarks that you expect gradual long-term improvement in top line trends. And clearly, it seems like just based on your comment around exit rate on emerging markets and food service that the gating factor here continues to be North America retail. So maybe you can just update us on how you're thinking about timing of getting back to just maybe stabilization first and foremost, in North America retail. Carlos A. Abrams-Rivera: Thank you. For me, what I would say is, and if you go back to kind of the strategy, what's fueling our growth and the improvements in North America performance, it is all the fact that we have now invested through our Brand Growth System back in our products. So we're investing in our growth superiority. We're investing in better marketing, investing in better tool with e-commerce investments that we have made over the last 6 months, and that is giving us the confidence that we continue to see that now play into the marketplace. We ended last year with Brand Growth System impacting about 10% of our business. But at the end of this year, it will be about 40% of our business disproportionately focused in North America ACCELERATE platforms. And you can see how when we are applying that methodology, that actually is driving our improvement in performance. In fact, let me give an example of Capri Sun, which is a business that we renovated. We invested back in the business. We improved the marketing. We improved the products. We make sure that we highlighted the benefit that it have with parents and kids that has no artificial flavors, that we have superior taste, that we have better qualities in terms of things that kids love to have, that we have better promotions, partnering with places like Nintendo, that we bring in new ideas into marketplace like Capri Sun with new promotional limited edition products, whether that is we bring in new -- into new channels, whether it's club, whether it's convenient. So you see how when we apply the Brand Growth System on a brand like Capri Sun that is comprehensive investments we make, the improvement that it yields in our business. So that, along with the fact that we continue to step up our marketing, and as I mentioned earlier, about 30 bps to get us about 4.8% by the end of the year, that combination of the way we are investing, the fact that we're investing more and that we're using agile way to working to then take those learnings and apply it to the portfolio is a combination that we believe is the right tools in order to drive complete continued improvements in our North America retail business. Megan Christine Alexander: And then -- and maybe just a quick follow-up for Andre, on the gross margin outlook. Inflation, I think, overall looks to be unchanged for the year, that 5% to 7%, obviously, a wide range. But would you be able to just update us on what base input cost inflation is versus tariffs, if that's changed at all? And then how should we be thinking about what carries into 2026, just what looks to be given a kind of lower exit rate on gross margin in the back half relative to the first half. Andre Maciel: Yes. So in terms of inflation, before tariffs, we have the peak of the commodities hitting in Q2, but some of that in terms of P&L recognition got pushed into Q3, and we should expect that some sort of relief started in Q4, so it should start to reach the inflection point. We still have pockets of high commodity inflation, particularly on meat and coffee. Regarding the tariffs, the current expectation based on the latest is an impact of approximately 100 bps this year linked to the tariffs. And if the tariffs remain as they are right now, it will create a full year annualized impact of approximately 180 bps. So there will be some carryover into that effect in 2026. As I said before, there are a lot of actions in place with our procurement teams and also our commercial teams to mitigate as much as we can, being mindful about the current consumer situation. But some pricing is required, and that's what we are doing. Operator: Our next question is from Max Gumport with BNP Paribas. Max Andrew Stephen Gumport: Center store peers that have recently established their off-calendar FY '26 outlooks have embedded some pretty meaningful margin pressure over the coming quarters from substantial reinvestment. I recognize, with your marketing going to at least 4.8% of sales and media spending going up at least 20% year-over-year, you are also reinvesting, but it still feels a bit less sizable than what we are seeing from some of these peers. So particularly in light of the continued volume declines, just want to get a better sense for what's giving you the confidence that your investment plans for this year are appropriate. Andre Maciel: Thanks for the question. Look, we -- everything we do, we are always very disciplined in our investments, and we like to test investments before scaling them up. So we feel good about the actions that we are doing for this year. I think those are the right ones and the magnitude are appropriate as well. And as we said in the last earnings, if we see the results we expect from them, we will not hesitate to step up. Keep in mind as well that we are actively expanding the Brand Growth System to more brands as we speak. So this is part of the reason as well we have decided to step up investments a little more beyond what we initially said last quarter. And as opportunities show up, as part of this assessment, we will continue to step up investments. At this point, we're really trying to grow the business in a way that we think is the healthy like not through price, but through various stronger products and stronger attributes, stronger marketing, which takes more time, but what's the right thing to do. But we are going to step up investments if we deem appropriate. That's for sure. Anne-Marie Megela: Operator, we have time for one more question. Operator: Our last question is from Alexia Howard with Bernstein Research. Alexia Jane Burland Howard: Can I ask about the pace of innovation? If I remember correctly, you were pretty low on the innovation front for much of the pandemic and the global supply chain disruptions. But it sounded as though you exited 2024 at a somewhat higher rate, but probably still quite a lot lower than peers. Can you talk about where you're at today as a percentage of sales? Where you'd like to get to over time and how quickly you could get there, just so we can get a sense for how quickly that might be ramping up. Carlos A. Abrams-Rivera: Thank you, Alexia, for your question. I guess, let me just give you a little bit of context, which is for us, it's important that when we define innovation, we're also thinking through what are the places that we can, in fact, renovate many of our key products. So when we talk about our Brand Growth System and the fact that it allows us to focus on us, making sure we bring the attributes to consumers they care about in our core business, that is actually a key part of also thinking through how do we maintain innovation within our business. And I have to say, as you pointed out, I think that if we go back to 2022, I think the number on innovation was around 1.6% of our sales. By the end of the last year, it was about 3% of our sales. So we're going to continue to drive from that investment on innovation to contribute a larger part of our business as we go forward. But I would say it also is already paying off. So if you think about the innovation that we have brought in, like the experience of bringing the Taco Bell restaurant experience to home, it is now the second year in which we're growing the business double digit, and now we're expanding to Canada. I mentioned earlier, Capri Sun bottle that we are now bringing into club. We bring it into a single serve. And now it's achieving high levels of velocities to whatever we have taken that product outside of the pouch. And we're also making sure that we continue to drive innovation in our Heinz business, I mean, whether that is looking at how do we take it into pasta sauce, which is happening across many of our businesses across both Europe and Latin America, but it's also making sure that we continue to expand on the importance of our Heinz Mayo business across our international portfolio and continue to expand into new countries as we go into 2026. So while you're right that we continue to see opportunities for innovation, our focus continues to be making sure we have the right core products with the right renovation in those businesses, and at the same time, being thoughtful about how we are actually bringing innovation to market that has the long-term opportunity to be here for many, many years. And I'm pleased to what I'm seeing. I also think that there's more for us to do. The last thing I would say, yes, is important to recognize. And when we talk about the Brand Growth System, it also creates and highlights opportunity for us to go after new innovation. So you're going to continue to see us going to marketplace, whether that is, with the kind of focus on not only line extension and new exciting flavors, but ways in which we can actually continue to make sure our brands are relevant for now and for the future. More to come. Operator: This concludes today's conference call. We thank you for your participation. You may now disconnect your lines.

Operator: Greetings, and welcome to The Kraft Heinz Company First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Anne-Marie Megela, Head of Global Investor Relations. Thank you. You may begin. Anne-Marie Megela: Thank you, during today's call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments, and related timing and expected impacts. 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 statement and risk factors contained in today's earnings release which accompanies this call, as well as our most recent 10-Ks, 10-Q, and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under news and events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera, for opening comments. Carlos, over to you. Carlos Abrams-Rivera: Thank you, Marie. And thank you everyone for joining us today. At The Kraft Heinz Company, we are proud to be a trusted partner in kitchens everywhere, providing confident connections particularly in these moments of uncertainty. Now despite growing market pressure in the first quarter, we delivered top-line results in line with our expectations, with strong cash flow performance and a healthy balance sheet. We are also encouraged by the progress we are making in improving brand superiority. While these advancements are not yet reflected in the financial results, they do give me confidence that we are putting in place the right building blocks. Our commitment to making the necessary investments to deliver quality and value offerings to our consumers is unwavering. At the same time, we are closely monitoring market tension and have adjusted our guidance accordingly. With that, I have Andrew joining me. So let's open the call for Q and A. Operator: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question comes from Andrew Lazar with Barclays. Please proceed. Andrew Lazar: Great. Thanks so much. Carlos Abrams-Rivera: Carlos, you mentioned in the prepared remarks that the revised outlook provides Andrew Lazar: the necessary flexibility to dial in on investments as deemed appropriate. And that said, this is not the first time, right, The Kraft Heinz Company has sort of used this language around proposed investments. And so far, it's not proved enough, although, admittedly, in a very dynamic consumer environment. You know, many industry players, I think, have taken the approach of kind of, like, increasing investments on seems to be more of an incremental basis to see how the consumer reacts, almost like a test and learn approach. The magnitude of today's guidance cut is larger than previous ones, I'm still getting a lot of questions from investors, I guess, as to whether this is more of the same sort of approach or if you see it as more comprehensive in some way. Thanks so much. Carlos Abrams-Rivera: Good morning, Andrew. Thanks for the question. First, let me just say, we are continuing to invest in the business despite what we are seeing in terms of the macroeconomic uncertainty because frankly, because we are confident in the strategy that we have. And I think in moments like this, a company can be sometimes overly cautious and defensive. Or play offense. We are choosing to play offense with discipline. So we are, in fact, prioritizing investments in marketing, R&D, and technology. The way we are doing that, Andrew, is we focus on increasing returns of our marketing dollars by shifting more towards consumer-facing marketing. We are also making sure we are optimizing the location across the brands and media types so that we can, in fact, make sure we have the best ROI. We can improve the quality of the messaging at the same time. I mentioned investing in R&D. We are going to continue to invest behind the innovation pipeline. We are making sure we are closing the gap to our investment levels that is 1% of net sales. I mentioned technology. We are going to continue investing in our technology as well because that actually has helped us in terms of driving the efficiencies in the business by investing in things like automation and enhanced digital tools. But you also spoke to, you know, why is this different? What's different now versus in the past? I'll tell you one of the important parts of what is different is the fact that we are also investing through the brand growth system. And if you recall, the brand growth system is our repeatable global model for understanding how we see opportunities within our brands, and how do we make sure we drive superiority on those brands through both pack products and packaging and making sure that every has the right brand resonance value equation, and on the execution. So it's not just what we are spending, but how we are spending too. And we mentioned in the past that we have done this with about 10% of our brands in 2024. Out of way to pilot. That is, in fact, now being scaled up to 40% of our business by the end of this year. So that idea of us having more confidence in us investing because we now we have proven that the brand growth systems help us identify the right opportunities. And allows us to make sure we take the right steps in order to fuel the investments. I think it's part of why we are going to be playing offense with discipline. So you'll see us actually step up our investments in marketing also to make sure that as we renovate our products, we are supporting it with the right focus on the consumer communication. So we invest behind the BGS. We make sure we have the great products, package, and quality. Then we make sure we have the right communication to support that and drive that forward. It's something that helped us work with our Philadelphia brand in 2024. It helped us in a highest UK business in the last year. And now we are gonna be seeing that across all of our brands as we towards, 2024. 2025. Here in The US. Andrew Lazar: I think good morning, Andrew. Just to add to Carlos' So remember that in our prior guidance, we already had contemplated a step up in price investments. And just roughly speaking to the extent of hundred bps on the top line. So was a relevant investment and concentrated on those categories we have previously described. And we also had in the prior guidance already contemplated a double-digit increase in media. So we were still retaining our marketing percentage of revenue at 4.5 in the prior guidance, and we with that, we by reallocating expenses within the marketing bucket, we could free up double-digit increase in media. Now in this new guidance, we have opened the room to further accelerate our market investment. Remember that in our long-term algorithm, we want to be approximate at 5%. We have the midpoint of the guidance around 4.8% of markets, so a 30 bps step up. There is still this number might still fluctuate a little bit up or down depending how the dynamics happen throughout the year. Including final impact on tariffs. But we want to accelerate the step up to reach the 5% And we also have in the guidance some impact in COGS linked to product renovation, as Carlos said. As we continue to deploy the brain growth system we have we have seen opportunities not only to improve quality of messaging and have more media pressure, but also to renovate the products and ensure stronger superiority. Andrew Lazar: Right. Thank you both. Thank you, Andrew. Operator: The next question comes from Yasmeen Wandi with Bank of America. Please proceed. Yasmeen Wandi: Hi. Good morning, everyone, and thank you for the question. So I kind of wanted to dig in a little bit on North America and you know, the organic sales guidance update for this year. So just for 2Q specifically, there's a few items here to consider. You know, you talked about the Easter timing shift, and then there's a plant closure lap. But there were also impacts last year on Lunchables from the consumer report, and then you had the Capri Sun reformulation impacting consumption. So could you help size those impacts, if any, to the second quarter? And if there's anything else that we should consider that will drive a gap between North America shipments versus consumption. Carlos Abrams-Rivera: Sure. Good morning. Thanks for the question. Look, we expect second quarter top line to be better than the first quarter top line. The effect of Easter as I said before, is approximately 90 bps, a hundred bps. So that will be a tailwind in the second quarter. Yeah. In addition to that, we have emerging markets not part of The US, but we have emerging markets further accelerating from where we were in Q1. And inside The US, aside from Easter, we do have we're gonna see improvement in the accelerate platforms. So cream cheese and Oreo da for example, they decline in Q1, and that's this was totally expected because we are lapping competitors with out of stock issues last year. But now we growth, and we're gonna you're gonna see growth in those two categories in the quarter. And to your point, we will see some improvement in Lunchables. It's still not be the levels that we believe we can achieve. As part of as the main renovation hits the market at the end the second quarter. But you should see lunch goes improving, particularly after mid-May and June. So that's when we really start to fully lap the consumer reports from last year. On the Muscatine, on the factory, we are lapping that as we head into the second quarter. But taking to mind that the industry food service has slowed down quite a lot this year. So we are not gonna see necessarily a growth in away from home in the second quarter. But beyond that, you will see the accelerate platforms sausage, cream cheese, meals, and snacking with a better performance comparison to Q1. Yasmeen Wandi: Okay, great. Thank you. That's really helpful. And a quick follow-up to that. Just looking into the second half of the year, obviously, understanding that February, you'll see some nice improvement on volumes given, you know, the onetime items that you just mentioned. You know, your organic sales cut was basically all volume since the price and contribution is was left unchanged. You see a need for North America volumes to inflect positively in the second half in order to hit your guide? Or do you expect growth in international, particularly in emerging markets, to be enough to hit your guidance? For the year? Carlos Abrams-Rivera: No, we don't need In fact, in our the midpoint of our guidance total company does not get you positive in any quarter. Yasmeen Wandi: Okay. Great. Alright. Don't need calling. Okay? Operator: Alright. Thank you, guys. Great. Next question comes from Tom Palmer with Citi. Please proceed. Tom Palmer: Good morning and thanks for the question. I wanted to ask on the COGS inflation, the revised outlook Just any breakdown of how much of that is related to tariffs versus maybe other drivers of that increase? And then just the timing of when we really start to see that step up. Thank you. Carlos Abrams-Rivera: Sure. So in our prior outlook, we had inflation at 3%, So before any tariffs, our guidance is step up to 5% of COGS. Particularly in some commodities like coffee and meat. We saw a big increase in comparison to rest of the last time we met. So the base inflation was already up to 5%. And now with the tariff impact, mean, obviously, a lot of uncertainties still around that, but we do estimate with what we know so far an impact in 02/2025 of 50 to 200 bps on the COGS. Timing wise, Look. We don't know for sure. Right? We are assuming that this would be concentrated in the second half. Maybe there'll be some impact in the second quarter. We build some inventory where possible in certain items as we anticipated that to happen. So that gives a little relief of a month maybe two in some of the items. But the impact should be mostly concentrated in the second half. Tom Palmer: Perfect. Thank you for that. And I noted or sorry, I noticed that there wasn't a change in kind of that pricing outlook, as Yasmeen just noted. But it sounds like is it there's price investment in some areas and then there is incremental pricing in other areas? Maybe just any detail you can provide there. Carlos Abrams-Rivera: No. In the midpoint, of the new guidance, we don't have further investments in price in addition to the hundred approximately hundred bps. We already had content in the initial outlook. So the incremental investments as I said, is mostly on marketing, particularly media. Product renovation. And there is some sampling investments because we remember that as we renovate the products, including the ones that we have renovated year, like Capricorn, really need to step up the trial curve. So we are stepping up sample investments heading to the summer. Tom Palmer: Alright. Thank you for the details. Operator: Thank you. The next question comes from David Palmer with Evercore ISI. Please proceed. David Palmer: Thanks. A couple of questions. You updated that your inflation guidance Thanks for your comments there on the tariffs. Being incorporated in that. I wonder how you're thinking about pricing offsets to that. And know, when it gets to a certain level of in input in inflation and your willingness to price that away, are there levels where you have to be cognizant of rising price elasticity perhaps over a few percent, for example, where you're more aware and of any sort of list pricing, and you have to start moving towards other types of adjustments or offsets, And then I'm and then I separately and, Andre, I know you've been very active in thinking about, you know, promotional activity and returns on that promotional activity. We look at our data, it looks like The Kraft Heinz Company has been a little bit different than some of the other larger food companies and that it's well below 2019 levels in terms of its volume on promotion, whereas some many many years, if not most, other companies look like they're at those levels already and continuing to rise I'm wondering if you kind of recognize that juxtaposition and how you think about the promotion strategy going forward. Is that something that you're noticing as well? Thank you. Carlos Abrams-Rivera: By the way, let me start with the second part, Carlos, and then have Andrew gonna comment a little bit on the first part of your questions. You know, first of all, what you're seeing is the fact that it follows our strategy. I mentioned earlier that we are going to continue to make investments and play offense with discipline. I think for us, it's the opportunity to make sure that when we are investing we are doing this in a way that is thoughtful about the return of that investment and that we are building something that supports our strategy and allows us to grow not only in the short term, but really in the medium and long term. What we're investing in in pricing for a promotional event, is because we believe that actually creates the kind of base volume opportunities as we go post that particular event. So you'll see us continue to invest in times of the year that consumer needs us. Whether that is now Memorial Day, whether it's July 4, whether it's back to school. Just gonna do it in a disciplined way to make sure that, again, it's supporting the stride that we have and not just change a short term volume that actually doesn't essentially, all you do is kind of rent you know, rent volume for a short period of time. The other piece that is important to notice that when we're making those investments, we're also doing in concert with our brand growth systems investments. So that when we are going for a back to school time period and we have now a renovated you know, new Lunchables, whether we have a renovated new Capri Sun, that's a moment for us to not only stimulate the demand, but also making sure that then consumers get to try the best product that we have ever made on those categories. So I think it's that combination that is kind of guiding our principles versus kind of how competitors are playing at this particular time. They're choosing different strategy. You know, we believe we want to make sure that we're doing things smartly because our focus is continue to drive profitable growth for the future. Andre, you wanna comment on the first part? Yeah. So hi, Dave. Look. On the promo side, Carlos said, we will continue to be disciplined and really seeking those promotions with good returns. You will see a step up in promotion activity during the key windows, particularly now in summer. So it will that number stepping up as part of our initial guidance. Again, we have approximately a hundred bps of incremental price investment in The US. And on regards to pricing the tariffs, look. We are trying to do everything we possibly can to minimize the amount of price necessary. So even things like to delay, we have anticipated some purchases. We are looking at alternative sourcing. There is opportunity for, in some case, reformulation, which takes a little bit longer. There are opportunities on the mix side. There are certain SKUs within a category that are less impacted than others when it comes to tariffs. So all of that is at play. We are stepping up productivity in the year. We started the year expecting 3.5% of COGS. Now we're expecting a little more than that. So we are taking all the possible levers but pricing might be necessary. So but again, I think this is that it is work in progress. David Palmer: Thank you, Thank you. Operator: The next question comes from Chris Carey with Wells Fargo. Please proceed. Chris Carey: Hi, everyone. I wanted to ask you a question about gross margins and just a follow-up elsewhere. From a gross margin perspective, specifically the Q2 weakness, that you're expecting and in the context of just how this typically works, you know, is the primary driver of Q2 gross margin weakness coffee inflation, And I guess I asked that question in the context of, you know, historically, is really a pass-through category. Where, you know, pricing comes through to offset the inflation. Understanding there's always gonna be quarter to quarter volatility, but are you seeing perhaps less ability to pass through the coffee inflation just given the overall coffee inflation backdrop? And then I you know, just secondly, are there any, you know, areas within your portfolio or broader portfolio where you're seeing, you know, more bright spots from a market share perspective? Because think, you know, it's similar to last quarter. Where we continue to struggle is you know, the categories have clearly softened, but market share performance has come under more pressure. So what are those things that you've been doing over the past few months maybe specifically where you're saying, okay. That you know, that specific strategy is working to kinda write the ship here because it's been a bit harder to see know, in the data. So thanks for those two items. Carlos Abrams-Rivera: Sure. Thanks for the question. I will start with the Q2 margins. So basically, we do expect pressure on the gross margin in the second quarter, and there are a few different items affecting the margin. The first one is, as I just said in the prior question, we do expect a step up in the promotion activity as we start the shipments for the summer season. So we will see a lower price in the P&L. The second we are facing impact of some hedge losses in the second quarter. And they are quite large, and the good thing is that once they roll off, heading to Q3, we'll start to see some of those commodities that's starting to come down, like dairy start to flow through the P&L. And third, to your point, there are some increasing in certain commodities in Q2. And the way we see right now is some of them are gonna reach the peak in Q2, and that they should start to go backwards. Or decelerate at the least as you head into the third quarter. So those three elements are the key contributors for the gross margin pressure that we are seeing. And there is a little bit as well of the product renovations that we're starting to step up. So as a result of that, plus we're starting to step up investment in marketing. We do the operating income to decline double digits in the second quarter. When it regards to the bright spots, that's over two. Yeah. Listen. I think if you look at our year to date, our latest five weeks versus the year to date, you see us making progress in all of our accelerate businesses. So whether it's cancellation, whether it's ready to eat meals, whether it's snacking. So all those things are progressing. I think in Q1, obviously, we had the impact of Easter. I think as we are seeing now the data with several weeks of the Easter now read, we are going you are gonna continue to see that improvement. And I think, for example, in a business like our Philadelphia cream cheese, which as we now kind of pass the Q1 lapping of the private label not have been on the business in the category last year. You see that continue to drive growth, whether you see that in our desserts business that continue to drive growth after reformulations and focusing on better for you products on in that category. So you will see that many of the investments we'll make it. It will continue to play out as we go through the year. And I mentioned that in the opening statement, is a lot of the great things that we are seeing in terms of the building blocks and not yet all reflecting the data, but those are things that you'll see us as we continue to progress throughout the year. I'm also frankly very encouraged about the fact that, you know, some of the big innovations we have done have continued to now drive growth. So a business like our Mexican strategy that we didn't have two years ago grew double digits last year, and we are growing double digits again this year. So that I also give me confidence in fact that as we are building innovation, we're doing it with the right insights with consumers to drive growth that is sustainable and profitable for the long term. Thanks for your question. Anne-Marie Megela: Operator, we have time for one more question. Operator: Our next question comes from Megan Clap with Morgan Stanley. Please proceed. Alexia Howard: This is Alexia on for Megan. The prepared remarks, you guys mentioned the wider operating income guide partly reflects changing policy landscape. Should we be thinking about that from a top line perspective, or is that related to cost? Just any incremental color you could give there would be great. Thanks. Carlos Abrams-Rivera: Thanks for the question. Look, there are as you know, a lot of things being discussed and under consideration that may have implication on the business, positive or negative. So part of the reason why we have this wider range is to contemplate a whole different set of scenarios that can come into play. So we're trying to just provide, you know, the flexibility knowing that there is a number of things that are still bought out. But in that guidance, and you'll see us that we are acknowledging some of those things. We're preparing for those things. And also at the same time, sure that we have the right flexibility to invest back in the business in order to drive the trade that we have. And then fuel the opportunities that we are seeing with our brand growth system to expand back in our brands. So that's all reflected in the way we're kind of shaping the year ahead. Thank you, Alexia. Anne-Marie Megela: And thank you everyone for joining us. Operator, that concludes our Q and A session. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Operator: Good morning, and welcome to The Kraft Heinz Company Quarter 4 2024 Earnings. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Anne-Marie Megela. Thank you. Anne, you may begin. Anne-Marie Megela: Thank you, and hello, everyone. During today's call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under News & Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera for opening comments. Carlos, over to you. Carlos Abrams-Rivera: Well, thank you, Anne-Marie, and thanks, everyone, for joining us today. I want to thank the Kraft Heinz team for their hard work and dedication this past year. Even though it was a tough year, we stayed focused on building for the future and improving profit margins while boosting the free cash flow. We do know that the economic landscape is rough, but we are proud that we returned $2.7 billion to our stockholders through share buybacks and dividends, which provide the highest yield in the food industry. Looking ahead to 2025, we are seeing key successes that aren't yet showing up in our financials and we are expecting to see improving top line throughout the year while preserving profitability. Frankly, I'm proud of the progress the teams are driving and confident that our strategy will yield long-term returns for our shareholders. Now with that, today, I have Andre joining me. So let's open for the call -- for the Q&A. Operator: [Operator Instructions] And our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Great. Carlos, you mentioned a number of times in the prepared remarks the plan to be disciplined in how you approach reinvestment this year, specifically calling out your expectation for some gross margin expansion and flat price in '25 despite the stated plan to invest in price in some key areas. I guess, what I'm hearing most from investors this morning is that they're really wondering if this outlook provides enough room to do what's needed this year to get the key brands back into volume growth. So I guess, my question is sort of what gives you the confidence that this plan is accounting for an adequate level of investment given sort of current market share trends? Carlos Abrams-Rivera: Thanks, Andrew. I think, first of all, I guess, let me put it into context of the margin expansion. If you think about 2024, we increased our margin by 100 bps. When you look at the way we're seeing 2025, it's somewhere between flat to 20 bps. So while, yes, it's an expansion, it certainly is much reduced than we have had in the past. And if I think about now our plan and what gives me confidence, let me just highlight a couple of things. First, if you think about our growth pillars, we actually have a head start going into this year and let me break it down in each of the growth pillars. In Away From Home, 75% of new customer wins are already locked in. That's about 40% of a year-over-year incremental growth in our Away From Home business. Now in Emerging Markets, we are building on the 17% distribution increase with new 40,000 additional points planned in 2025 that we have already mapped out and making sure that our teams are clear on where they're going to be able to secure those. And then frankly, in North America Retail and the rest of the business, what you see is that 75% of the 2025 innovation pipeline is already locked in. And on top of that, we also are leveraging our Brand Growth System that we have proven through the pilots that we did in 2024. So in each of our pillars, we have things going on already into 2025 that is about us continuing versus completely something new. And at the same time, and you mentioned this in your question, we are investing in certain places, we are investing in price, we are investing in product and we are investing in marketing. We're making sure we're prioritizing those brands, that we know that we can benefit from having the Brand Growth System insights. We are investing in technology-led solutions that are actually helping us drive the efficiencies that lead to improved margins. And then lastly, we continue to shift more marketing dollars towards consumer-facing marketing as we go into 2025. So again, those are -- that's the way kind of I see it is it gives an opportunity for us to expand in a more modest way our margins, but at the same time, coming into the year with things that we have built in 2024 that now we can see reaping benefits in 2025 along with investments specifically in price, product and marketing. Andre Maciel: I'll just add to that, Andrew. So I will add that when we think about our top line improvement, as Carlos said, it does not only come from price. It comes also from lapping some of the challenges we faced last year and also comes from other product enhancements that we have been deploying since the second half of last year. When I think about the gross margin, we do expect another year of efficiencies higher than inflation. And we are going to price the inflation linked to commodity categories, coffee being one example, like we have done historically. So there is some price embedded into the plan in commodities and emerging markets. So the combination of efficiencies ahead of inflation, price in emerging markets and commodities give us some room to be investing more in price or trades in the places where it makes the most sense. Operator: Our next question comes from Peter Galbo with Bank of America. Peter Galbo: I wanted to ask about the top line and the pillars maybe in a slightly different way. Just within the organic sales guidance for '25, Andre, how are you thinking about the growth rates for each, ACCELERATE, PROTECT and BALANCE, within that organic sales guidance? And then the part B to that question, Carlos, I think a year ago you kind of gave us market growth rates for each of those ACCELERATE, PROTECT and BALANCE, how you see the market growth for '25 comparing to those targets you gave us a year ago. Andre Maciel: Okay. I can start. So I think about the pillars of growth. First, Emerging Markets, we will see gradual improvements building from Q4 in all the quarters and we do expect to exit '25 at double-digit growth. In Away From Home, we do expect some slight improvement in Q1 to flat to Q4, but then building from the base gradually throughout the rest of the year and probably exiting around the mid-single-digit that we territory. So still below algo, but a good improvement versus 2024. And inside the ACCELERATE platforms in the U.S., we do expect an elongated recovery, as we have said before. And most of the U.S. improvement in trends in Retail comes from ACCELERATE. So that's where we are investing most of the price. That's where we are investing a lot of our product enhancements. So that's where we're going to see -- you should see a sharper improvement again throughout the year. Not as much in Q1 for the reasons I already mentioned before. I think investments get more concentrated from Easter and also there is the Easter effect between Q1 and Q2. But at the end of the year, you should see ACCELERATE being the one driving most of the improvement in the U.S. Carlos Abrams-Rivera: I guess, what I would add is I think we all can agree that tactic wins battle, but strategies win wars. And our strategy hasn't changed. We have not only continued to drive resources and prioritizing our ACCELERATE platforms, but also making sure that a year later we continue to live under the roles of each of those particular categories. So I feel great about the fact that we see kind of how our balanced portfolio continues to live into the role of making sure they're contributing with the right margins, at the same time, making sure that they are bringing renovation and innovation into the categories to make sure they're relevant with consumers. But again, our strategies haven't changed and any 1 year is not going to make us change that. I think that we -- as we stand here, I'll tell you, I feel even more confident that we have this right strategy for us to deliver our long-term algorithms over the long term. Operator: And our next question comes from John Baumgartner with Mizuho Securities. John Baumgartner: I wanted to ask about the marketplace activities in the U.S. and the market share softness. As you reduce the unprofitable trade, which is net positive for margins, are you getting the sense that maybe your consumers have become a bit more accustomed or trained to buy on deals a bit more for your [indiscernible] Where you're reinvesting elsewhere, whether it's in marketing or display, the lifts on that are just sort of insufficient to counter the volume drag. I'm just curious if maybe making these changes to promo is a bit more painful upfront than you had anticipated with the elasticity to the consumer. Andre Maciel: As we said throughout the last year, I think not all promotions are working the same as they used to. We do believe that base volume has also a significant implication on the size of lifts that we observe. So base volume is an area that we're paying too much attention to, especially, again, a lot of the product enhancements should help that base, which should give us a stronger starting point for the lifts to come up. There are places where we are contemplating as well base price changes instead of simply a promotion. So there is a discussion in some categories that might make more sense one versus the other. And on promotions, again, we have seen typically higher frequencies working better, not necessarily deeper discounts. You're going to see some of that reflected as we head into next year. Carlos Abrams-Rivera: The only thing I would add -- this is Carlos, is one of the things that we continue to see is consumers increasing the number of locations in which they buy their food. So we are seeing smaller size of baskets per trip, but an increase in the number of trips. So for us, it's also important not just to make sure that we have the right price, but that we also have right distribution in different channels in the U.S., which is why our expansion in dollar channels, club channels where we actually are seeing growth as well, too. So for us, it's making sure that, again, we have that combination on where the consumers are shopping at the right price point for us to make sure that we are attracting the purchases for consumers at the moment they need it. Operator: And our next question comes from Ken Goldman with JPMorgan. Kenneth Goldman: I wanted to dig in a little bit on the increase in your tax rate, if I could, into '25. We've heard from a number of multinational food companies and beverage companies in the last couple of weeks, I don't think any of them have really talked about quite the increase in tax that you're about to experience. I didn't know if there's anything unique in how you had previously considered tax in some of these other countries that we should consider or if there's anything you know about that's slightly different in how you approach the way you think about tax rate and so forth with the understanding that, of course, your tax -- your cash tax rate isn't going up quite as much. So just wanted to get a little bit of color there. Just -- it just seems a little bit more unique to Kraft than what we might have expected given the size of the announcement. Andre Maciel: Look, I think companies have different strategies when it comes to taxes, so it's difficult for me comment on what others have. We did have a more competitive tax rate in the P&L compared to other peers, you can see that very clearly. We had to record in December -- in Q4 a $2.4 billion tax benefit in the P&L -- in net income this quarter and that's linked to a transfer we did in a certain business operation. And that was part of the efforts to reduce the cash impact of several countries enacting the global minimum tax regulation. So we did have this relevant benefit in the P&L this year. But as a consequence, the tax rate in the P&L will have a 500 bps increase starting '25. On the flip side, a $2.4 billion P&L gain will translate into approximately $120 million cash gains per year for the next 20 years, which makes the impact in our cash tax rate, which ultimately is the one that I'm most interested at being about 200 to 300 bps, okay? So you will see this is one of the reasons, not the only, why also our cash conversion is expected to be around 95% into '25. Operator: And our next question comes from Leah Jordan with Goldman Sachs. Leah Jordan: I wanted to ask about Lunchables. Just seeing if you could provide an update on how you see the recovery in that business. I know you had a supplier issue in the fourth quarter. It seemed like it was going to be resolved in 1Q, but the January data does still look a bit soft. So how should we think about the improvement from here? Is it more just needing price adjustments? Or is it more of a step-up in innovation as you're planning? And then just any color on the competition you're seeing in the category from private label and smaller brands. Carlos Abrams-Rivera: Thank you for the question. First, I would say is that the supplier ingredient issue that we faced in Q4 still lingers through Q1. We will have that -- we will exit Q1 in a much better location in terms of service. So I think that, that you still see as we see the data in January. But again, as we go through the quarter, that will improve significantly. Now in terms of the overall category, what I'll say is our focus has been how do we continue to invest in the business that we believe can be a great source of growth for us as a company. And I'm proud of the fact that the team had been looking at using our Brand Growth System, looking at the places that actually can solve different pain points for consumers. So you'll see as we go through the rest of the first half a product that is much improved with better quality, better ingredients and us continuing to bring different innovation and marketing to our Lunchables business. So I think what you see right now, don't think of that as a sign of how the year is going to be, but you'll see that still there's a lingering effect of that Q4. Andre Maciel: If you look at the sellout December and January, for example, for Lunchables, there are 4 SKUs in particular that are linked to the upstream supplier issue that we mentioned that are declining more than twice the average rate of Lunchables as a whole. And those are dragging the sellout down quite a lot in these last few months. We do expect that to continue to happen into February. We think the service issue will be fully resolved during the month of February and then we're going to see a gradual recovery on the sellout from that point onwards. Operator: And our next question comes from Tom Palmer with Citi. Thomas Palmer: I wanted to just ask on, and this is a little bit of a follow-up, but on the organic sales growth and inflection as the year progresses. I think the comment in the prepared remarks was sequential improvement throughout the year. It sounds like the second quarter has maybe some unusual timing benefits with the Easter shift and then also lapping the plant downtime from a year ago. So just trying to understand, are we looking for kind of an underlying sales trends, this bigger inflection starting in the third quarter to overcome that? And if so, kind of what are the key drivers of that inflection? Andre Maciel: Thanks for the question. So yes, in the second quarter, you should see a relevant improvement on the trends. But only because of Easter being about 100 bps shift from Q1. But also we start to lap the factory closure -- temporary closure we had in the quarter. We start to lap that Lunchables report that was issued early in April. So those 2 things alone will -- these 3 things alone will have a relevant improvement in the trends, plus the fact that, as we mentioned before, price investments start more pronounced as we head into Easter and beyond and as we continue to launch some product enhancements, Lunchables being one of them. Operator: And our next question comes from Michael Lavery with Piper Sandler. Michael Lavery: Wanted to ask a similar question to Andrew's, but with the advertising as opposed to promotional spending. You pointed out the 4.5% level, but that does include market research. And even for peers, excluding that, the advertising level is -- averages closer to 5% or more. Is your marketing spending enough? And I know it's come up, but with just competitive and consumer dynamics, is that at the right level? Does there need to be some upside to that figure as well? Carlos Abrams-Rivera: Listen, I guess I will start by saying -- and thank you for the question, not all brands, not all countries are created equal. So I think one of the things you see is that we're also making sure that some of the analysis that we have done in the past years is that we have kind of the right levels of marketing in different categories and in different countries based on our needs and what it means to be successful. The second thing that you should also know is that we talked about earlier, we have especially designated categories to ACCELERATE, PROTECT and BALANCE. Our marketing dollars are going to continue to follow that. That is part of the strategy of us making sure we invest in those businesses that we believe have a bigger tailwind as we go forward. So again, in a different level of spending by different type of strategy. And the last thing I would say is one of our focus has been over the last 2 years doing 2 things: first, making sure that we improve the return of every dollar that we invest in marketing. So we have the analytical tools to allow us to do that. And second, that we continue to shift more dollar from nonworking into working. So I think as we go into 2025, you'll see us that even though we may stay at the same levels of overall spending, there's actually a dramatic shift in terms of how much consumers will see in terms of our marketing as we are shifting away from, again, places of nonworking dollars, being more efficient with those dollars so that actually can be beneficial to the brands. Andre Maciel: And just to complement, as we have said before quite a few times, we do believe our sufficiency levels are around 5% and we're going to gradually get there. But to Carlos' point, one of the benefits, among others, of the Brand Growth System that we are deploying now is shedding light on opportunity for us to be a lot better in the returns of the marketing investments. So you'll see in '25 we are going to release $60 million to $80 million more marketing, like brand media marketing, which is quite a lot, more than a 10% increase, in our overall media investment. That's coming from nonworking dollars. And within the media, there is also a lot of efforts to redeploy media to places that provide higher return, be it about media levers or across certain brands. So even though the P&L will be flat as a percentage of revenue on a year-over-year basis, you'll see a lot more marketing pressure, which is important. Operator: And our next question comes from Chris Carey with Wells Fargo Securities. Christopher Carey: I wanted to ask, I guess, a bigger picture question. I think one of the things I personally struggle with is that the categories in which you compete are actually running more or less in line with historical growth rates. Not amazing, but more or less in line. And your business is just underperforming those categories in which you compete. And certainly, there are specific categories that have had some issues and you'll be lapping those and clearly that will be helpful. But it does feel like there's a bit broader of a dynamic underway. And I think that's where some of these questions are coming from around pricing investments and what's potentially needed in the acceleration of organic sales growth. I guess if you could diagnose what you think is driving some of this underperformance relative to categories on a broader level, whether that's execution, whether that's affordability. And really what I'm getting at, I suppose, is say we're sitting here in a few months and we're not seeing the pickup, what is the correct action to take? Is it incremental pricing, incremental advertising, a rethink of execution? So I realize that's a big question, but I'd love your observations or thoughts on this topic. Carlos Abrams-Rivera: Thank you. Appreciate the question. I guess, let me just start by putting things in perspective a little bit in terms of the way I see it. Our portfolio is about over 200 brands and over 40 countries. If you think about today where we see our challenges, they are concentrating in 4 brands and only in the U.S. Retail business. And so it actually helps quite a bit for us to make sure that we are being focused on our investments in products and pricing in order to drive top line improvements in particular in those areas that, again, there are a subset of the large brands that we have in a number of countries we participate. At the same time, we're doing that, we're also being conscious of making sure we manage through our margins so that we don't go backwards in our gross margins. And in terms of the investments we're making, I think that it's easy for us to just point to the things that we actually have proven already. Let me give you an example of Capri Sun . We've actually improved 5 points in dollar sales in the fourth quarter. And that came about us renovating the product to make sure we win on taste, innovating, we're bringing new multi-serve packaging, single-serve bottles, bringing value to consumer, expanding into convenience channel. And at the same time, we're already seeing how the multi-serve product in club is actually becoming a top quartile item. So for us, it is that we already have kind of a blueprint in which we have applied our Brand Growth System to the critical brands in order to see results that we will continue to see -- experience as we go forward. So I know that sometimes it can seem like a lot. But again, for us, it's specific, it's a few brands, it's in the U.S. Retail and it's places in which we are attacking, leveraging kind of the proven methodology that we have now developed through our Brand Growth System in order to drive top line growth. Andre Maciel: The other thing I will add is, look, there is not one answer, like there's not a silver bullet. I think given the different categories that we play in, different dynamics, the approach differs a lot. So there are places where, yes, it's affordability and that's where we are going to invest the price the most, to ensure that the price gaps are established. There are places, which is about continuing to invest in the products to maintain or increase product superiority. And that's where we see investments in places like Capri Sun, Lunchables and there are a few others. So you will see next week in CAGNY, I think that there are good answers for what you're seeking for because there is a lot of time in that presentation that we're going to be talking about, our path to growth, given specific themes across the different platforms. So I think you're going to see what you're asking in more detail over there. Operator: And our last question comes from Alexia Howard with Bernstein. Alexia Howard: Okay. Can I hit on the GLP-1 topic? We've seen other protein-focused companies in North America already announcing plans to lean into the rising uptake of these GLP-1 injectable weight loss drugs. First of all, do you believe Kraft Heinz is seeing any impact from them? And what opportunities are there to meet the unmet needs of these patients over time? Carlos Abrams-Rivera: Thank you, Alexia. I guess, let me start with the last part of your question. And no, we have not seen any meaningful impact from GLP-1 in the business. Now we do know that consumers who do use GLP-1s, typically what they're looking for is more protein and more hydration alternatives. So here at Kraft Heinz, we're making sure we continue to provide those choices for every consumer. And we've seen that, whether that is making sure in our portfolio that we highlight in products like Oscar Mayer, Lunchables, P3, even our quesadillas and Delimex and Heinz Beans, the amount of protein that actually can deliver for consumer in taste and accessible and affordable way. And then at the same time, we're also making sure that we are continuing to drive the importance of us elevating the portfolio of any product that has protein. So the fact that we have this Taste Elevation product platform within our company allows us to make sure that no matter what protein people are using at home, that we can actually elevate it and make sure that it delivers a great taste they're looking for. So I think you'll see us continue to emphasize this in approach as we go forward because, for us, it's important that we provide choices for every consumer and every lifestyle. Thank you, Alexia. Anne-Marie Megela: Thank you, everyone, for your questions. Thanks, everyone, for your questions today. We look forward to seeing you all at CAGNY next week. Carlos Abrams-Rivera: See you next week. Thank you. Operator: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Operator: Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Anne-Marie Megela, Global Head of Investor Relations. Anne-Marie Megela: Thank you, and hello, everyone. Welcome to our Q&A session for our third quarter 2024 business update. During today’s call, we will make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments, and related timing and expected impacts. These statements are based on how we see things today, and actual results may differ materially due to risk and uncertainties. Please see the cautionary statements and risk factors contained in today’s earnings release, which accompanies this call, as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today’s earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com, under News and Events, for discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I will now hand over -- I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera, for opening comments. Carlos, over to you. Carlos Abrams-Rivera: Thank you, Anne-Marie, and thank you, everyone, for joining us today. As we report our third quarter results, I first want to recognize the entire Kraft Heinz team for their continued dedication to making life delicious for our consumers. In today’s uncertain environment, people are increasingly seeking value. Our commitment to serving them with our iconic brand remains unwavering. For our stockholders, our focus remains on executing against our strategic pillars, driving profitable growth and generating strong cash flow. Both Global Away From Home and Emerging Markets are growing and gaining momentum, and we are addressing areas for improvements in U.S. Retail. By maintaining a disciplined management approach and long-term perspective, we are able to navigate today’s near-term volatility while generating strong cash flow and reinvesting in the business. We have the right strategy, we have amazing talent and competitive advantage culture. This gives me great confidence that we can drive consistent, long-term, profitable growth. And with that, I have Andre joining me. So, let’s open the call for the Q&A. Operator: Thank you. [Operator Instructions] Our first question comes from Andrew Lazar of Barclays. You may proceed. Andrew Lazar: Great. Thanks. Good morning, everybody. Carlos Abrams-Rivera: Good morning. Andre Maciel: Good morning. Andrew Lazar: Good morning. So, Carlos, I know initially, right, Kraft Heinz expected to return to sort of an on-algorithm pace in the latter part of this year. Your comments in the prepared remarks suggest you now don’t expect to reach an on-algorithm pace during 2025. So, first, just to clarify, is that a comment on the totality of the year or you don’t expect to hit your algorithm at any point during the year? And then as you diagnose the elongated recovery in U.S. Retail, how much of this is sort of execution-related or simply a consumer that has not yet fully adjusted their reference price points to the new levels and you having to sort of nudge them along a bit more than you might have initially thought? Thanks so much. Carlos Abrams-Rivera: Thank you, Andrew. Let me start, and then maybe pass it off to Andre to give the details of how we see the impact of the long-term algorithm. I guess, first of all, I’ll say, certainly, this year has been very different than I think many of us in the industry expected. So, I think, when we think about what we thought was going to be the exit versus what we see now, a number of circumstances have changed, but I think we are, frankly, better reacting to what the reality of the consumer, particularly in the U.S. and that has implications on long-term algorithms. So, I think, Andre, if you can just cover to that and then I can go back and talk about the execution aspect of your question. Andre Maciel: Sure. So, thanks for the question, Andrew. As you rightly pointed out, we do not expect at this moment to reach algo on any part of next year, and as we said in prepared remarks, we do expect Away From Home Globally and Emerging Markets to continue to improve and continue to grow, and we’re going to see migrating closer and closer to the long-term algorithm. Emerging Markets continue to deliver volume growth that has been throughout the entire year and the pressure will be mostly concentrated on the U.S. Retail part of the business. We -- as Carlos said, I think, the industry dynamics this year did not go the way that we initially anticipated and we’re exiting the year in a softer position, and we do expect, even though industry next year currently we expect should be in line with levels pre-pandemic, we do expect propensity to trade down, continue to be very elevated at similar, if not higher levels than what we have this year, which will continue to put pressure on share. The good thing about that is we remain very confident in what we’re doing in our strategy for the long-term. We are being very disciplined in how we want to grow the business, for us it’s critical to be focused on growing our base volume in a healthy way, better innovation, higher marketing, and being very prudent and surgical on where promotions make sense or not, and because the problem is very concentrated in four categories that represent the vast majority of the U.S. Retail challenge, some of them, as we have said in prior earnings, take a longer time to recover. You’ve got Capri Sun, for example, where they did a firm renovation, as we have said, it takes time until the trial gets generated and the repeat happens. So we need to be prudent. We are confident in what we are doing, but there is a longer trajectory out there. And with that, for execution, Carlos going to say a few words? Carlos Abrams-Rivera: Yeah. Let me just start by saying, as I said in the prepared remarks, we do feel like we have the right strategy, and frankly, if you look at our two out of our three strategic pillars for growth, they are working and gaining momentum. That also gives me quite a bit of confidence in terms of our ability to execute, and in fact, the reality is that we have also delivered consistent, best-in-class productivity levels for five conservative quarters about 4% of COGS. Again, our ability to execute shows up that way. And if you think about Away From Home, you think about the way that the year began and how we were able to navigate that storm and be able to gain momentum as we go into the second half, again, our ability to execute in that area. If I think about Emerging Markets, the fact that we are growing volume, we are gaining share, we are increasing retribution, again, our ability to drive execution in that area as well, too. So we have a number of things that I think are going well that give us the confidence and now we are also diagnosing kind of their specific areas in U.S. Retail that, frankly, we know what we have to address and we are going to be putting our entire company focus on making sure we make the right turnaround on those businesses. Thank you, Andrew. Andre Maciel: Thank you. Andrew Lazar: Thanks for your thoughts. Yeah. Thank you. Operator: Thank you. Our next question comes from Ken Goldman with JPMorgan. You may proceed. Ken Goldman: Hi. Thank you. I wanted to ask about Lunchables. On the one hand, you are optimistic you can turn the brand around. I can certainly appreciate some of the challenges, and I guess, your upcoming efforts in a positive direction. On the other hand, you did take a pretty large charge today, which is related to Lunchables, and I guess, that does not really happen if there is an internal belief that the brand can fully come back. So, can you kind of walk us through how to balance -- I do not want to say it is an optimistic tone, but certainly you are encouraged about the ultimate path for Lunchables and how to balance that with the charge you took today and is it fair to say that that charge reflects your belief, I guess, that the brand may not ever return to what it once was? I guess that is the underlying question here. Carlos Abrams-Rivera: Yeah. Thank you, Ken. I appreciate the question. First of all, let me just be clear. Lunchables is a very important part of our business, and defending a number one market share is a top priority. Full stop. Now, we are expected to see gradual improvements, but at the same time, we also recognize where we are right now. And part of that, I would say, is the negative publicity that we receive from that misleading interest group appears to be lingering longer. Remember, this is a brand that is focused on families and kids, so rebuilding that trust just takes some time. At the same time, we are seeing some competitive entry coming into the category, and in particular, and again, this is only for this particular quarter, we are seeing -- we are managing a particular supplier ingredient issue that we know that is a short-term focus on. So let me, I guess more importantly, let me tell you what the things that we are doing to recover. First of all, we are continuing to invest to expand the category penetration in this changing competitive environment. We are expanding flavors and formats. We just introduced a new spicy nachos that is launching nationwide as we speak. We are reimagining how we think about value at the shelf. We actually launched a new campaign for both parents and kids as we go into the first half of 2025, and at the same time, we are investing to renovate our entire line as we go into the first half of next year. Now, beyond this, we are also pulling forward a brand growth system to deploy against Lunchables to make sure that we have brand superiority for now and the future. And just to make sure that we have the right kind of nomenclature, brand growth system, if you recall, is a repeatable global model for growing our brands. It is essentially a process to solve consumer pain points with superior products delivering a convenient way at the best value possible. So we are using the best brand growth system that we have developed against the opportunity for us to drive this brand into next year. So, as Andre said, some of the things do take some time. We recognize the moment right now is being more challenged because of the one challenge in this particular quarter, but we believe this is a brand that will continue to grow and continue to be a hugely important part of our portfolio. Andre Maciel: Just to add, regarding the charge, that is mostly a function of the decline that we are facing this year and the consequence of the allocated recoveries. So, when you do the cash flows, they land at a different spot because, remember, if you just look at Q3 alone, the sell-out of Lunchables is down about 15%. So, we -- as we expect the recovery to take longer and be gradual, that has an implication on that has resulted in the decline mostly. Carlos Abrams-Rivera: Thank you again. Ken Goldman: Thank you very much. Operator: Thank you. Our next question comes from Peter Galbo with Bank of America. You may proceed. Peter Galbo: Hey, guys. Good morning. Thanks for taking the question. Carlos Abrams-Rivera: Good morning, Peter. Peter Galbo: Maybe to follow up there as it relates to Lunchables, if you could give us a bit more detail just on the ingredient supplier issue. I mean, I know certainly in Oscar Mayer, right, there’s an overhang from kind of the Listeria outbreak in the category that’s probably impacting Oscar Mayer sales. But is that having any sort of upstream impact into Lunchables as well and any detail there would be appreciated. Carlos Abrams-Rivera: No. What I would say is, if essentially one of our suppliers was unable to fulfill one particular ingredient and it actually impacts essentially one SKU of Lunchables, but it’s an important one, and again, we impact to be limited this year. So this is creating a short-term shortage of that particular ingredient and it’s affecting us mostly in this particular quarter in Q4. But we continue to see opportunity for us to kind of resolve this in the very near future and get us back to what we need as we go into first half 2025. Peter Galbo: Got it. No. That’s helpful. Thank you. Carlos Abrams-Rivera: Okay. Peter Galbo: If I could sneak in a second one. Just on Spoonables, I think that was an addition in terms of one of the challenges. Andre, I think, in the past quarters you’ve talked about, you thought it was kind of a pass-through issue on some of the raw materials that some of your competitors were seeing. But now it seems like maybe there’s more of a brand problem or a product lingering issue. So maybe you can expand a bit on Spoonables, what changed in the quarter. Again, that’s kind of been added to the list of headwinds? Andre Maciel: Yeah. Spoonable has been facing a soft sell-out now for several months. And as we said before, we believe it’s not only, but mostly linked still to price gaps out there in the market. And we -- I don’t think we have executed everything the way that we anticipated and that is work to do on that front. But we still see, versus historical levels, certain price gaps that are disadvantage. That’s just where the issue should be. Peter Galbo: All right. Thanks very much. Operator: Thank you. Our next question comes from Tom Palmer with Citi. You may proceed. Tom Palmer: Good morning and thanks for the question. I wanted to follow up quickly on 2025 assumptions. Oh, hi. Thanks. When you look at some of the challenged areas of your portfolio, I think for 2025, you said you’re assuming better category performance, but assume continued trade down. So, I guess, to what extent do you see price adjustments as a way to address this continued trade down versus innovation and packaging, things like that? Carlos Abrams-Rivera: Listen, I think for us, we know that the right way for us to continue to build our brands is by driving superior products with better marketing and making sure that we have a full value format for all consumers, which is why we have continued to drive innovation in our products while we continue to focus on expanded distribution, both in club channel, Dollar General, as well as continue to expand our distribution in omnichannel. So that’s number one. I think the question behind your question might be in terms of us thinking through whether we need anything else that we need to do in terms of managing price. I guess, what I would tell you is that, there are moments in which it does make sense for us to promote more. What -- the way we think through it is, let’s make sure we do that in the right consumer location that ultimately leads to better base growth for the brand. So we need to do that intentionally so that we have the right investments returned on those promotions so that we avoid areas like barking, hunting behavior that ultimately do not have real incremental sales for the brands. So -- but at the same time, there are good places where, in fact, we have promoted more and we see that it makes sense for us to continue to see positive returns. So areas like Mac & Cheese Cups in which we’re driving significant growth as we are right now, making sure we have the right price gaps and the right kind of attractive starting price points in the category. Areas like Cool Whip, what we know can also lead to better base growth for the future. So it is a combination of, again, making sure we grow the brand, leveraging a brand growth system, focusing innovation, renovation, better marketing, and at the same time, be thoughtful about the places in which it makes sense for us to manage those price gaps in a way that leads to the base growth going forward. Andre Maciel: What I’ll add is our long-term algorithm contemplates continuous gross margin expansion. We feel very confident and proud about what we have done on the supply chain efficiency side. We have now four consecutive years of very strong delivery coming from there and this year in particular is the highest ever for us. We feel confident about the pipeline to continue to sustain very good levels of productivity and this productivity is critical to allow us to reinvest in the business. As Carlos said, look, our priority is really on improved trends on the base volume. That volume that happens agnostic of promotions. That’s 90% of food and beverage sales and people keep talking about promotions. The focus is base volume. And base volume, you do it to continue to innovate, bring the news to consumers, renovate the portfolio like we have been doing, do more and great marketing and that’s what we want to do and that’s what we continue to do. So our priority is there. So look, we’re not going to talk in detail guidance of 2025. We’re going to talk a lot about that in the next quarter. I think we’ve said enough about 2025 to give you just a flavor of how we are seeing the big picture. But nothing changes in our strategy and nothing changes in terms of expectation to continue to expand gross margin in a prudent way. Tom Palmer: Thank you. Carlos Abrams-Rivera: Thanks. Andre Maciel: Thank you. Operator: Thank you. Our next question comes from David Palmer with Evercore ISI. You may proceed. David Palmer: Thanks. I just want to build upon the discussion you’re having, which has been helpful. Really, you’ve protected profitability pretty well in spite of inching up promotional activity in the U.S. Retail data that we see. And it sounds like from what you’re saying that you’re open to doing some tactical shifts in promotion spending from here if you see the returns. But I’m wondering, do you see more significant spending level investments potentially in the horizon? It might not be promotion. It might be other marketing. And/or conversely, are you seeing any sort of tactics or content that could be improved upon that could really improve the base trends as you’re talking about? What -- is there anything in the pipeline that you think might cause one of your key platforms to materially improve, just really good old-fashioned innovation and marketing improvements that you can make? Thanks very much. Carlos Abrams-Rivera: Let me start. Thank you for the question. First of all, I would just say, if you put into context, again, we have three growth pillars. Two of them, we have put the effort and now are both growing and gaining momentum. And if you think about the U.S. business, we have kind of diagnosed the problem exactly to about four to five brands. And just to give you context, we have over 200 brands in our company. So for us, it’s very much focused on those areas and we went to attack. And hopefully you got to see in our prepared information that we sent out that already we are seeing how Capri Sun and Mac & Cheese, we are seeing the improvements and trends in sales as we have renovated, innovated and invested in both of those brands. We are seeing places like our Philadelphia business, Ore-Ida, Taco Bell, places where we have turned around those businesses and now driving significant amount of momentum as we go into the year and we have seen that even outside of the U.S. as well. So that idea of us continuing to understand how we play to our strengths by focusing on renovating, innovating and investing is something that has been proven model for us, and we already see evidence of that. And frankly, if you look at our Heinz business globally, today, it is a brand that globally for us is $4.5 billion and actually grew 4% in this particular quarter. So we know we have the right replicable model for us to apply and we will continue to do so, which is continue to make sure we have the right level of investing in marketing, not only the levels, but also continue to focus on the effectiveness of the marketing and then support it with the right investments in terms of technology, R&D, in order for us to fully, completely drive the innovation that we want to see. So in terms of promotions that I mentioned, it has a role. It is something that actually supports the business in certain locations in which can lead to that base growth. But frankly, our commitment to making sure that we invest in the things that will drive the brand’s strengths over the long-term is the number one priority. Thank you for the question. David Palmer: Thank you. Operator: Thank you. Our next question comes from Robert Moskow with TD Cowen. You may proceed. Robert Moskow: Hi. Thanks. I guess, I would like to drill down on one of the product lines as well as Mac & Cheese. Carlos, you said that where you’re making investments, it’s really working, but it is showing up as one of the drivers of the declines in the quarter. And I wanted to know, like, there’s a lot of elements of Mac & Cheese and your Kraft is a big innovator, but what elements are you kind of struggling in in Mac & Cheese, because the data shows market share losses and I see a lot of premium products being entered into the market by your competitors. Is that the part of it that is more difficult for Kraft to compete in? Carlos Abrams-Rivera: Well, first of all, Rob, thanks for the question. In Mac & Cheese, remember, we have a brand that actually expands a number of formats. Like, if you see our Mac & Cheese Cups, already seeing a significant amount of improvements as we have gone into Q3. So that particular part of the business now is growing and gaining momentum as well. At the same time, we just launched new flavors to attract millennials. So a Ranch product, a Jalapeño product, and expect us to continue to work on those type of new flavors. We’re also now bringing new shapes into the category, and I think, again, the idea of also bringing properties like Super Mario Brothers will be an opportunity for us to continue to drive that in terms of attractiveness into the category. So I think for us in making sure that we are continuing to focus on what are those consumers and what are the right formats and flavors that we can bring into the category. And at the same time, making sure that we talk to consumers, we do it in a culture-relevant way. What I’ll tell you is that, one of the things that we’re proud of is that a brand like ours, Mac & Cheese, is a brand that is built for the many, not the few. So we know the role that we have in today’s families, in which we wanted to make sure that we provide affordable and approachable solutions that everybody can enjoy. So there’s a role for us to continue to live in, at the same time that we’re bringing new formats at different opening price points with different new flavors that attract a different type of consumers. So, again, we’re seeing the progress already in Mac & Cheese Cups, and I can see us continue to build on this as we go into next year. I feel very good about the path we’re taking. Robert Moskow: Okay. Thanks. Can I ask… Andre Maciel: That’s a good example, Rob, of items that require longer recovery, if you will, because innovation, you need to ramp up, consumers should try, they should repeat. So I feel great about the products that are there in the market, but they take time and you need to be patient. That’s something that we have not been in the past, is patient with our innovation and we are changing that. But we feel good about what we’re doing. And to your specific example, that’s one of the core examples of just promoting more is not it. So thanks for the question. Anne-Marie Megela: Operator, we have time for one more question. Operator: Thank you. And our last question comes from Chris Carey with Wells Fargo Securities. You may proceed. Chris Carey: Hi, everyone. Thanks for the question. As I digest the conversation in the call this morning, I think, really what I’m trying to understand is, this concept that I think Lunchables has been a headwind we have known about. Capri Sun was a headwind. And I think I’m trying to understand what your perspective is on sort of the underlying ex those items and whether that specific bucket or a large bucket has changed relative to a few months ago and perhaps how you see that going forward. And if it has -- if things have changed, what do you think are the core drivers, right? So I appreciate the focus on some of these items. But when you take a step back on the rest of the business, what are the things that are happening that are pushing you to feel one way or the other? If you could just maybe expand on that, I think it would be helpful to kind of understand the trajectory of the underlying business ex those items? Thanks. Carlos Abrams-Rivera: Sure. I think it sounds like you’re referring mostly to the U.S. Retail business. Chris Carey: Yeah. That’s correct. Carlos Abrams-Rivera: If you think about Capri Sun, this is a product that over the summer we renovated the product. We are seeing now the momentum is starting to improve. We are seeing that the fact that we are bringing a new format into new channels, whether that is multi-serving club, new bottles, single bottles into retail, going into convenience, going into vending, that allows us to continue to build the momentum of the holistic part of the brand. So new formula. Consumers are trying it. We are seeing that actually it’s helping us continue to start growing base volume. And at the same time, our focus continues to be how do we actually build that brand beyond just a typical retail channel in the 10-pack that for a long time has been the core part of the business. Now, in the case of Lunchables, I think the headwinds have really kind of offset some of the great work that is happening across Kraft Heinz. And I’ll tell you that as we think about Q3, the back-to-school period proved to be more challenging than we had expected and why we actually recognize that it’s going to take longer for us to do this, the recovery of Lunchables. Now, that doesn’t change the fact that we are completely committed to it. We recognize that this idea of us making sure we continue to build the trust with parents and families, it is part of what our job has to be done. But as I mentioned earlier, we are -- if you go into first half of next year, we’re bringing new products, renovating our quality, making sure that we have a new campaign that talks to both parents and kids, and at the same time, already in stores, we’re launching nationwide new products for us to expand to a bigger audience. In this case, we relaunched kind of the spicy nachos as we know that is an opportunity for us with bringing new kids into our franchise. So it is a short-term situation that is making what was a difficult headwind more challenging because of the supply ingredient that we have in Q4. But over time, you’ll see us continue to invest behind this to make sure that in fact Lunchables be the overall tremendous brand that we have created a shape into this category. Chris Carey: But just outside of those brands, how do you feel about the business on an underlying? Sorry to ask another, but it’s just with respect to the rest of the business excluding those two brands, have things materially changed or should we think about these really being the core headwinds on the relative trajectory from here? Thanks so much and sorry for interjecting again. Carlos Abrams-Rivera: No. Thank you. I appreciate the question. Again, if I go back to what is it that we intend to do? We intend to drive the growth of our company through three key areas. Making sure we continue to drive Global Away From Home superior than anyone else. We are doing that and we’re getting momentum. We continue to drive emerging markets. We are seeing the growth that we saw in the quarter that gave us confidence that we can continue for us to drive that particular pillar. And in the U.S. Retail, really is about those few brands that we know we can act on. And in fact, a couple of those brands already, whether that is our Capri Sun business, whether it’s our Mac & Cheese business, we already are seeing improvements as we go through the quarter that we believe are in the right path for us to continue to gain into the future. So, overall, I feel very good about the fact that we know where the situations that we have to address are. That we have the tools in-house by leveraging a brand growth system to actually build on the momentum of those businesses as we go into 2025. And also feel good that we can deliver the accelerated platforms and growth that we expect as a third pillar of our overall growth for the company. And the last thing I will say is, this is also underlined by us continuing to deliver great productivity that is helping us fuel the gross margin. So we’re doing all this as we are delivering world-class level productivity. We’re investing back in the business by investing in marketing, R&D and technology, and not compromising in the long-term growth of our company. And at the same time, also making sure that we are thoughtful about continuing to deliver great cash flow for our shareholders. Thank you so much for your question. Operator: Thank you. I would now like to turn the call back over to Anne-Marie Megela for any closing remarks. Anne-Marie Megela: Thank you very much, and thank you, everyone, for joining us today. We appreciate your interest in Kraft Heinz. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Operator: Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Second Quarter Results Conference Call. [Operator Instructions] Please be advised that the conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Anne-Marie Megela. Anne-Marie Megela: Thank you, and hello, everyone. This is Anne-Marie Megela, Head of Global Investor Relations at The Kraft Heinz Company, and welcome to our Q&A session for our second quarter 2024 business update. During today's call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. These statements are based on how we think 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures which excludes certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under News and Events, or discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera for opening comments. Carlos, over to you. Carlos Abrams-Rivera: Well, thank you, Anne-Marie, and thank you, everyone, for joining us today. Recognizing that it remains a difficult consumer environment, I am proud that we at Kraft Heinz are providing high-quality, convenient solutions that are a great value, brand worth paying for. And we will continue to stay focused on renovating and innovating with new benefits functionality and accessibility. At the same time, our teams have been relentless in unlocking efficiencies with a mindset of continuous improvements. And as a result of greater productivity and efficiencies, we have been able to hold prices below inflation this year while continuing to invest in innovation, marketing and R&D. And for our stockholders, through our dividends and share repurchases, we have returned over $1.5 billion in capital so far this year. I am very encouraged on how our focus on improving working capital is paying off. We increased free cash flow nearly $100 million or approximately 9% compared to last year and maintain our targeted leverage ratio. And finally, it's hard to believe that it has only been 4 months since my leadership team came together. We're on this journey together, all committed to driving improvements and achieving our company dream. I see the ownership and grit with my direct reports and across the organization. We are all embracing this new operating model and ways of working, and we are only getting stronger and stronger. With that, I have Andre joining me. So let's open the call for Q&A. Operator: [Operator Instructions] Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Carlos, you mentioned the need for selective promotion and trade spend activity in the second half just to drive better volume results for a more value-seeking consumer. I'm curious if there's a way to dimensionalize the portion of the percentage of sales that are sort of in need some adjustments. And if there are any particular hotspots that require maybe more aggressive pricing actions or sort of a reset of sorts? Basically, I'm just trying to get a sense for how broad the price point issue really is across the portfolio with the understanding that, as you've talked about promotional right now are still below those you saw in 2019. Carlos Abrams-Rivera: Andre, why don't you start and I'll add complement. Andre Maciel: Andrew, thanks for the question. Look, we -- as we said in our guidance, we're contemplating a step-up in trade investment level. You saw that in Q2, we already had a little more trade than what we had in the last year, where those are still well below 2019 levels. We believe that looking forward, we are more focused on those price gaps versus branded competitors and in places where it makes sense for the long term. We -- I think we have been saying all along, and we continue to stick to this that we believe that's the way we want to grow the business is not through over relying on promotions and rather continue to invest behind our innovation, our renovation and our market investments. And that's what we have been doing, and we're sticking to that. We are confident about that into the future. But in the short-term, we are seeing selected spots where it does make sense to add promotions to close those gaps. I'm not going to give you like an overly precise number to your question, but I estimate in the 30% to 40% of the portfolio where those price gaps require some incremental level of investments in the U.S. Andrew Lazar: It's really, really helpful. I mean. Yes, and then just a really quick one. Do you anticipate volume inflecting to positive in the back half? Because I think by our math, it's still implied that, that's the case even by the new guidance range? And I guess, how do you see volume progress playing out specifically in North America in the second half? Andre Maciel: We do expect revenue and volume to gradually improve throughout the quarters. In our midpoint of the new guidance we don't have -- we don't need volume to grow for us to achieve our guidance. So our price expected to be in the -- around 1% territory for the total portfolio. So if you think about the second half, what's impacted the guidance is sales declining 0.5% and so that you can see. Now it's good. The good thing is volumes in emerging markets, despite some headwinds in Brazil and China, continue to be positive. They are positive in the second quarter. They will continue to be so a year to go. And in the U.S., we're going to -- we expect to have volume continue to improve. Again, in our midpoint, we don't need the volumes to turn positive for us to achieve it. Carlos Abrams-Rivera: And what I would say to add is -- also give me confidence as we think about that trajectory improving in the second half is that we are very much focused on driving that value in very much in a sustainable way. So it cannot just be value for the sake of value with delivering value in a sustainable way through innovation, renovation and marketing, for frankly, families that we know are spending more time cooking at home. So when you see some of our innovation around things like Mac & Cheese, where we're bringing new shapes, new flavors, new pack size to consumers at different price points. When you see us bringing New Mexican solutions with Taco Bell and Delimex, that allows us to, again, bring families solutions for their home when they're spending more time together. That is part of us kind of bringing new ideas and ways in which we can bring value to families at this particular time. And we're seeing that also in Away From Home business, where we continue to see the improvements on the momentum of the business. We are seeing the improvements that we are now servicing better going into Q3. We are also getting new customers in Away From Home business that, again, help us make sure that we're building on the success we've had in the past. And as Andre said, we have been selective in our investments in trade, but we're also committed to a disciplined approach to the RGM tools that we have used in the past, and we know that help us make sure that we continue to make a balance on the profitability of how we spend in a smart way. Andre Maciel: Just a final comment is I think our dated guidance also reflects this philosophy in this approach because you see we have adjusted our net sales guidance down, but we largely kept our EBIT growth and we kept fully capital EPS growth. So that's what we are sticking for. We have been very disciplined in being very thoughtful about the type of investments we make and what are the long-term implications of that, and we're going to continue to do so. Operator: Our next question comes from Ken Goldman with JPMorgan. Ken Goldman: Just sticking on the subject of the back half. You provided a number of reasons for optimism. I think you've cited more innovation, renovation and marketing. You've talked about expanded distribution in certain parts of the business and then, of course, those targeted promotions. Just as we think about these drivers, plus the absence of the plant maintenance headwind, which are you counting on as being the most important and meaningful to hitting your updated outlook? Do the promos have to work? Is it really about innovation striking a note with consumer? I just want to get a better idea of kind of your visibility and reliance on the factors you're talking about. Carlos Abrams-Rivera: Thank you for your question, Ken. I think, frankly, is a -- it depends a little bit on the region of the world. I think if you think about our emerging markets, as Andre pointed out, we have been growing volume. We continue to see improvements as we go into the second half of the year and we're ready. We exited June in a much better way than we had for the whole quarter. So we are seeing that in that case, distribution gains that we have invested in our go-to-market strategy in emerging marketing is working. And we continue to build the success we've had in the past. In our Away From Home business, it really is us continue to drive the improvements on our service, given our plant closure that we had in Q2, and those continue to start winning and winning some customers that we, in fact, already have qualify for us in the second half of the year, and that is both globally in the U.S. and outside the U.S. So we are not expecting initially a big improvement in the overall situation and away from home in the U.S. But what we do expect is that we are, in fact, continuing to see the progress in our distribution gains as we go forward. And in the U.S. and North America for all, is really driven by this balance between us driving this innovation, renovation of our brands, truly be more thoughtful about the value that we're creating with consumers in terms of the better products, the better ideas that we're bringing to market as well as being thoughtful on how we are going to spend on our revenue management tools -- spread our revenue management tools in order for us to make sure that we're having the right price gaps in the intended fashion across the branded competitors. So that would give you a little bit of sense of how we're thinking about the overall portfolio. I don't know, Andre, anything you want to add? Andre Maciel: No, I think [indiscernible] Operator: Our next question comes from Steve Powers with Deutsche Bank. Steve Powers: You called out a couple of overseas markets, specifically the U.K., China and Brazil, different dynamics in each of those markets. But obviously, a lot of work going on as you try to correct trade gaps -- or sorry, price gaps in the U.K. and fight through consumer demand softness in China and Brazil. I guess could you just expand on what you're seeing in those markets? And maybe a bit more color on what your expectations are for the back half in terms of any kind of sequential improvement? Andre Maciel: Sure. So particularly maybe starting with the U.K. We -- as we said last year in earnings, this is a place that suffer a significant amount of inflation, probably even more than other developed markets. And private label in that particular market has started to get a lot of traction. And we decided in Q3 last year, to start to step up investments, to protect the volume. We do have some factories in the U.K. that also need to be mindful about the utilization of those factories, and protect the volume for some of the strong brands we have over there. We have put that in place since now almost a year ago, and we have seen the returns happening on the volume share side. So I think we're moving in the right direction. And with -- we were able to mostly protect even gross margin because of the amount of efficiency that we have generated there. So U.K., I think, is moving in the right direction. When it comes to China, a similar to what we have heard from others, the industry continues to be soft. I mean vessel the expectations that we do have about a country like China. So we continue to gain market share in modern trade. So that's a good thing. But the industry is just not working. And I think we set our expectation moving forward that it is for the short-term about China industry growth. In Brazil, we -- the good thing is we continue to gain market share. So that's been very consistent. And I feel good about that. Consumer has been demonstrating similar to other parts of the world fatigue and has been showing also vulnerability. So we saw some price gaps to branded players or private label that is negligible, also coming down. So we had to invest. But we face a situation where the customers adjusted their inventories down. You have to understand that in the emerging markets, the retailers tend to carry more inventory than in developed markets. So in a country like Brazil, you see inventories at the 45, 50 days level compared to the U.S., where you see 20 days, 25 days. So is very different. And what we have seen a situation like we are right now high interest-based consumer tightness, is [indiscernible] the inventories down. And honestly, we are not expecting that, and that created a challenge for us in Brazil in the first half of the year. We believe that inventories -- we believe now that they should be at the appropriate level, which should allow us to improve the situation. But yes, that's a little bit of a snapshot. Operator: Our next question comes from John Baumgartner with Mizuho Securities. John Baumgartner: I wanted to come back to North America. Your portfolio in a lot of your categories, you're not the highest priced product. And you think there should be some benefit from trade down into your brands. But with the focus on managing price gaps to other brands, it also seems like the equation is still very much price based. So at this point, how do you feel about the ability to redefine your portfolio through innovation, marketing, where you can better compete on non-price factors? Because it feels like there's already been a lot of work done with ingredient reformulations and so on. How do you think about the non-price competition? Carlos Abrams-Rivera: Yes. Well, first of all, thank you for the question. And as you pointed out, we have a series of iconic brands across our portfolio in North America that we feel great about. And you've seen already. I mean, you've seen brands from Philadelphia to -- or either where you are seeing the growth as we have continued to renovate those businesses are the success that we've had in a brand like Jell-O, where we have continued to renovate. So we have a playbook on how we continue to renovate our business, our brands to make sure that they, in fact, continue to be resonating with consumers today and for the future. I think in places where we are seeing that consumers are making choices as they are trying to manage the cash flow of the family, we also have to be aware that we have to provide consumers options at different price points so they can be part of their role basket size of the cash flow that they have available to them. That's why in a business like Mac & Cheese, well, it's certainly something that can fit the entire -- can feed the entire family. We want to make sure we have different price points in which we can come in to consumers and allow them to make sure they continue to enjoy our products. And it's also about us being able to be accessible in new places. One of the things we find right now is that consumers are actually increasing the number of trips and locations in which they shop. So for us, it's important that we continue to expand where consumers are going to try in our brands and why we have been so much focused on driving our improvements in terms of distribution in the dollar channel, whether that is with our Oscar Mayer businesses and making sure that we have the product they're looking for at that particular venue. But it's also us expanding our distribution in places like club, where we know consumers are also looking for different ways in which we can find value for the family. So for us, it's applying the playbook that we have from renovating and innovating and at the same time, making sure we have providing the access to families as they're shopping from -- in new spaces whether they're going from a dollar store to grocery to club and our brands continue to be there. Those are all things that you'll see us continue to add as we go forward into the second half of the year. Operator: Our next question comes from Michael Lavery with Piper Sandler. Michael Lavery: Just was wondering in away from home, maybe two things. You called out that it had the 2.1% decline globally. Obviously, you had the plant closure and some discontinuations. Can you unpack maybe the components there and give a sense of how much the slower foot traffic was a headwind? Or what the -- what the growth rate was excluding those kind of onetime things and maybe how much was from slower foot traffic? And then also, you've given an update in the past on the remix launch in BurgerFi the test. And just curious how that's progressing there. Carlos Abrams-Rivera: Andre, you want to start then I'll go? Andre Maciel: Sure. So our Global Away From Home business declined 2.1% in the quarter. And the impact from the plant closure is about 200 bps. So meaning that we will be flat without that effect. That will put us in a situation of similar performance to Q1, if you remove the plant closure effect. The planned exits that we had at the end of last year, they had back in the quarter of roughly 150 bps. So will be then growing 1.5%. So we're still gapped versus our long-term ago. We have been gaining sustaining share. Again, if you remove the effects from the plant closure, what we saw in Q2 in the industry is in the category that in where we play is that industry was worse in Q2 than in Q1, which I think we were not really expecting that. So in the U.S., about 100 bps softer in Q2 versus Q1. So I think the performance on our side helped to offset that headwind that happened in Q2. Carlos Abrams-Rivera: Yes. And then to your question about our equipment strategy is pretty comprehensive in terms of how we think about bringing innovation, but also solving pain points for the operators and Away From Home. So the HEINZ REMIX, today, we have that already in market. And the way I think about it is, it is really a moment for us to do the trial, making sure we get the learning from that so that we can scale that in a meaningful way in 2025. And so far, we're hearing great fear from operators. We're collecting a number of data from consumers, and we're seeing how that actually allows us to even improve as we think about how we are going to deploy this further in 2025. The interesting thing, too, is that initially, we thought this would be something that people would be using most in their burgers. We actually are seeing them using in other foods as well when they see that in the different QSRs. Now beyond the HEINZ REMIX, we also have been focusing on bringing new dispensers, tabs and bending into the pipeline. And again, it's part of us thinking about more comprehensive, about how do we solve the pain point for operators. So our dispensers, for example, that are much easier for operators to clean, and it allows us to actually make sure that they reduce the amount of labor involved in the collecting and changing of the dispensers, they began shipping to customers now in Q2 and we believe that actually it's going to continue to improve distribution as we go into the second half of the year. And already beginning to get much, much distribution that we had originally expected. So you'll see you'll continue to now drive some of the learning that we began in the U.S. globally as well as we continue to then bring more of those tabs and bending ideas into the marketplace. And thanks for the question. Operator: Our next question comes from David Palmer with Evercore. David Palmer: Just looking ahead in the U.S. retail and you're looking to stabilize things there, and thanks for the commentary earlier on volume and pricing. But -- how are you thinking about improvement across the portfolio and what we're going to be seeing in the scanner data? You've called out Capri Sun and Lunchables as two areas that might improve, that are turnaround situations, those are down, certainly the most, but that doesn't necessarily mean those are the biggest areas of improvement that you're anticipating. How are you thinking about which brands and which categories will improve the most in the second half? Carlos Abrams-Rivera: Let me start. And then what I would say is -- we called those out because there were a meaningful headwind for us and in our second quarter. And I think it's something that the teams have done an amazing job of making sure that we have the right plans as we go forward. I mean, it was meaningful to the point that in the case of Lunchables, we saw from a low point of, I would say, down 17%, the worst weeks in the second quarter. What we have actually seen a steady recovery since that particular point, and we're building that improvement. And the teams are getting ready, both in terms of renovating, innovating, doubling the marketing spend, improving the media mix, improving the targeting strategies and increasing the value equation for the consumers as we go forward. And that includes innovation. Some of it we included already in some of the slides that you saw, but also we have other innovations that for competitive reasons, we're not including yet, but they will be coming in the second half of the year as well. For us, we continue to expand in the Lunchables within partnership with Del Monte in the second half of the year. So there is a meaningful amount of program that is supporting our Lunchables and you see that from -- and you begin to see that really come into fruition in our back-to-school program when we're teaming up with the Transformer movie, as something that, frankly, we have been successful in the past of doing movie tie-ins, as we have done with the Heinz brand. And we did point out as well Capri Sun because, again, it was a meaningful headwind for us in the second quarter that again, the teams have been very much focused on driving a change in trajectory as we go into the second half of the year. They have renovated the original Capri Sun to better align with the consumer taste preference, invested twice the marketing as we go into 2023 versus 2023. We have secured strong back-to-school displays with customers. We have invested in the right promotional events, and we have expanded into new channels with club. So again, it had both places where we have seen some meaningful headwind in Q2 that we now have also just as a meaningful reaction in terms of improving the trajectory as we go forward. And that will continue with the other things that are working for us. We do have some positive momentum in parts of our accelerated platform. I mentioned Narita, which is gaining almost a share point our Mexican business, we're also gaining 80 bps. Cream cheese business has sustained growth through the entire first half of the year. So those are business that we'll continue to see gain that momentum as we go into the second half of the year. Andre Maciel: In think we should expect Mac & Cheese as well. There's a lot going on in the Mac & Cheese in the second half. That might be worth. Carlos Abrams-Rivera: Yes, yes. I think that -- if I think about how do I round up the items and accelerated platforms. There's probably two areas in which we feel like we also have to be focused on, and we are. One is on our Spoonable business in which we are, in fact, making sure that we are having the right brand price gaps against our branded competitors. So we are investing in new flavors and making sure we have renovating the package design on a Spoonable business. And in Mac & Cheese, as you saw from our slides, you saw us making sure that we bring in, again, new innovation, new shapes, new flavors, tie in now with Super Mario Brothers. So that idea of us being able to bring innovation and exciting into the Mac & Cheese business is part of us continue to see us improving the momentum of that business we go into the second half of the year which we know is a product that the families really care about in moments in which they're looking for value to feed their entire family. David Palmer: Great. And I was going to follow up and ask you about condiments and sauces, and in particular, the spoonables area like you discussed it, but you covered it. I'll pass it on. Anne-Marie Megela: Operator, we have time for one more question. Operator: And our last question comes from Robert Moskow with TD Cowen. Robert Moskow: Andre and Carlos, I think one of the concerns on Kraft Heinz stock is that all this great progress you've made on gross margin recovery might come under pressure over the next 12 months because you have to make some of these price investments and because volume has been weak. So maybe to address those, can you talk to -- what would gross margin have been in 2Q excluding some of these onetime issues like the plant closure and the other elements that maybe are more transitory? Could this have been an even higher number? And would that kind of give us confidence, therefore, that there's more room for gross margin expansion into 2025? Andre Maciel: Rob, thanks for the question. Look, in both Q1 and Q2, we did have a few situations that negatively impacted gross margin like very onetime in nature. I'd be reluctant to give you a precise percentage points, but we did have quite a few substantial events in Q1 and Q2. And despite that, we are able to expand the way that we did it. As you head into the second half, last year, we had a big step-up in gross margin in the second half. So we're going to see a more muted year-over-year impact from gross margin. But -- so -- but that's part of the plan since the beginning. So we're not really worried about that. As we head in '25, and I'm not going to give guidance although, but if you remember our long-term algorithm, we do contemplate continuous gross margin expansion, not at the levels that we are seeing right now, but in the 25, 75 bps-ish. But as a consequence of the very strong efficiency that we have, I think we were able to fix the supply chain now a few years ago, and we have now for 4 consecutive years in very strong delivery coming from the team. We have -- we feel very good about the pipeline that we have. We have been able to see to not only -- remember, we had a 3% inflation this year. We're only pricing 1%, and we were able to offset that with efficiencies and still expand gross margin should we invest in the business. So we do expect that this equation might continue to work into the future. So we should expect a more gradual but continuous gross margin expansion. Carlos Abrams-Rivera: The only thing I would build, Rob, is this idea was really changing the rewiring of the company, where we are all focused on driving efficiency because it's the fuel for us to drive profitable growth has now been embedded across the company. You see that with procurement, you see in operation, but you also see in marketing on us being able to have more efficiencies of how we go to market improving the return on investment. You see that in trade on how we apply AI to have better tools on how we actually have better investments and profitable ways in which we can embed our trade as we go into the marketplace. So it is not a one and done. It is something that we believe can be a sustainable strength for us as a company. And personally, I believe that having healthy gross margin is truly the key component of having a virtuous cycle of growth, and that is a big part of why we are so strong believers on a long-term algorithm for the company. Andre Maciel: The changes in operating model that we have done a couple of years ago to really reintegrate commercial and supply chain, I think it's really paying off big time. And the incentive alignments that we have done, we mentioned this before, like everyone in the company has 2 KPIs in common, which market share and gross margin because we want people to grow profitably. So I think that also contributes to that. Anne-Marie Megela: Thank you, everyone. Thank you for your interest in Kraft Heinz. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Operator: Good day, and thank you for standing by. Welcome to the Kraft Heinz Company first quarter results conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anne-Marie Megela, Global Head of Kraft Heinz Investor Relations. Anne-Marie Megela: Thank you, and hello, everyone. Welcome to our Q&A session for our first quarter 2024 business update. During today's call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under News & Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Before we begin the Q&A session, it gives me great pleasure to hand it over to our Chief Executive Officer, Carlos Abrams-Rivera, for opening comments. Please, Carlos. Carlos Abrams-Rivera: Well, thank you, Anne-Marie, and thank you, everyone, for joining us today. So before we begin our Q&A, I'd just like to provide some perspective on our top-up session here at Kraft Heinz, our consumers. And while we've seen a notable uptick in consumer sentiment in the first quarter, there is a gap between high and low earners continues to remain wide, and it shows a clear and continuing bifurcation. So the lower-income consumers are challenged with interest rates remaining high, gas prices elevated and savings dwindling. So there's a clear pullback of restaurant spend by these lower-earning households, especially in restaurants and convenience stores. These consumers instead are looking for value as they prepare more meals at home. So in contrast, there has been a meaningful growth in travel and accordingly, an increasing hospitality and entertainment sales, driven by the bounce back among the higher earners. And here at Kraft Heinz, we are here to meet the evolving needs and taste of all consumers, whether they're looking for value in serving their family delicious meals at home or seeking culinary delights that they set out on new adventures. They can look to the iconic and trusted brands of Kraft Heinz. So for us, it's about having brands that are accessible and available to everyone. I believe we're well positioned to serve all of this consumer for three primary reasons: one, because we are bringing innovative food solutions and faster than ever before; two, because we continue to renovate our core brands for today and tomorrow; and three, because we have the best team in the industry, full stop. We are on track to meet our goals of generating $2 billion incremental net sales from innovation, and the world has taken notice as we were recently named one of the world's Top 50 Most Innovative Companies by Fast Company. But more importantly, we are expanding the choices we offer our consumers so that they don't have to sacrifice, whether it's providing greater value through multipacks, plant-based options such as our newly released NotCo Mac & Cheese or expanded the choices in our iconic brands such as Zero Sugar Heinz Ketchup. Myself, I've been traveling around the world visiting with our employees, and they are consumer obsessed. Their sense of ownership, collaboration and agility is so inspirational. I just want to say thank you to every one of them for their dedication. We are proud of our progress, both far from satisfied, as we continue focusing on serving these consumers and making lives delicious for everyone. And with that, I have Andre joining me, so let's open the call for Q&A. Operator: [Operator Instructions] Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: It looks like KHC is still losing share in North America Retail, though at a more modest pace recently. But in the ACCELERATE platform specifically, your remarks call out holding or gaining share in about 55% of this platform. I guess would you expect this percentage to be higher given the disproportionate allocation of resources to this platform? I guess a little more detail on share trends within ACCELERATE would be helpful. And then you mentioned U.S. restaurants softening a bit. Are you starting to see any of that on the flip side benefit at-home eating for your business? And if not, why would that be? Carlos Abrams-Rivera: Yes. So thank you, Andrew, for the question. Before I get into the ACCELERATE, let me just at least give you a view of how I'm seeing so far the business performance. If you look at the last 5 weeks, just to remove the noise of Easter, we actually continued to see volume share improvement versus year-to-date, and we're holding dollar share at the same pace in the U.S. So that's at the macro level in the U.S. for our company. Now if you look at the ACCELERATE platforms, we actually continue to outperform the other platforms. So far, we are seeing flat in dollar share and growing volume share by 0.2 points. And now let me just break the other 2, and then I'll go back to ACCELERATE. We are losing share in PROTECT platforms, as we continue to see the impact of the decline in SNAP benefits. At the same time, I'm actually pretty excited about the renovations we are seeing in these brands because we are going to be continuing to bring more consumer preference options as we go into the [ sense of the year ]. In our BALANCE part of our portfolio, we are losing share but improving versus a year ago versus year-to-date, primarily driven by coffee. Now to your question about ACCELERATE platforms. There's a couple of big brands that are in there that I would like to unpack a little more. If you think about our Mac & Cheese business, which is within the ACCELERATE platform, what you're going to be continuing to see is: one, we are going to start lapping a lot of the headwinds from SNAP. Mac & Cheese was probably one of the more categories that were more actually impacted by SNAP. And as we go into Q2, beginning now in May, you'll see a plethora of new innovations from gluten-free to new options and flavors on our Mac & Cheese business as well as some new, exciting things for the category with some new SKUs that we're bringing in the second half of the year. If you look at the other parts of our ACCELERATE platform, that includes our condiments. And the condiments side, what I would say is our category actually is expanding. So we are growing, and we're actually growing volume share. So for us, is how do we continue to drive this growth within the category that has the right tailwinds behind it. And you'll see us continue to expand on the number of offers and innovations and we go into year to go. The one note that may be also helpful to understand in the ACCELERATE platform is also we also got out some nonstrategic business, in particular, our Heinz bulk vinegar, which was a business that for us in terms of the economics didn't make us more sense. So we also exited that in the first quarter of the year. So hopefully, that gives you a sense how we're thinking about ACCELERATE within the comfort of our total company. I think the second part of your question is on an Away From Home business. And I think let me just say that right now, as I mentioned in some of the prepared remarks, we are seeing some of the slowing of the restaurant traffic in the U.S., which some of it is impacting our business, but also some of the impact that we saw in the first quarter was due to us exiting some low-margin businesses, as we think about making the right choice for the overall P&L. The actual exit of the business was about $50 million in the first quarter, and that's going to be similar throughout the rest of the year. Now for us, as we believe as we go forward, we actually believe that it's about us continuing to drive the importance of Away From Home in new channels. I mentioned in the opening remarks that we're also seeing great opportunities in terms of travel and leisure. And that's an area where our teams are both focused because of the only growth, but also because it allows us to expand margins into those areas. And we also are seeing improvement in terms of distribution of our core businesses as we go into the -- into Q3. So again, I feel very good about Away From Home. I think that the trends will continue to improve. And at the same time, for us at Kraft Heinz, we have the scale to make sure that no matter where our consumers are shopping at hotels, where they're going into restaurants or a home, that we have the distribution opportunity for us to kind of make sure that we are there to service anywhere they are. Thanks for the question, Andrew. Operator: Our next question comes from Ken Goldman with JPMorgan. Kenneth Goldman: You mentioned inflation in your comments in a few areas. I guess two questions here. First, I don't think you updated us, forgive me if I missed it, but I think last time you were talking about maybe 3% cost inflation for the year. I'm just curious if that's still a reasonable number. And then I guess, second, more broadly, there's been a lot of attention paid to cocoa, obviously, but coffee inflation has been fairly notable as well. And I'm just curious, right, even though historically, coffee is somewhat of a pass-through category, do you think that if you and your competitors need, you'll be able and even willing to raise prices to customers as much as you typically might hear? Or do you maybe expect a little more, I guess, pushback than usual? Carlos Abrams-Rivera: Thank you, Ken, for the question. Let me just -- okay, let me start, and then I'll ask Andre to continue to build on it. For us, we are certainly committed to continue to provide families with affordable options. So -- and that means something that we take very seriously. And if you think about 2023, we did end the year with a 3% inflation, but we only pass about 1% pricing to consumers. So we do that very much intentional in a way for us to make sure we are all doing everything we can to offset things so that consumers don't see it. Now Andre, if you want to comment a little more in terms of what you see in terms of cost inflation today in the coffee category. Andre Maciel: Sure. So yes, we still expect inflation to be in the low single-digit territory, like we said before. So nothing has changed in that regard, with inflation a bit more concentrated in Q2 and Q3 than in the shoulder quarters. And that's primarily because of what we call the big 3 commodities: cheese, meat, coffee, which we are seeing particularly in meat and cheese, higher level of inflation happened in Q2, Q3 as we are lapping very favorable comps from last year. So yes, so we don't see any other meaningful change here. And the price that has been taken is very surgical around those categories have been suffering the largest impact. And say cocoa likely is not a relevant part of our portfolio at all. I mean a little bit in Netherlands, but beyond that, there's nothing worth mentioning. And we don't see any reason to believe at this point that we would not be able to continue to pass-through the prices in those commodity categories like it has always been the case. So... Kenneth Goldman: All right. And if I could ask a quick follow-up. Just the increase in gross margin guidance, coupled with no other changes implies a bit higher SG&A than you previously expected. So just assuming that's accurate, are there any key areas in operating expenses we should think about that are maybe a little bit higher than planned, obviously, not a huge amount? Or maybe the plant shutdown is the primary, I guess, culprit here, so to speak. Just trying to get a little color there, if we could. Carlos Abrams-Rivera: As you saw in CAGNY, we are starting to deploy our brand growth system, which is the method that allows us to continue to improve in our marketing and continue to strengthen our brands. And one of the components of the brand growth system is ensure that we have the sufficient level of marketing across the portfolio. And we've started to see a few selected areas where we need to step up the market investment, thinking on the long term. And we have been gradually approving incremental investments on top of what initially planned on the marketing side, in particular, which I think is a great thing for us. That's all. Operator: Our next question comes from Bryan Spillane with Bank of America. Bryan Spillane: I just had two questions. One, just, I guess, a detail. Can you share with us -- I think in the past, you've shared with us how much the SNAP issue has impacted organic sales. So do you have that for the first quarter? Carlos Abrams-Rivera: Look, it's never 100% precise. We're talking about the macroeconomic model, but we estimate on the U.S. Retail business back in the range of a few hundred bps negative impact. Bryan Spillane: Okay. And then a question on the Away From Home in the U.S. and the deceleration. And again, you've quantified the impact of the plant closure, but just can you give us a sense of how much the -- I'm sorry, the impact of the exiting the customer. But can you give us a sense of just how much of the decline is also related to like traffic at restaurants? Just trying to get a sense of the weighting of what's actually driving the slowdown. And then also, as you look into the second half, right, where you're expecting -- there's an expectation that there's going to be some recovery, just what underpins that? And I say that in the context of as we're kind of going through earnings season, a lot of the restaurants have incrementally gotten worse or slower. So just is there maybe too much optimism baked into the back half expectation for recovery when it looks like a lot of these restaurant companies are guiding down? Carlos Abrams-Rivera: Let me start and then Andre, if you want to kind of build on that, and thanks for the question, Bryan. First of all, I continue to feel very good about overall strategy globally about Away From Home. Again, it's a business that we are seeing continue to improve outside the U.S. and even as we are seeing some of the slowing of the restaurant business here in the U.S. If I think about the second half, there's a few things that I think we'll feel better as we go into this rest of the year, even in the U.S. here. First of all, we mentioned about this factor impact that we had to close for unplanned maintenance, and that's going to affect us in Q2, and that will be behind us as we go into the second half of the year. The second part is that we are also going to be expanding the number of clients is where you're going to find our portfolio. So there's a number of things that I cannot speak today, but that we'll see as we go into Q3, in which we actually expand the distribution of our products. And then the third part is that we are going to continue to drive the focus on us going into attractive higher-margin channels. So again, beyond the restaurants in places like leisure, hospitality and travel, where we are actually seeing better performance because of the higher-income consumer and us getting into those channels in particular. And I think within that channel, we are seeing very successful programs around our Heinz Selection program and hospitality experiences that allow us to bring differentiated type of programs in an industry that until now, we really have in play that strongly. So -- and then lastly, what I would say is this is an area where we're going to continue to drive innovation in Away From Home. I mean already, you are seeing how we are taking our Heinz REMIX machine, and we're actually using that and planning it to work in the partnership that we have with BurgerFi, which is now our first restaurant to debut through Heinz REMIX, and that we're going to see that expanding as we go into 2024. So the idea is it's not only the fact that we're going to be present, but we're also going to continue to bring innovative in both the channel and the type of products we're going to bring into those channels. And Andre, anything else you could talk about? Andre Maciel: I don't think so. Operator: Our next question comes from John Baumgartner with Mizuho Securities. John Baumgartner: Carlos, you highlighted consumer stress as a theme. And I wanted to ask in North America where the volume declines are still more pronounced, things like Mac & Cheese you just detailed for Andrew, but also catch-up in juices. These are categories where private label has been underpenetrated historically, and now you're seeing volumes growing a bit. Are you seeing anything different, whether it's new merchandising by retailers or new price sensitivity among consumers that's changing the dynamic in these categories at all? So I'm curious for your take on the pockets of private label share growth. And then maybe a follow-up, are there any specific categories in U.S. Retail where you're expecting material benefits from joint business plans or reinvestment for the duration of this year? Carlos Abrams-Rivera: Let me thank you for the question. First on the private label, first of all, we are fortunate that we have such an iconic and beloved brands in our portfolio. And I think what you're seeing is that really, we haven't seen much of a change in terms of our overall gaps versus private label. And I think for us, the benefit that we have had is that over the last 2 years, we have spent a significant amount of energy and continue to renovate our portfolio. And today, we certainly have, in the U.S., renovated almost 100% of our portfolio to make sure that it continues to be relevant for today and tomorrow. And I think that, that along with the fact that we are also very much focused on delivering great value to consumers. We have to make sure that as we think about value, that is not just about the price point, it's also about it's worth paying for it. So that's why our focus on driving quality products in a way that is affordable and giving more consumer choices, that is also driving the overall value equation for consumer. So what you're seeing in the data is private label have been gaining share, but really they have stabilized and they're taking more share from other branded players. In terms of our JBP, that continues to be a strength of ours. That frankly, it comes out with the fact that we have been building this trust and partnership with our key retailers that allows us to truly leverage the scale of our total portfolio in a way that help us to both drive our distribution of innovation as well as improve our overall performance and execution in store. Because of this partnership, we can do things in store that probably the other peers cannot do. Whether that's when you think about the holiday season coming up now in the summer, we have the range of a portfolio that allows us to create through differentiating and unique value promotions that other people cannot do. So it's something that we continue to elevate and we continue to build on as we strengthened our portfolio and the partnership we have with the key retailers. Operator: Our next question comes from Steve Powers with Deutsche Bank. Stephen Robert Powers: Carlos, in the prepared remarks, you talked about the unplanned maintenance that you had to take on one of your Away From Home plants. It seems that you've resolved that issue and you expect the impacts to be isolated to the second quarter. But maybe just a little bit more detail on what transpired there. Any kind of root cause diagnostic? And then just do you expect that to be a pretty quick bounce back in recovery in 3Q? Or is the recovery going to be more spread across the back half? Carlos Abrams-Rivera: Yes. Thank you for the question, Steve. Yes, listen, it's not -- I wouldn't give you that much more information than already shared. It was a temporary shutdown in our plant for that unplanned maintenance. Now that particular factory was very much focused on our Away From Home business. And so those continents are places that we can outsource from other places and much within our network of factories. So that's why, in particular, it created a little bit of a dissonance in the Q2 only. And Andre, if you want to give a little more details on the impact in our -- what we see in the range of the portfolio for Q2? Andre Maciel: Yes. So as we said in prepared remarks, production has resumed and is gradually going back towards the prior level. Not there yet, but production has resumed. And that's why I expect the impact to be -- we do expect production to be fully back on track within the quarter. And then the impact on top line, as we said, will be in the range of 50 to 100 bps to the total company growth, which is a function of how fast you can really bring the production fully up to speed. Operator: Our next question comes from David Palmer with Evercore ISI. David Palmer: Two questions. First, a follow-up on Foodservice. What is your general Foodservice assumption going forward that underlines your mid-single-digit organic growth that you have planned for the year? Is that, that you basically expected that current trends industry-wide and globally will remain similar level that you saw in the first quarter or improving from there? And then secondly, just Oscar Mayer and the beverage business, both were declining maybe mid-single digits or so in measured channels in the first quarter. Could you maybe talk about the challenges and general plans and prospects for improvement for each of those? Carlos Abrams-Rivera: Maybe, Andre, if you can comment on Away From Home and maybe I can build on the Oscar Mayer and beverage business. Andre Maciel: Yes. So first, if you think about our second half, as we said, we expect to be on algo throughout the entire second half. And if you think about our 3 pillars of growth, first, on Emerging Markets, as we said, Q1 came in line with what we said will happen mid-single digit, primarily because of the shipment phasing in Brazil. So as we head into Q2, we do expect Emerging Markets to be now very close at our long-term algo, and in the second half fully on the long-term algo. So that's a point comes from that roughly, maybe a little more. On the U.S. Retail business, as a function of industry improving gradually, volume continues to improve. All the innovation, renovation, Carlos mentioned a few examples. We do expect to be, if not on algo, at least approaching algo, so that will be a big contributor for the improvement as we head into the second half. And then finally, on Away From Home, like we don't need to be fully on algo to deliver our numbers in the second half, and that's not what we're contemplating. So we don't expect Away From Home to be fully back on algo. Even though on the international side, we should be back there in the U.S. where we think the dynamics of the industry is what give us a pause. We do expect improvement and a gradual improvement on the industry plus the business risk. But I mean, I think we're still a bit on a pause to see how much of the industry will recover. But again, we don't need to be fully on algo in the U.S. Away From Home to deliver our guidance for the second half. Carlos Abrams-Rivera: And then just going deeper on the Oscar Mayer and beverage question, David. But I would say, if you go back to our CAGNY presentation, those are businesses that are in 2 different portfolio roles within our company. So our beverage business is within our PROTECT business, in which we actually are allocating resources in order to protect the profitability through the renovation across those brands to drive the growth. So if you think about some of the key brands there, you see that our MiO liquid concentrate in which we actually just renovated our entire kind of design or product. We have a new campaign, a marketing campaign focused on the wellness of the brand can offer. If you think about Crystal Light, we just debuted our first major innovation in 10 years, and we're launching a number of new and exciting functional benefits. If you think -- and then for us is how do we continue to drive that sense of focus on renovating on those particular products because we know they are differentiated, and we think they are well positioned for the long term. In the Oscar Mayer part of our BALANCE business, which, again, we are making sure we're making the right investments in order to protect our distribution. And at the same time, we also are being thoughtful about how we are going to manage a business that are very exposed to the commodity side of things. So we are being also thoughtful of making sure we are protecting the top line, while at the same time, making sure we have the right gross margins management in order for us to make it work within the entire Kraft Heinz portfolio. Andre Maciel: The other thing I'll add on the BALANCE portfolio as a whole, you saw in prepared remarks that overall, the BALANCE declined 4% in the quarter, but the gross profit dollars grew 5%. So as we have said before, we continue to -- it's a balancing act, and we continue to make sure that we don't starve those brands of the core investments to sustain their business. But you should not expect an average growth coming from there. Operator: Our last question comes from Robert Moskow with TD Cowen. Robert Moskow: Andre, I think you might have already answered this, but mathematically, I think the guidance now for Foodservice implies a 50 basis point reduction to the overall company compared to, I think, the high single-digit guidance you had last quarter. So does the rest of the portfolio need to offset that? Is anything -- are you expecting anything to be a little better than you expected? Or is it just kind of absorbed? And then secondly, I think the slide said that you're seeing improvement in retail trends in U.S. Retail, maybe that's just versus a year ago. But can I assume that despite the market shares being down versus a year ago, do you need to make any big -- any adjustments to your marketing plan for 2024? Is there any increased price investment or advertising investment that needs to be made that's different from what you expected? Carlos Abrams-Rivera: Andre, do you want to start with Away from Home, and I can comment on the retail trends? Andre Maciel: Yes. First, as you said, the 50 bps that we mentioned in the prepared remarks should be clear, is linkage, the 50 to 100 bps expansion of plant shutdown and is focused on the second quarter. So we do not expect impact from that as we go into the second half. So as we head into the second half, as I said before, we do expect Emerging Markets to be fully back on algo. We do expect the U.S. Retail, North America Retail to continue to improve, like improve in Q1. We expect to improve more in Q2 and then more in the second half, like as a function, again, of lapping SNAP and a lot of contribution from innovation and renovation. And on the Away From Home, we do expect the rest of the world to gradually improve and get close, if not, at algo. And then the U.S. becomes then the question we don't need to be at mid-single digit in the second half for us to achieve our guidance. But we do expect a gradual improvement on industry. And I think we are seeing that from different sources as well. I think that there is a general expectation of that together with all the business wins that we have done, and I think that we're going to be past the situation with the plant as we had in the second half. Carlos Abrams-Rivera: Thank you, Andre. And on the retail trends, I guess, I'll go back to the point at the beginning, which is we are seeing volume share improvements versus in the last 5 weeks into year-to-date. So we are seeing that the momentum is happening already. And for us, what we are going to be doing is focus on those things we can control, which is as you go into the year to go, you'll see us continue to drive the renovation of our brands, like I mentioned, whether it's in our PROTECT platforms and ACCELERATE, which is driving more innovation, as you'll see now, begin now in Q2 and we continue to step up through the rest of the year. And then these margins are marketing investments. Andre mentioned earlier that part of the reason we're taking some of those gross margin dollars and investing back in the business is because now we are deploying a brand growth system that allows us to think about how do we make sure we're being smart about where to spend and places that maybe we haven't been spending at sufficient levels. So you are, in fact, going to see that continued focus on not driving the right dollars against the right priorities for us to drive the retail growth. And thank you for the question, Rob. Anne-Marie Megela: And thank you, everyone, for joining us. This concludes our earnings call for the first quarter '24. Thank you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Operator: Good day and thank you for standing by. Welcome to the Kraft Heinz Company Fourth Results Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Anne-Marie Megela, Head of Global Investor Relations. Anne-Marie Megela: Thank you, and hello, everyone. This is Anne-Marie Megela, Head of Global Investor Relations at the Kraft Heinz Company and welcome to our Q&A session for our fourth quarter 2023 business update. During today’s call, we may make forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which excludes certain items from our financial results reported in accordance with GAAP. Please refer to today’s earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com, under News and Events, for a discussion of our non-financial measures and reconciliations to the comparable GAAP financial measures. Before we begin the Q&A session, it gives me great pleasure to hand it over to Carlos Abrams-Rivera for opening comments and to host his first earnings update as our Chief Executive Officer. Carlos, over to you. Carlos Abrams-Rivera: Well, thank you, Anne-Marie, and thank you, everyone for joining us today. Before opening the call for questions, I just would like to say thank you to all my colleagues here at Kraft Heinz for delivering another solid 2023 results, and at the same time, making the strategic investment for the future. And frankly, all that while navigating some persistent industry pressures. I am very enthusiastic for our next chapter here at Kraft Heinz. And in 2024, we expect to drive top line growth, return to positive volumes, expand gross margins and operating margins and continue to reinvest in the business and an iconic brands. With that, I have Andre joining me today. Let's open the call for the Q&A. Operator: Thank you. [Operator Instructions] One moment for questions. Our first question comes from Andrew Lazar with Barclays. You may proceed. Andrew Lazar: Great. Thanks. Good morning, everybody. Carlos Abrams-Rivera: Good morning. Andre Maciel: Good morning. Andrew Lazar: Carlos, I was hoping to start out maybe organic sales in the fourth quarter were impacted, as you talked about by trade timing and a retail inventory deload. You're suggesting that you expect the first quarter organic sales to be similar to 4Q, which implies that underlying sales maybe could be a bit worse than 4Q. I don't think you expect the retailer deload to continue. So, if I have that right, I guess, what would cause the sequential slowdown in organic sales in 1Q? And how do you see that playing out moving forward? Carlos Abrams-Rivera: Yeah. Good question, Andrew. Thank you for that. The math on Q4 to Q1 may be similar, but the factors driving it are very, very different. I think maybe, Andre, if you can give a little more color as to the effects of both the North America business versus the emerging market business and how that's shaping kind of the math behind the numbers? Andre Maciel: Sure. Good morning, again, Andrew. So, we -- as Carlos said, we do expect similar numbers from Q4, but coming from different drivers. So, on North America, we do expect better performance because we should not repeat both the trade timing and the inventory deload. We think we're going to be at a healthy level at this point and sellout. If anything, maybe it will be in line or slightly better getting to Q1. Now when you talk about emerging markets, we do expect a shipment phasing that will affect Q1. So, we do expect, instead of growing double-digits like we have been doing consistently, emerging markets should be growing the mid single digit territory. You might remember that last year, we had a very strong performance in Latin America. Brazil grew 40% in Q1. So, we're going to lap it that, but nothing wrong with the underlying sellout trends both in North America and emerging markets. Andrew Lazar: Great. Really helpful. And then, Carlos, it seems -- like if I have this right, most of the pressure in the GROW platform in the fourth quarter was in Easy Meals. If I had that right, can you talk a bit about what caused that, and maybe how this plays out as you move into the first quarter? Because it sounds like you do expect North America to get better. Carlos Abrams-Rivera: Yeah. And frankly, Andrew, if I think about Q4 -- let me start with some of the positive, which is we also saw the return to growth of our Ore-Ida business, driving both growth and share performance as we continue to leverage kind of the new partnership we have with our Simplot and really being able to service the business to its full potential. Now on the kind of headwind side, I think we saw some challenges in our mac & cheese business. Frankly, it's a business that is driven disproportionately by our SNAP exposure. So that affected some of the business in Q4. However, as I think about going forward, there are three key things we're doing to make sure we improve the trajectory: One, we're also making -- we are investing further in our new campaign behind mac & cheese and driving new innovation behind it as well. So, you'll see from us additional areas around bringing new SKU flavors. We're bringing variety packs and we're bringing, you may have seen a new plant-based option with mac & cheese in a partnership with NotCo. We're also making sure we continue to drive even better value with mac & cheese by leveraging the fact that we have in our portfolio, partnership that we can do with brands like Oscar Mayer to offer truly a complete meal solution for consumers, plus offering multipacks around 12 packs and 4 packs in different formats to different types of consumers who are looking for value. And then finally, we're also making sure we're partnering with retails, we're actually improving the overall assortment to optimize the traffic down the aisle. So, I feel very good about the fact that the team have been able to acknowledge what happen and taking -- creating a new plan for us into '24 to improve the performance of Easy Meals. Andrew Lazar: Thanks so much and see you all next week. Carlos Abrams-Rivera: Thank you. Operator: Thank you. One moment for questions. Our next question comes from Bryan Spillane with Bank of America. You may proceed. Bryan Spillane: Hey, thanks operator. Good morning everyone. I just had a -- I have a question about Foodservice and maybe if you can just drill in a little bit. In North America, it decelerated relative to the previous quarters. And I think even in your slide, you've got underperformed relative to the industry. And so, I guess a couple of questions there. One is just is there a trade or an inventory deload happening in Foodservice. Maybe if you could talk a little bit about the respective channels within Foodservice, what got better and maybe what got worse? And then sort of your expectations, both for North America and global on Foodservice, do you expect it to be kind of in line with your algorithm for Foodservice this year or maybe even a touch better. Just want to unpack that Foodservice a little bit more, please. Carlos Abrams-Rivera: Glad to. Let me start by clarifying something you said in your question. In our Foodservice business, we are growing both ahead of the industry in North America and International. So, I think that we actually feel very good about our performance on Foodservice, and we see that as we go forward into 2024. So, we see Foodservice growing up -- growing in 2024 in our long -- appropriate with our long-term guidance. So high single digits. So, we think actually it's going to be a continued driver of our performance as we go into 2024. And frankly, we see that us having even more coming as we go forward because we are not only performing well where we are, but we also are improving by getting into new higher margin channels like independent and non-commercial channels, plus driving big innovation, leveraging our technology, leveraging the iconic brands that we have. So until now, we have seen the beginning of the potential of Foodservice and that is actually driving faster growth than we have seen in the industry. And we actually believe that between the innovation that we have between us going into new channels that are higher margin and more attractive, we can actually make that even a faster growing part of our portfolio as we go forward. Bryan Spillane: I guess if I'm looking at slide nine correctly, I think you've got the industry growing faster than your North America business in the fourth quarter. So, again, it just seems like -- I don't know if there's a disconnect between what you shipped versus what consumption was. But -- again, unless I'm looking at this slide incorrectly, it actually looks like you underperformed the industry. Carlos Abrams-Rivera: Let me just say, I think you are looking at the slide incorrectly, and happy to follow up with you … Bryan Spillane: Okay. Okay. All right. Thank you. Carlos Abrams-Rivera: Thank you. Operator: Thank you. One moment for questions. Our next question comes from Stephen Powers with Deutsche Bank. You may proceed. Stephen Powers: Hey, thanks. Good morning, everybody. Carlos Abrams-Rivera: Good morning. Stephen Powers: Carlos, I guess stepping back, I'd just like a little bit more detail on your conviction surrounding improve total portfolio volume trends and presumably volume share trends and a return to growth as you progress through '24. Because on the one hand, I understand drivers that you talked about in your prepared remarks. On the other hand, we're coming off a quarter that saw you tweak organic growth expectations lower coming into the quarter and then effectively undershoot those expectations when the dust settled. So, I guess, again, what gives you the confidence that we're not only leveling off, but we're approaching a level that where we can return to growth without, I guess, incremental investment in promotions and price because it doesn't seem like that's part of the outlook. Carlos Abrams-Rivera: Right. Let me just -- let me unpack that a little bit. First, as you -- as Andre mentioned earlier, there is some factors specifically affecting our Q4 performance in terms of trade as well as inventory that we're not going to repeat as we go forward. As we go into 2024, if I think about, first, the top line, we are going to continue the progression of emerging market at Foodservice. And then emerging markets already growing volume. We have seen the progress of our Foodservice business growing faster than the industry. And in North America on the top line, we actually expect to recover share as we are now making all the payoff of the innovation investments we have made, we'll start seeing that coming throughout the year. So I think that idea of us continue to invest in the right things behind our insights in North America, it's paying out with innovation. And then it also to have the right business plans with our retailers. Those factors actually are going to help us drive the top line with confidence. If I think about kind of the -- specifically, you talked about volume. One of the things that we are looking at is we are anticipating a return to the historical activity levels. And in fact, we are seeing that already. So, we are expecting volumes to turn positive in the second half in the year because as I mentioned, the idea of us continue to invest in innovation that actually will give us the right tailwinds as we go into the year, plus we no longer will have some headwinds associated with both pricing that we took in Q1 of last year as well as the SNAP benefits cycling that as we go into the second half of the year. So that also -- that all together gives me the confidence that we can see that us coming together with a better performance we're going to '24 in a way that actually allows us to exit the year in an algo for us as a company. Stephen Powers: Okay. Okay. Very good. Very good. Thank you. And then Andre, if I could, there was -- the free cash flow conversion this year improved as it was expected to. So that's a positive. I guess, just as we look into '24, how are you thinking about free cash flow conversion in the New Year. Can we expect further improvements? And if not, either way, I guess, what are the drivers of free cash flow progress as we go forward? Thank you. Andre Maciel: Sure. And good morning. So yeah, as you pointed out, we were able to deliver a very solid cash flow conversion in 2023, above 80%. And we do expect a small progression also as we head into 2024. We still going to be in the 80s territory because we do expect another year of solid CapEx investment like we have been doing in the last two years. There's a lot of good investment opportunities for us in the organic business. Yeah, and we have some taxes step-up that we also mentioned it's affecting earnings as well. So those two factors go against that. But on the other hand, the working capital should expect to continue to improve as a consequence of the investments we have been making. Carlos Abrams-Rivera: The one thing I would add too is as we go into -- those of you joining us in CAGNY, we'll be able to unpack to a little more of our investments we're making. I mentioned quite a bit about innovation, about how we are going to continue to invest in our brands, making sure they are superior to our competition. So I think you'll see a little more details that from myself and the team when we're together in Florida. Stephen Powers: Okay. Very good. We will see you there. Thank you. Carlos Abrams-Rivera: Thank you. Operator: Thank you. One moment for questions. Our next question comes from Ken Goldman with JPMorgan. You may proceed. Ken Goldman: Hi. Good morning. Just curious, there's some early indications that maybe as an industry, quick service restaurants, seeing some fraying at the edges in terms of consumer demand, mainly under the weight of higher prices. I'm just curious if this is something you're seeing as well. And to what extent, if at all, does your outlook maybe potentially factor some kind of slowdown there. Carlos Abrams-Rivera: Yeah. In our business, frankly, a lot of our business can is, is really focused on front of the house. And we're actually seeing solid performance for our away-from-home business, both in the U.S. and as well as outside the U.S. And if you think about the fact that outside the U.S., we use that channel very much as a way for us to drive awareness and build their brands. That continues to drive positive growth for us. In the U.S. as well, we see that even within the context of QSR, we continue to see progress and improvement. But at the same time, we're also expanding into new channels that allows us to continue to drive the growth, whether that is from our vending opportunities into new hospitality areas. So, we also are having a little bit of a broader view of how we define our away-from-home business to go into new spaces that we know are margin accretive and not be dependent on just one channel in order for us to drive the growth. Ken Goldman: Understood. Thank you for that. And then the gross margin increase you're expecting this year despite a little bit of lingering inflation. Can you just remind us what some of the key drivers will be of that? Is it simply a continuation of would help 2023 in terms of COGS efficiencies and some revenue growth management assistance? Andre Maciel: Sure. So, we expect gross margin to expand again and is part of our long-term algorithm, we feel proud of what we have done so far. Remind that we always have been pricing to offset inflation in dollar for dollar, and that's what we have done in the last two years. However, in 2024, we are expecting to price approximately at 1% level, which is below the inflation that we're expected at 3%. But -- so the main driver is really coming from the gross efficiencies. We have been delivering ahead of what we outlined to you a couple of years back. So 2023 are very solid year, almost 4% of gross efficiency as a percentage of COGS. And in 2024, we expect another solid year. So, this gross efficiency is helping us, not only to offset a component of the inflation, but also is helping us to expanding gross margins and investing a little more in the business on the SG&A side. And that's something that you should expect to see from us. Ken Goldman: Great. Thank you. Andre Maciel: Thank you. Operator: Thank you. One moment for questions. Our next question comes from Pamela Kaufman with Morgan Stanley. You may proceed. Pamela Kaufman: Good morning. Carlos Abrams-Rivera: Good morning, Pamela. Andre Maciel: Good morning. Pamela Kaufman: I was hoping that you could double click a bit into the drivers behind your Q4 results in North America and how you're thinking about those factors going forward? You pointed to weaker consumer demand, but also discrete headwinds like the inventory deload and lapping the trade accrual. So, how are you thinking about North America consumer demand in '24? And can you explain what drove the one-time dynamics? Was it a specific retailer or specific categories where you saw a deload? And maybe you can explain the effect of the trade accrual. Thank you. Carlos Abrams-Rivera: Let me start and give you a sense for how we see the consumer today. And then maybe, Andre, you can go deeper into the specifics about the Q4 and how we are -- how we see that playing as we go forward. But I guess the place that will start would be that what we're seeing in the data is regardless of the income levels that consumer is looking for value and they continue to be under pressure. And what we see is low income consumers are actually shopping more at places like Dollar Stores, higher income consumers, more club stores. But mostly, we are seeing them looking for overall, smaller trips to stretch their dollar further. So for us, it continues to be about how do we continue to deliver value in different ways to that consumer who are very much focused on value through intentionally investing in our brands making sure we have a longer value offerings and increasing the distribution in different channels to be what we have done in the past. And let me just be specific before Andre give you the details on the Q4. And if I think about club channels, we have introduced a number of brands into club from Capri Sun to Lunchables Classical Pasta Sauce. In fact, we also tested new innovation in our club channels. And in 2024, we'll have 20% higher number of offerings into club that we did in 2023. Now if I think about the enterprise points in the category and the SKU that we can have in kind of areas around Dollar Stores, we're actually making sure that we're driving things like improving on assortment of barbecue and mustard or crab of mayo and salad dressing as well as new items around Taco Bell and our partnership that we have in order for us to drive expanded use of our Mexican initiatives. So if I think about Dollar Store, we actually have today over 300 SKUs. And year-over-year, we're going to be increasing about another 10% versus what we had in the past. So, we are making sure that we are in the right channels with the right assortment and continue to invest in our innovation in order to make sure that we could absolute consumers looking for value independent of where they're looking for different occasions, different formats, different shopping behaviors. And now, Andre, if you want to give a little more context on the Q4. Andre Maciel: Sure. So North America net sales declined 3%, and approximately 140 bps is linked to the trade accrual release from last year into -- probably 2022 and from inventory deload year-over-year. But in fact, it's not that we saw a deload happening in 2023, that in Q4 2022, as we started to recover, services start to ship ahead of consumption. So we are lapping that effect. So there's nothing really on that regard affecting 2023, it's just a lapping effect. Now the sellout was negative, and it was softer than what we anticipated. We underestimated the impact of SNAP in Q4. It turned out to be more than 150 basis points stronger than we thought. If you remember, there was a concentration of emergency allotments at the end of 2022. So, on a year-over-year basis, there is benefits declined close to 40%, which is substantial. And that's what affected a lot of sellout. We should continue to see some of that in Q1. So, on a year-over-year basis, Q1 '24 will still be about 20% less SNAP than last year. So, we're still going to suffer a portion of this effect. But on the other hand, our market share has improved in Q4 as we anticipated, which is a very good sign. We are living -- exiting the year with the best share performance of 2023. So that give us a lot of good momentum heading into this year. Hope that helps. Pamela Kaufman: Yes. Thanks. Just a quick clarification. So, are you saying that SNAP was a greater headwind in the fourth quarter than the prior two quarters? And why do you think that is? Andre Maciel: Yes, Absolutely. Yeah. Because there is a concentration of emergency allotments considered in Q4 of -- in '22. So, there is SNAP a benefit in Q4 '22 were actually higher than Q2 and Q3 2022. Pamela Kaufman: Okay. Thank you. Andre Maciel: And this itself is not a surprise. I mean, we just underestimated the elasticity of that. Pamela Kaufman: Understood. I'll pass it on. Thank you. Andre Maciel: Okay. Operator: Thank you. One moment for questions. Our next question comes from Robert Moskow with TD Cowen. You may proceed. Robert Moskow: Hi. Thanks. A couple of questions. Those of us analyzing your commodity exposure see a lot of deflation running through on the ingredient side, maybe even the packaging side. And your guidance is for inflation to be positive. Can you walk through some of the components that we can't see, maybe it's conversion costs or things like that, that make this a -- continue to be an inflationary year? And then my second question was, you have a $25 million write-down for, I think, systems related to your modernization efforts. Can you go into a little more detail as to what caused that write-down? Thanks. Andre Maciel: Sure. Good morning, Robert. Good to hear from you. So on the inflation side, as we said in prepared remarks, we do expect inflation again into 2024, low single digits on the 3% territory. Even though ingredients as a whole, we see quite a few commodities that are deflationary. We still have the impact of maybe tomatoes and sugar affecting us negatively. So, there is a little net increase in terms of commodity inflation. And then -- but the biggest bulk of the inflation is really coming from labor. We continue to see a relevant higher than pre-pandemic level on wage increase as well as transportation making 2023, the transportation costs were quite low, and we are seeing some signs of rebound on the transportation cost side. So, this is where inflation is mostly coming from. On the second part of the question about the $25 million. So not 100% of that is the system write-off, even though it's the majority of it. And this has to do with us deciding not to maintain investment in a certain technology that we think will not be relevant for the future. So, we decided to stop that investment and redirected issue, something that we think will be more relevant towards future agenda [ph]. As you know, technology is front and center of our strategy. And we have continued to make decisions to make sure that we can turn it into a competitive advantage to us. So -- and if this might require us to make decisions in between a quarter that we do not initially anticipated because we saw that that's the right thing for the business for the long-term. We're not going to hesitate to do that. Robert Moskow: Okay. Thank you, Andre. Andre Maciel: Thank you. Operator: Thank you. Anne-Marie Megela: Operator, we have time for one more question. Operator: Thank you. And our last question comes from John Baumgartner with Mizuho Securities. You may proceed. John Baumgartner: Good morning. Thanks for the question. Carlos Abrams-Rivera: Good morning. John Baumgartner: First off -- good morning. Wondering if you could provide an update on the outlook for efficiencies. Just given the over delivery in 2023, what's included in the guide for 2024. And as you think out to this next round of improvements, specifically the new overhead savings from automation, fixed assets. How are you thinking about the timing for when those benefits begin to accrue? Andre Maciel: Great. So thanks for the question. As we said, 2023 are very solid year. We delivered close to 4% of efficiencies as a percentage of COGS. And we do expect 2024 to be another year where we will be delivering ahead of the 3% COGS that we have outlined. I want to make sure that you understand that not only this is a consequence of the complete ways of working changes that we have done in supply chain, more focused on variable costs and continuous improvements. But also we are -- we still have some efficiency opportunities that are coming through as a consequence of the pandemic and all the inefficiency generated by that. That helped in 2023, and that is still going to help a little bit in 2024. But beyond that, there are a lot of things happening on the supply chain space, difficult to name only one because given the share size of our COGS, but we do have initiatives coming from network optimization in the U.S. We have a very complex distribution center network, more than 80 distribution centers overall. We do have initiatives in automation. In fact, we have a very strong partnership with Microsoft trying to do -- using technology to allow us to make faster decisions. And if that improves labor usage and reduce yield losses. We have a lot of opportunities on value engineering to continue to make sure to offer the right type of attributes to consumers. So, there is a lot of different levers. We're going to touch on a few of them next week in CAGNY, but I think we are very pleased with the quality of the pipeline we have in supply chain now. Carlos Abrams-Rivera: And I think you will see is that how the investments we have been making in technology, the partnership we have been making in digital are basically fueling a lot of that efficiency in a way that actually creates some benefit for us for now and to the future as well. And again, will impact that even further when we are together in Florida. John Baumgartner: Okay. Thanks for that. And then just quickly on international. The emerging markets vol mix was pretty solid in Q4. But I'm wondering if you can speak to the vol mix in the developed markets, what you're seeing in Europe from category performance, private label competition and the consumer dynamics there sort of giving you confidence in the international guide for 2024. Thank you. Carlos Abrams-Rivera: Happy to. I think if we think about what we have mentioned in terms of value and how consumers are looking for value in the U.S. is similar as well, too, in terms of consumers in Europe. I mean, they are looking for that value as well. And we are continuing to make sure that we're bringing that value through the critical brands that we have, like our Heinz business in the U.K., for example, and how we continue to bring the products to the market that bring a number of improvements on our quality of our products as well as focusing on the benefit that we bring. So, for example, a product like HEINZ Beanz and the fact that brings kind of such a benefit around protein, that's something that is kind of now shifting in terms of how we think about that product. The fact that we're also bringing within certain part of our categories, new entries by leverage to our brands. So, in baked beans we will have not only the HEINZ Beanz, but we also have HP baked beans. And that allows us to actually play in a couple of different areas with consumers, both at a more mainstream as well as to more value. And then in places like Germany, we're also introducing new benefits to consumers as they are looking also again for value, whether that is Heinz Mayonnaise in new channels in the discount spaces, but also making sure that we continue to bring the innovation consumers are looking for from us. Like our Heinz Tomato Ketchup with zero sugar. So, we are approaching it with the same sense as we do in the U.S., which is let's make sure we're in the right channel with the right assortment. And at the same time, let's focus on bringing -- and focusing on the benefits that we bring with our products. John Baumgartner: Thanks Carlos. Thanks Andre. Carlos Abrams-Rivera: Thank you. Operator: Thank you. Anne-Marie Megela: Thank you very much. Operator: I would now like to turn the call back over to Anne-Marie Megela for any closing remarks. End of Q&A: Anne-Marie Megela: Thank you, and thank you, everyone for your interest. We look forward to seeing you next week. Operator: Thank you for your participation. You may now disconnect.

Operator: Good day and thank you for standing by. Welcome to the Kraft Heinz Company Third Quarter Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Anne-Marie Megela, Global Investor Relations. Anne-Marie Megela: Thank you, and hello, everyone. Welcome to our Q&A session for our third quarter 2023 business update. During today’s call, we may have forward-looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which excludes certain items from our financial results reported in accordance with GAAP. Please refer to today’s earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com, under News and Events, for a discussion of our non-financial measures and reconciliations to the comparable GAAP financial measures. Before we begin, I’m going to hand it over to our CEO, Miguel Patricio, for some brief opening remarks. Miguel Patricio: Well thank you, Anne-Marie, and thank you all for being with us today. And before opening the call for questions, I just would like to thank Kraft Heinz, my entire team for another great quarter. And again, I would like just to highlight some positive aspects about this quarter. We are generating accelerated profitable growth fueled by our three pillars. Our share and volume trends are improving as a result of the action plans that we are implementing. And we continue to strengthen our balance sheet, hitting our target net leverage of approximately 3x. And then we continue to invest in the future with another quarter of significant investments in marketing, technology and R&D. Well, with that, I have here with me today, Andre and Carlos. And so, let’s open the call for the Q&A. Operator: Thank you. [Operator Instructions] Our first question comes from Andrew Lazar with Barclays. You may proceed. Andrew Lazar: Great, thanks. Good morning, everybody. In Slide 33 of the slide deck this morning, you call out branded promotional activity is still below ‘19 levels, and Kraft activity is below branded. So one clarification, Is the branded figure you highlight all food categories, or just the branded players within Kraft Heinz’s categories? And then I guess based on your plans for the remainder of the year and looking into ‘24, I guess how would you anticipate these metrics shifting? Do you expect branded promo levels to return to historical levels? And would you expect Kraft Heinz to narrow the gap versus branded? Or how do you see those metrics moving from here? Thanks so much. Carlos Abrams-Rivera: Thanks, Andrew. It’s Carlos. Let me first address your point about clarification. What you see in the page, it is about those branded players that do compete with Kraft Heinz. The second part in terms of how do we think about our promotions as we go forward. First, I will tell you that I’m not going to comment on what other companies may or may not do. But I will tell you is that, one, we’re not going back to 2019 levels. We are going to – at the same time, as we go forward into Q4, we know there is a seasonality to our business. And as we have said earlier, we’re going to make sure now as we go into the holiday season, that we make the right investments to support our business. Now I’ll say that at the same time, we’re going to continue with the same level of discipline that we have shown until now to make sure that our investment with the right level of ROI as we go forward. Thanks for the question Andrew. Andrew Lazar: Thank you. Operator: Thank you. [Operator Instructions] Our next question comes from Peter Galbo with Bank of America. You may proceed. Peter Galbo: Hey, guys. Good morning. Thank you for taking the question. I guess just in North America, on the volume piece, there is a fair amount of discussion both in the prepared remarks around kind of meats being a drag this quarter. And you discussed a bit about how you’re giving up maybe some volume to maximize profitability and gross margins. But then you also kind of discussed how service levels aren’t where you want them to be, particularly in sliced meats, and you’re expecting improvement on that going forward. So I guess the question is just what should we be taking away from those comments? Are you kind of continuing to scale back on volume and focus on the profitability there? Or should we think about a volume share recovery and maybe some headwinds to the margin mix that come with that, particularly as we think about North America volume? Thanks. Carlos Abrams-Rivera: First of all, I think that – let me just put into context kind of the volume question that you see in North America. First, I would say is that what you see for us as a company, we continue to improve sequentially from what you saw in Q3 – I’m sorry, Q2 to now in Q2 – in Q3. And then, if I look holistically at the company first, you’ll see that we continue to drive the things that are working for us. We are continuing to grow in Emerging Markets where we’re growing volume mix year-over-year now in Q3, that we continue to expand in our Foodservice and that we believe that it continues to drive opportunity as we go forward. And then specifically in the U.S. business, you see how the investment we have made in terms of improving our share of shelf, our investments in marketing, our investing in innovation and our improvement in CFR have continued to improve overall actions. Now as we think about the total portfolio, there are some places in which we’re going to remain focused and disciplined on how we invest back into the business. I think you referred to in our meat business, where we want to make sure that we are not going to be just following unprofitable growth, but that we’re going to be rational and disciplined on how we invest in those businesses in order for us to drive the right consumer pull, but at the same time, not sacrificing the overall profitability of the business that we need to maintain. Andre Maciel: I will just add that in our long-term algorithm, volume is important to us. So in our 2%, 3% growth, it comes from a balanced contribution between price and volumes or volumes there, but as Carlos said, we are seeking profitable volume growth. We are not trying to maximize gross percentage margin, we are trying to deliver profitable, sustainable growth, ultimately translating to sustainable EPS growth. Thanks for your question. Peter Galbo: Great. Thanks very much. Operator: Thank you. [Operator Instructions] Our next question comes from John Baumgartner with Mizuho Securities. You may proceed. John Baumgartner: Good morning. Thanks for the questions. Carlos, I just wanted to touch on the meats business again, coming back to Peter’s question. You point out it’s an energized business, but the category is seeing price competition, private label is gaining share, that was not happening at the outset during COVID, during work from home. It just seems as though the ambition to rebuild or maintain profit, it’s hard to square that with what looks like a need to reinvest more given the declines. So how do you think about resource allocation, your willingness to continue reinvesting in that business relative to the point where you just say, hey, these assets may be better suited to another owner like what happened with the nuts business. Just curious about your willingness to stick with it given a very tough backdrop in the category. Thank you. Carlos Abrams-Rivera: Andre, why don’t you start here, and I can build. Andre Maciel: Sure. So as we have said before, different parts of our portfolio, they have different roles, and these roles might change over time. The role for me right now is to rebuild the profitability which has enrolled at 50% in the last 5 years while continuing to invest in the brands to improve, innovate, so then at some point, this brand can be in a position to grow in a profitable way again. And that’s what we’re doing. In Q3, for the second quarter in a row, this part of the portfolio, declined mid to high single digits on the top line but grew mid to high single digits on the bottom line, not by milking the brand, but by making the type of – the right type of investment and the right type of actions that are appropriate for this portfolio right now. For us to be chasing volume with this in an unsustainable way, only through promotion, that’s not the game that this – that we want this brand to play. Carlos Abrams-Rivera: The only thing I would add is that even in – if you think about our cold cut business within our meat business, we have continued to improve our CFR, but that is the one area where we’re still not at the right level of service that we want for the year. You’ll see that progression. At the same time, as we have improved our service, we have also began to see improvement in our share, too. So if you look at month to date as well through October, we are seeing that, in fact, our cold cuts business are beginning to gain share. So we are just going to be looking at the category in a very disciplined way to make sure we’re doing the right things, as Andre said. John Baumgartner: Okay, thank you. Carlos Abrams-Rivera: Fair questions, John. Operator: Thank you. [Operator Instructions] Our next question comes from Stephen Powers with Deutsche Bank. You may proceed. Stephen Powers: Great. Thank you. Good morning. I wanted to shift gears, if I could, and talk about the momentum you have in both Foodservice and Emerging Markets and just get your perspective on your confidence that momentum can continue and perhaps how the organizational changes that you announced today internationally might contribute to that momentum as we go forward. And also Andre, if you could, if I could tack on a second question, just now that leverage has dipped below that target level of 3x, just wondering how you’re starting to think about prioritization of cash going forward. Because the cash generation has been good, I presume cash will build and just think about how you’re thinking about allocating that cash going forward. Thank you. Carlos Abrams-Rivera: Thank you for the question, Stephen. Andre, why don’t you comment on the capital allocation, then I’ll talk about Foodservice and Emerging Markets. Andre Maciel: Sure. So on capital allocation, our priorities remain unchanged. That means continue to fund our very competitive dividend, maintain investment grade and prioritizing organic growth like we have been consistently doing during the past 3, 4 years. We are very proud that we were able to get to this level of leverage 1-year ahead of our initial expectation, and that’s very important. That shows that the business is strong and the organization is focused on delivering sustainable performance not only on the EBITDA side, but also in cash conversion, which is a remarkable improvement of this organization. And now I think that puts us in a very good situation to assess options to deploy this cash, and we are looking at those. Carlos Abrams-Rivera: Thanks, Andre. Let me comment first on Foodservice. I feel very optimistic about our plans in Foodservice. And we have really been working on building a foundation for the future. And if you think about the way we are thinking about building our business in basically three areas, we continue to make the investments in our chef-led models and that’s driving positive performance for us. We also are making sure we are competing in more attractive and better margin channels, things like our independent and non-commercial channels versus traditional where we have been limited to. And then lastly, we are seeing much more powerful innovation that allows us to lever the technology investments we have made and bring those into the product forefront, whether that is in things like our Heinz Remix machines and how that actually creates an opportunity for us to separate ourselves for the future. Now if you look at the full year for Foodservice, our expectation is probably to grow somewhere in the low to mid double digits versus last year. And we are – I will point out that we’re gaining share too, in both North America and the international zone. And then let me just make sure also that it’s clear that if we think about our long-term algorithm, Foodservice is expected to grow about 5%, and we’re going to be well above that level in 2023. Now if I switch over to our Emerging Markets, the one great thing that we also have been investing behind in Emerging Markets is kind of the discipline of our go-to-market model. And for us, the reason we feel so confident is because there is a data-driven go-to-market model that allows us to drive distribution, that then – we can then build and press in existing markets and enter new ones. And we have done that several locations. In fact, we are on track to implement our model in 90% of Emerging Markets by the end of this year. And just to remind you, in things like – in the first phase of building distribution, we would build the infrastructure, and then we go into the full structure in order to truly take advantage of our emerging business. I think in Emerging Markets, I would just add the comment that in Q3, we saw a temporary headwind as we think about particularly in Asia, where we have a business in Indonesia that is most surrounding around Ramadan season and where we saw some travel shifting – spending shifting from travel, away from gifting, and we have a gifting business in Indonesia. So that was that was a temporary thing. But as we think about the year ahead, we believe that we will get back to the right levels of performance also in our Indonesia business. Thanks for the question. Stephen Powers: Thank you. Operator: Thank you. [Operator Instructions] Our next question comes from Ken Goldman with JPMorgan. You may proceed. Ken Goldman: Hi, thank you. Just a quick one. In your slide presentation, from the prior quarter 2Q, you mentioned that you were expecting positive volume growth in 2024. I may have missed it, but did you reiterate that today in either of the slides or any of your commentary? Andre Maciel: Yes, we did. And that’s the case. Nothing changes. So nothing changed in terms of volume expectations as Carlos said. So we said, and it happened that volume would improve in Q3 sequentially to Q2, and it did. It improved in Q4 versus Q3. And at some point in 2024, the volumes will turn positive. Carlos Abrams-Rivera: In fact, I think everything that we’re seeing right now in the market, in our actions are working. And it just gives us more confidence as we think about our 2024 plans. Ken Goldman: Sorry, can I just quickly clarify that? I think people interpreted the commentary about positive volume about – as net throughout 2024, it will be positive. But I think the comment that was just made was at some point in 2024, it will turn positive. I guess I’m curious, do you expect at the end of the year, your total 2024 volume to be positive? I just wanted to get a sense that people aren’t overmodeling the year. Andre Maciel: I am not going to give guidance for 2024 right now. What I just said is what we have been saying all along. Operator: Thank you. [Operator Instructions] Our next question comes from Michael Lavery with Piper Sandler. You may proceed. Michael Lavery: Thank you. Good morning. I know we have covered maybe a little bit just on the volume and how to think about its role in the portfolio side, but I want to just come back to one specific piece. You have talked about your approach and being disciplined and rational. But in your prepared remarks too, you also specifically said that in cold cuts, you are investing to hit the right price points. Can you just maybe unpack that a little bit and reconcile how those two go together and what exactly you mean by those investments on the price side? Carlos Abrams-Rivera: Yes. Good question. Happy to clarify, Michael. What I would say is that we need to make sure that we are responding to the moments in which consumers are going to be looking for the right solutions for whether it’s at the holiday seasons or all the points throughout the year. And as we go into Q4, for example, we will make sure that we are making the right investments. However, we will be doing that with the right level of discipline to make sure we drive the right returns on that investment. So, the idea is that we have simply – like we stated earlier, we are not going to just be chasing volume, we are going to be looking for what is the way for us to drive profitable volume in a way that combines our ability to continue to build our businesses through the right investments in marketing and using the full array of revenue management tools in order for us to be able to drive the right efficiency and effectiveness of our investments. Michael Lavery: And so some of what you are saying would be the depth of the promotion is part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard, would that be a right interpretation? Carlos Abrams-Rivera: I think that would be one of the things that you could say. But I think on top of that, if you think about the full array of our revenue management tools, pricing, price architecture, other tools at our disposal that allows us to actually think about what is the right investments in order for us to maintain the level of – improving level of profitability that we have seen deteriorate over the last few years. Michael Lavery: Okay. Thanks so much. Carlos Abrams-Rivera: Thank you. Operator: Thank you. [Operator Instructions] Our next question comes from Jason English with Goldman Sachs. You may proceed. Jason English: Okay. Good morning folks. Thanks. So, I guess congrats are in order. Congrats, Miguel, for a good run and the improvements you have driven while at the helm of the company and congrats, Carlos, in the upcoming promotion and responsibility. So, on that topic, I guess the starting-off question is, what do you expect to do different? Should we be bracing and expecting any strategic shifts, or given that you have been an architect of many of the plans that have been in place, is this going to be sort of business as usual? Carlos Abrams-Rivera: First of all, Jason, thank you for the kind words, and I am certainly very much humble and excited about the opportunity ahead for me and for the company. What I would say is that, as you pointed out, I have been sitting next to Miguel for the last almost 4 years now. And I think a number of things that we have done as a company, we certainly have done together. And strategically, I think that I am certainly committed to the three growth pillars that we have for going forward that is – and think about also how do we continue to drive our expansion in emerging markets, how do we continue to see foodservice as a great growth for us and then the growth platforms within our U.S. business. At the same time, you also probably read some of the changes we are making in our structure in order to actually help us accelerate some of those things that we have done. For me, one of the critical aspects of this time when I have been transitioning as – and coming to the new role in January, has been listening to the organization and making sure we have the clarity of our strategy. And our structure is going to follow that clarity. So, some of the things you will see in terms of us being able to have a bit of breaking down the international zone which has worked in the past well for us, but now as we go into a new way of us growing, allows us to be a little more focused on those emerging markets in which we are going to make some additional investments. That, I think is part of us thinking differently about how we bring that structure and so that strategy to life in our structure. So, that’s I think some of the things that you are going to see, is what are the places that – with the lens of the jobs to be done for the strategy of the company, that we can maybe arrange certain things where we can truly leverage the scale of the company, the scale that we have been investing behind our technology and our marketing capabilities and to deploy them against the three pillars strategically that I am very much aligned with. Jason English: And should we expect inorganic solutions to come into the fold a little bit more so now that your balance sheet is in a better situation? Carlos Abrams-Rivera: As Andre said earlier, we continue to look at opportunities, but I would say that’s something that is part of our ongoing thoughts about how do we continue to see the active view of our portfolio. But there is nothing today that I would say that we will be announcing. Andre, anything else you would add? Andre Maciel: No, I think that’s consistent with what we have said before. I think our priority is organic business and M&A. If it happens, it has to help us accelerate our organic strategy, essentially be fully consistent, like we have done less for acquisitions or sales elevation and pre-opting in emerging markets and to be accretive to our top line, bolt-on on top of acquisitions. That’s what we are focusing on. Jason English: Understood. Thank you very much. Carlos Abrams-Rivera: Thank you, Jason. Operator: Thank you. [Operator Instructions] Our next question comes from Matt Smith with Stifel. You may proceed. Matt Smith: Hi. Good morning. I wanted to ask a question. Your productivity savings have been very strong this year, and you already increased your target for the year. Those have in part been used to have a stepped-up level of investment behind marketing, R&D and innovation. But as we look forward, can you sustain this level of incremental savings into 2024, or should we expect a return to the target of $500 million? And after this year has stepped up investment, do you believe you are exiting with the appropriate level of investment across the business, or do you plan to continue to invest in an elevated rate as we look forward? Carlos Abrams-Rivera: Maybe, Andre, if you could speak to our efficiency plans? Andre Maciel: Sure. So look, at this point, we are still committed to deliver the 3% of COGS of $500 million on a go-forward basis. But as we have said before, our benchmark is really on the 4% level, which we are achieving this year. And you should keep in mind that this year as well, we had a lot of, let’s call, gettables from inefficiency that was generated from the pandemic, that’s also helping. But we feel good about how our supply chain organization today is operating at completely superior level with very stable service levels and being a lot more forward thinking, which gives us confidence in delivering that 3% that we have talked before. From an investment standpoint, I think this also has been a great year because we have been able to deliver very solid bottom line growth while really resetting the investment level from the company for the future, which means that I think a lot of the reset has happened. There are still places that we want to invest more. But I think we took advantage of this year to really reset the level of investments to a very good level. Matt Smith: Thank you, Carlos and thank you, Andre. Operator: Thank you. [Operator Instructions] Anne-Marie Megela: Operator, this will be the last question. Operator: Thank you. And our last question comes from Robert Moskow with TD Cowen. You may proceed. Robert Moskow, your line is now open. Robert Moskow: Hi. Can you hear me now? Carlos Abrams-Rivera: Yes. Robert Moskow: Sorry about that. So, this is kind of a what-if question, and maybe you might not want to ask – answer what-if questions. But we are all watching top line growth kind of decelerate in the U.S., and the U.S. retail is such an important part of your mix. So, I guess my question is, if we are in a scenario where we are kind of in a 0% to 1% kind of sales growth environment next year, just for your categories, what would your philosophy be on an EBITDA basis? Like would you still drive to drop savings to the bottom line to hit the mid-single digit EBITDA, or would a slower top-line environment necessitate a slower EBITDA growth kind of target? Andre Maciel: Okay. Good morning, Rob, and good to hear back from you. Look, we believe that for us to grow top line in a profitable sustainable way is critical. So, if in an event where industry is zero, I think that doesn’t change the game that we are trying to play. Because I don’t know if you are implying that we will start to go aggressive on promotions to try to get volume through market share in a productive and sustainable way. If that’s what you are asking behind your question, that’s not the game we are going to play. So, I will just say that our strategy continues to be the same, it’s working. And I think we feel that’s heading in the right direction. We don’t want to make a change in direction because of temporary situations in the industry. Robert Moskow: Okay. Thank you. Carlos Abrams-Rivera: Thanks Robert. Operator: Thank you. I would now like to turn the call back over to Carlos Abrams-Rivera for any closing remarks. Carlos Abrams-Rivera: Thank you. So, before we leave here, I just wanted to acknowledge and take a moment to thank Miguel for all the support and trust that he has shown to me personally and for everything he has done for a company as he has built this tremendous and strong foundation. I can tell you that today, Kraft Heinz is a much stronger company because in 2019, Miguel Patricio put this company on his back and carried it forward. And I am forever grateful for being part of his team as we all work together to transform Kraft Heinz. And as I take over as the next CEO of Kraft Heinz, I am proud of where we have been as a company and even more thrilled about where we are going. And thank you all for joining us today. Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

Operator: Good day and thank you for standing by. Welcome to the Kraft Heinz Company Second Quarter Results. At this time all participants are in a listen-only mode. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anne-Marie Megela, Head of Global Investor Relations. Anne-Marie Megela : Thank you and hello everyone! Welcome to our Q&A Session for our second quarter 2023 business update. During today's call we may make forward-looking statements regarding our expectations for the future, including items related to our business, plans and expectations, strategy, efforts and investments, and related timing and expected impacts. These statements are based on how we see things today and actual results may differ materially due to risk and uncertainties. Please see the cautionary statement and risk factors contained in today’s earnings release, which accompanies this call, as well as our most recent 10-K, 10-Q, and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today’s earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com, under News & Events, for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Before we begin, I’m going to hand it over to our CEO, Miguel Patricio for some brief opening comments. Miguel Patricio : Well thank you Anne-Marie and thank you everyone. Thanks for joining us today. Before opening the call for questions, I would like to thank the entire Kraft Heinz team. We have proven again that our strategy works, generating top-line growth fueled by the three pillars, while reinvesting margin gains into the business. But while we did lose share in the quarter, as price gaps have stayed wider for longer than we would have liked, we are managing the business for the long term and still generated mid-single-digit top-line growth within the range of what we expected. As you may remember on the last earnings call, we introduced four action plans to drive share. We have seen those plans take hold, and they have led to improving results each month within the quarter, building momentum into the second half of the year. The continued execution of these action plans and the lapping of last year's pricing are expected to drive improving volume trends in the second half of 2023 and into 2024. Our results give me continued confidence in our strategy and in our business, and I'm pleased to reiterate our full year guidance. With that, I have Andre and Carlos joining me. Rafael [ph] is on a well-deserved vacation with his family, so let's open the call for Q&A. Operator: Thank you. [Operator Instructions]. Our first question comes from Andrew Lazar with Barclays. You may proceed. Andrew Lazar : Great. Thanks so much. Good morning, everybody. Andre Maciel: Good morning. Miguel Patricio: Good morning, Andrew. Andrew Lazar : I was hoping to dig into the promotional environment a little bit and some of the comments from your prepared remarks about branded competitors promoting at a higher level than Kraft Heinz. In your view, are branded competitors either over promoting or promoting in what you see as sort of in a irrational way, or is it more that KHC has not been able to ramp up its own merchandising activity yet to the extent needed, given some of those supply constraints and leading over the pricing actions? I guess in other words, would you still expect the industry promotional levels to settle in below 19 levels or is there some concern building internally that competitive behavior could return to previous levels or beyond, and that pricing could actually go negative at some point? I’m just trying to put some context around all of this. Thanks so much. Miguel Patricio: Good morning, Andrew. Thanks for the question. I will ask Carlos to answer, since I believe it's related to the U.S. retail. Carlos Abrams-Rivera : Good morning, Andrew. You know the way that kind of I look at it is that if you look at the industry as a whole, today's promotional levels are as you said, still below 2019. What we are seeing is that our branded competitors are actually closer to those levels, and what we are working on is how do we continue to make sure that we act with a thought of protecting our margins and building the virtuous cycle as we continue to improve on our marketing, continue to improve our services, our innovation, and importantly that we stay focused on driving the revenue management needed in order for us to be rational in terms of the effectiveness of our promotions. So if you look at our promotions this year, we actually have been very effective and efficient. We actually are generating attractive ROIs in investments. I think the numbers right now are up 50 points versus 2019, and that's true because the focus that we have on those agile AI Driven Revenue Management Tools, that we are applying to making sure that every promotion does have that kind of true ROI return. Now, on top of that, we're also making sure that we are working to maximize the opportunity on those promotions, so the quality of our merchandising, especially when you look at displays continue to improve, and in fact our share of displays continue to see increasingly improvements over the first quarter. So I think all together what I would say is, our focus continues to be very much leveraging our revenue management tool, continue to focus and drive in the investments in terms of marketing innovation, which you will know will make sure that improve our view as we go into the second half of the year and on to 2024. Andrew Lazar : Great. I'll pass it on. Thank you. Miguel Patricio: Thank you, Andrew. Operator: Thank you. One moment for questions. Our next question comes from Ken Goldman with J.P. Morgan. You may proceed. Ken Goldman : Hi, thanks. You mentioned that the second half's organic sales growth rate will be more in line with the long-term algo, not to put too fine a point on it, just so we can model more accurately. I was just curious, does this mean you expect it to be within that 2% to 3% range, that's your long-term algo or just getting somewhat closer to it? Miguel Patricio: Thank you, Ken. Andre please? Andre Maciel: Hi Ken. Good morning. As we have said in previous remarks, we expect to gradually go towards the long-term model. It might happen that we're going to reach there between Q3 and Q4, but you should expect like revenue to be gravitating towards that, yes. Ken Goldman : Okay, I'll follow-up on that. And then I wanted to ask a follow-up about capital allocation priorities. Paying down debt is I think number three on that list, ahead of portfolio management. You highlighted that leverage is I guess more or less at your target. Does debt pay down thus move down a notch in importance, and I guess what I'm getting at is, is there a scenario in which you might, maybe start to buy back some stock again? Andre Maciel: Yes. Yes, we are not changing our capital allocation policy now. So as we said, our priority has been to fund the business organically and I think we have been doing that very consistently. We – for us to maintain the dividends that we have, which provided a very attractive yield is critical and I think we feel good about our rating now, the level of the grade we had in the past 16 months. M&A, as we said before continues to be something that we actively look at. We’d like to – as we said in the remarks, we mentioned that multiple times, so we have been very disciplined in how we're doing that. But there is no change at this point. I mean we're always taking into consideration market dynamics and our capital structure, but we don't have anything new to say at this point. Ken Goldman : Thank you. Operator: Thank you. One moment for questions. Our next question comes from John Baumgartner with Mizuho. You may proceed. John Baumgartner: Good morning. Thanks for the question. I wanted to stick with North America and the comments on promotions, but more so on delivery. Is there – Carlos, you highlighted the ROIs you're seeing and you touched on the quality promos a bit, but to dig inside a bit more deeply versus history, how are you seeing the lift sort of changing from quality promo programs, the feature, the display relative to the pre-inflation era? Are you seeing a greater role for price reductions going forward? Does quality programs still have the same degree of lift in terms of the influence of those drivers? Just trying to get a sense for, as you lean into promo more in the back half and programming, does pricing need to be a larger driver at the margin than you would have thought relative to feature and display a couple of quarters ago? Carlos Abrams-Rivera: John, thanks for the question. I'll say, I think some of the parts were a little hard to understand, but I think I got the gist of your question. Related to the second half that we think about promotional level, and we have said this in final calls and within our guidance, there is a step up that we'll do in promotional levels as we go into the second half of the year in selected categories, but always with a disciplined approach of positive returns. What I would add to is that, one of the things that we are able to do with our promotional investment to improve the effectiveness of those things, of that investment, is to make sure we level the entire portfolio and that we are thinking through how do we make sure we have the right product selection to the right audiences. So for us, when you look at our, whether it's back to season, and we combine the different kind of categories that we can bring together, as we think about back to school in which we can bring in Lunchables and our Capri Sun business together, that idea of us being able to kind of go into the retail environment and actually leverage the entire scale of our business allows us to be more effective in terms of the returns of those promotions. So it's both, looking at the true ROI, through the AI management tools that we have, as well as maximizing our presence in store, leveraging our scale. The last thing I will say is, as we think about going into the second half of the year, we're also seeing consumers behaving in a way, in two different kind of camps. They are the consumers who are going to be looking for those more, I would say larger packs in which they are going to look for the value by looking at the total size of the products that they are going to get and why we are introducing more products in the club type of packages, whether that is in our Mac and Cheese, in our Lunchables and you see that that is focused on driving that particular type of behavior with consumer effectiveness. There's also going to be a number of programs specifically to making sure that we are keeping consumers who are also focused on the cash flow within our categories, which is why we also have been introducing more of the smaller package, more of the dollar type of products that allows us to maintain our consumers within the category for longer. So we're approaching that in those two prongs, at the same time, always looking at making sure we have the right ROI in every investment that we make. John Baumgartner: I apologize for my connection there, but just to clarify, if we think about price promotions versus sort of non-price, the quality, the feature, the display, have you seen any sort of changes in terms of how deep you may have to go on price reductions going forward or do you think that kind of quality promo, you'll still see attractive lift? You don't really have to get deeper on pricing. Andre Maciel: But what we have said Andre here, what we have seen throughout these past three years is that we can have very attractive lifts without having to go as deep. And I think that that, when you look across, at least based on data from my review [ph], that's what we have been observing for ourselves and I think that still remains true moving forward. The other thing that as Carlos mentioned, that I think moving forward we're going to start to see more and more increasing importance of mix, and that's vis-a-vis only doing more promotions or playing with these prices. So I think we're going to be hearing a lot more about mix-related actions. John Baumgartner: Okay. Thanks for your time. Miguel Patricio: Thanks, John. Operator: Thank you. One moment for our next question. Our next question comes from Bryan Spillane with Bank of America. You may proceed. Bryan Spillane : Hey, thanks operator. Good morning, everyone. Miguel Patricio: Good morning. Bryan Spillane : Hi. So I had – I guess I had just two questions. First one, just a clarification. I think we talked about margins in the prepared remarks that fourth quarter margins will be higher than the third quarter. I just want to clarify, was that a comment on gross margin or EBITDA margin? Miguel Patricio: Andre? Andre Maciel: It ends up being both, but it's driven by the gross margin. Bryan Spillane : Okay. Andre Maciel: And it's mostly, it's a seasonal factor, because in Q4 we typically sell-through. We're over-investing products in higher margins. If you look just for generality, aside [inaudible] Q2 is higher than Q3, because we ship a lot of greeting [ph] season, which has higher margin, we ship for summer. And then in Q4, we have items like cream cheese, gravies, and other items like that have very high margin, desserts. So that's why it's just mixed related. Bryan Spillane : Okay. And then second question, and I guess maybe this is related to what John Baumgartner was just asking, but maybe just more simplistically, I think coming out of the first quarter, you talked – and this, we're talking about North American retail, that one of the issues or one of the drivers of share losses was just price gaps, right? That competitors, whether it's private label or branded in certain categories hadn't followed your pricing. And so I guess I have two questions. One is, have price gaps narrowed or your share gains that you've seen sequentially over the last couple of months happened without the price gaps closing? And then when we think about your – the comments about the expectations for volume growth in ‘24, right, is that dependent also on kind of normalized price gaps? I guess what I'm trying to understand is like, can you drive volume without those price gaps closing, because you really can't control what your competitors do. Andre Maciel: Yes, I think there's a couple of things. If we look versus the bottom, the last two, three months we have seen the price gaps narrowly moving favorably to us, so getting closer. So there is certain contribution coming from that. And also, all the other actions that we outlined in the remarks, right. So we had to do some pockets of challenges in service that is now getting behind us. I think the only big remaining item is cold cuts. That as we said is going to be recovered by end of Q3 or the Q4. We have innovations starting to ramp up, and I think Carlos can give more color on that. Carlos Abrams-Rivera: Yes Brian, what I would add is that, first of all on the comment on private label. Private label shares trends actually have been flat since you looked at it. In fact since second half of 2022, even with increasing price gaps that we had after our price impact in February. So we have taken that pricing to protect our margins, and some branded competitors have not followed, but at the same time, we continue to stay diligent on the way we think about the business. Now, in the points that Andrew just mentioned, in terms of – as we think about going forward, why is it that we see the moderation of our improvement? I'll give you three reasons on the way kind of I look at it as we go into the second half of the year into 2024 in the U.S. retails. You know number one, we're investing more in marketing, we're launching more innovation, and we are lapping the pricing actions as we go into second half of the year. And just to unpack it one more level, if you think about the innovation that we are seeing right now, we are actually building momentum as we go into the year, as we are following this kind of two-pronged strategy innovation. First, you're going to see us continue to launch more disruptive innovation platforms, and that includes things like our NotCo line of plan-based offerings, the new Crisp from the Microwave, which delivers great taste and all the convenience, and the restaurant-to-retail platform, and you see that already with things like the IHOP® Coffee line. The second part of the innovation is also how do we take our existing brands into new spaces. Already, we introduced a new frozen Mac and Cheese. We are expanding our Delimex and Taco Bell into more spaces with the Mexican meals, and as we speak, we're also launching new Oscar Mayer scramblers as we continue to expand on the Brexit platform. So you see, it's comprehensive in terms of how we are approaching innovation in order to continue to shape the categories as we increase its shelf space and quality display as we go forward, and that's already paying us. And in fact, just to give you a factoid, if you look at our Lunchables, we are creating a new golden wall in Lunchables as we go into a second half, and we are seeing that in some of our top customers that increases about 40% our space within the shelf. So again, it's not only thinking through the kind of promotional event, but also what we're doing in terms of our driving, volume-driving activities that are important as we go forward. Operator: Thank you. One moment for our next question. Our next question comes from Pamela Kaufman with Morgan Stanley. You may proceed. Pamela Kaufman : Hi! Good morning. Miguel Patricio: Good morning. Andre Maciel: Good morning. Pamela Kaufman : In North America, you pointed to your organic sales growth below consumption in certain parts of the portfolio, like the GROW platform, Taste Elevation, Easy Meals. What's driving that gap, and are you seeing a change in how retailers are managing inventory levels or shelf space for your brands? Miguel Patricio: Let me start with the – thanks for the question. Let me start with the second part of that, which, what we're seeing right now is – if you look at the second quarter and what we know today, we believe retail inventory is actually in pretty good shape. In fact, on average, retail inventory for us was flat across the North America business, and what did happen, it was in truly isolated pockets and earlier in the quarter, so that we actually saw that through the quarter it continued to improve, and so there's no – I don't see that as an ongoing situation as we go forward and that has been proven as we go through the quarter, so. And I'm sorry, the first part of your question then was what? Pamela Kaufman : Why were your sales below consumption across some of your platforms? Miguel Patricio: Yes. No, thank you. You know, I think if you look at our GROW platforms, which continue to drive our priority and our strategy, those actually in consumption remain very strong. I think if you think about Taste Elevation growing 8% for the quarter, Easy Meals growing 6% in the quarter. In those cases, the difference between organic and our consumption were specifically in Easy Meals, where there was an inventory de-load in the beginning part of the quarter that as I said earlier, it continued to improve as we go into – as we go forward. And I think for us is, that remains – our strategy remains – the fact that the consumption continued to improve as we go through the quarter and the performance we saw in those, I think supports our continued focus on that strategy as we go into the second half of the year. Pamela Kaufman : Okay. Thank you. Miguel Patricio: Thank you. Pamela Kaufman : And just a follow-up question on your outlook for volumes improving in the back half. You pointed to moderating pricing growth as one of the drivers, but in the second quarter, pricing already moved past its peak, although volumes still softened. So why do you think that volumes will get better from here, considering the competitive environment and some of the macro headwinds you highlighted, like the student loan repayment resuming? And I guess just related to that, how much of a driver do you think that the innovation that you talked about can be for volumes? Thanks. Andre Maciel: Yes. Look, our price – our price in Q2 as you saw was close to 11%, and the reason why we saw higher elasticity and higher volume decline as I said before is because of the expanded price gaps. Now moving forward, these price gaps are not getting worse. If anything, they are slightly getting better. So as you head into the second half, as we continue to lap price, we still have valuable price that happened last year, so that you're going to be lapping starting now in Q3, and even we had another round that implemented Q4 last year. So we have two rounds of price still to lap in the United States alone. So beyond the pricing side, there are other things linked to our action plans that will help us to step up the share level that we are at today. I think Carlos can speak about that. Carlos Abrams-Rivera: The one thing I guess I would add to that too is that, if you think about innovation, it's not just kind of the launching innovation, but what the innovation allows you to actually perform in market. So when I mention things like us being able to improve our presence and expanding our shelving on things like Lunchables because of the innovation. And in Lunchables for example, we are going to new locations. So we're doing – already announced yesterday, we're doing pilots on taking Lunchables into the pro section; we're launching innovation in schools; we are expanding our presence in vending. All that actually helps us strengthen our overall kind of performance in stores. We also are doing that in Philadelphia cream cheese. If you think about a year – a year ago, this is actually going to be the first holiday season in which we're going to go into the holidays with full service on Philadelphia cream cheese and that's true for the last several years. So now we have an opportunity to actually truly kind of leverage our power of our brand, make sure we build that kind of our shelf display, as we go into this one of the most important seasons for Philadelphia business. And we also changed to that too in coffee. I mentioned earlier, the fact that we had a new line with IHOP in terms of bringing coffee, a new IHOP coffee into the stores. That actually allows us to also expand our coffee category into the stores and actually win additional spaces as we go into the second half of the year. So the innovation plays a couple of roles. It both attracts consumers and shapes our category to grow, but it also helps us expand our presence in order to increase the volume as well. Andre Maciel : So volume expected to improve as a function of lapping prices from last year. We still have two rounds to lap. Innovation ramping up. Shelf resets in the fall. That I think would be favorable to us, that's the expectation and service level recovery, particularly in cold cuts. Pamela Kaufman : Got it. Thank you. Operator: Thank you. One moment for questions. Our next question comes from Cody Ross with UBS. You may proceed. Cody Ross : Hi. Thank you for taking our questions. I just want to focus on gross margin and specifically your inflation outlook. What's driving you to move your inflation outlook lower this year? Andre Maciel: So commodities in general continue to come down, and as hedges roll off and our contracts get adjusted, some of them are based on indexes. We are seeing costs continue to move favorably, which has been allowing us to expand the gross margin, and by consequence has been allowing us to accelerate the investment behind the business, particularly in marketing, R&D and technology. [Cross Talk] Cody Ross : Any particular commodities? Andre Maciel: That are declining? Cody Ross : Yes. That you would call out, that’s driving that. Andre Maciel: I don't think there is a particular one. I mean our portfolio is large, there are so many commodities in the business. There is a general movement of commodities coming down. The exceptions to that sale are tomato, potato, that have bad crops, and sweetness. Other than that, we are seeing generally commodities moving favorably. Cody Ross : Understood. And then in light of the declining commodities or your outlook for inflation, do you think you took too much price, given you said you took price ahead of competitors and they have not followed? And then I'll pass it on. Andre Maciel: No. I would say… Miguel Patricio: Let me answer that one. I would do everything again. We’ve had very high inflation, and we are leaders in the vast majority of categories where we play, and it's our role as leaders to try to compensate these price increases with – this inflation with price increase. So I would do everything again. I mean, we can always go back on price if we think we have to or when we have to, but we had to lead price increases. So yes, that would be my answer to you. Andre Maciel: And the only thing I would say is remember that we never get to be very systematic in terms of pricing to offset the inflation, and that's what we have done. We have no price ahead of inflation. If you look at our gross margin in Q2, it's still slightly below 2021 levels. And the other thing that is worth mentioning in the gross margin, we showed that in prepared remarks. Our efficiency plan is trending very well, and we are ahead of – we are pacing ahead of the $500 million that we have said we’ll deliver by the year, so another good news. Carlos Abrams-Rivera: Let me build on that point from Andre. I think that the only sustainable way to keep increasing our investments behind the brand and to grow our volumes and shares for the future is by improving gross margins and investing back in marketing, R&D and technology, which is exactly what we are doing. Because we had very high, very good gross margin this quarter, we could increase marketing this quarter by 23%. We could increase R&D by 10%. We could increase our investments in technology. And as Andre said, that was possible because in one side, yes, we had price increases, but on the other side, because we are every month delivering more and more efficiencies in supply, we're excited with that part as well and that's my answer. Andre Maciel : And I expect that people noted the difference as well, how they are operating, because we have been intentionally opting to use those resources, to put back in the long term behind marketing and technology. We could have opted to be adding more promotions, but that would not make sense, because we’d be adding promotions to low return. We are thinking about the long term here. I hope people note the difference of how they are being – they are getting the big base very different. Anne-Marie Megela : And that will wrap it up for today's Q&A session. Thank you all for your questions. I will turn it over to Miguel, who will just kind of wrap up the call for us. Miguel Patricio: I just want to thank you all for the time and for the attention and the patience with us. So thank you so much, and hope to talk to you and to see you very soon. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: Good day and thank you for standing by. Welcome to The Kraft Heinz Company First Quarter Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] And be advised that today's conference is being recorded. I would now like to hand the conference over to Anne-Marie Megela, Head of Global Investor Relations. The floor is yours. Anne-Marie Megela: Thank you, and hello, everyone, and welcome to our Q&A session for our first quarter 2023 business update. During today's call, we may make forward-looking statements regarding our expectations for the future, including related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com, under News and Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio, for some brief opening comments. Miguel Patricio: Well, thank you, Anne-Marie, and thank you, everyone, joining us today. We are proud, proud and confident. We are so confident that we are raising our guidance on EBITDA and earnings. We are so confident that we are increasing our investments in marketing and in R&D by $100 million to $150 million versus budget, which represents a solid double-digit growth versus previous year. These results are not a coincidence. They are because of our confidence. We have been consistently saying that we'll grow through emerging markets, and we grew 23% this quarter. We'll grow throughput service globally, and we grew about 29% this quarter, and we'll grow through our priority growth platforms in U.S., Easy Meals and Taste Elevation, where we had double-digit growth. The rest of the portfolio has to free up resources to invest in our strategy. These results are possible not only because of our strategy, but because of everything that is behind our strategy. Let me start with people. Today, we have a great team and very engaged team. Speed. Well, agility is a big word for us and the products that we have in place are transforming the company. In innovation, in supply, manufacturing, procurement, in sales, in logistics. And two good examples of that is innovation, where we have now a much stronger pipeline for the future and we reduced the time of innovating from three years to a couple of months, or in supply that through the pods plus the partnership with Microsoft and the usage of artificial intelligence, we are improving our planning, our service levels, reducing waste, reducing times. We are in a very different place today. And finally, efficiencies. When we announced 3 years ago, a $2 billion in 5 years of gross savings, there were a lot of people that were skeptical that represented $400 million per year. We not only delivered this number in 3 years in a row, but we are now increasing this bar to $500 million a year. With that, I have here with me today, Andre, our CFO; Carlos Abrams-Rivera, our Zone President for North America; and Rafael, our Zone President for International that are joining me. Please, we are ready for the Q&A. Operator: Thank you. [Operator Instructions] And our first question comes from Bryan Spillane with Bank of America. Please proceed. Bryan Spillane: I just wanted to ask, I guess, two questions related to the U.S. One is, I think as we kind of strip out the foodservice piece and look at what's underneath, it looks like there's a bit of a dismatch or mismatch, I should say, between kind of what we were seeing in the Nielsen data and what would have been reported underlying. So just trying to understand if there was anything there relative to timing of shipments or promotions that might have affected the cadence? And then, second, if you can just talk a little bit about in the U.S. specifically, kind of how you're seeing the promotional activity or the promotional environment as we kind of head into some of the big summer holidays? Is it intensified? Is it kind of in line with your expectations. Just kind of how you're seeing those summer holiday setup, please? Miguel Patricio: Andre, please. Andre Maciel: Look, when you look at the U.S. performance, I don't think there is nothing out of the normal happening in the quarter. The inventory load was immaterial given where already ended at the end of Q4, as we said before. So it's really a function of the sell-out and the foodservice, which performed very well in the quarter in the U.S. zone. So maybe people underappreciated a little bit of impact of that. I believe it has something to do also the fact that last year, with Omicron and things, everything was shut down. So that impacted the sellout in retail across in the industry at the beginning of the quarter, but also helped a lot of foodservice to have a very strong performance. When it comes to promotions. As we have said all along - well, it has all along, we expect an increasing promotional year to go. That's what has been in the guidance to the plan from the beginning, so nothing changing there from that regard. Obviously, not prudent way and always emphasizing that well for 2019 levels. And you see in remarks [ph], how well we are doing in terms of continuing to improve our ROI with the tools that we have in place. And so I will give some color to pass over to Carlos to give some color on the promotional environment. Carlos Abrams-Rivera: The one thing I guess I would add, Bryan, to what Andre just said is, as you mentioned, the ROI has continued to improve. But let me give you a little more color as to what's behind that. We have spoken about the agile scale and how that has reengineered kind of Kraft Heinz. And part of that is us creating ownable agile revenue management tools that actually allows us to improve the returns of our promotions. So like, for example, we have a trade management system that we created in-house, and it gives us real-time access to essentially over 10,000 promotional events. And then what we do is, we actually create digital tools that leverage that large amount of data to provide insights and recommendations in a very simple way. Now those solutions then help us to make sure that allows us to figure out what is the right depth of discount, what is the right time of the year and what are the right promotional tactics we have been doing. So if you look at our Q1 numbers, we saw about a 10-point improvement in ROI in this particular quarter versus what we saw a year ago. And it's about 15 points if you compare that to 2019 of Q1. So again, our ownable tools continue to help us make sure that we are driving that investment. So as we go forward, our continued focus is make sure that we invest in the business that we are focused on the renovation of our business and marketing, driving a stronger quality with those event-based activities that really have the high ROIs. And Raf, I don't know if anything you want to comment on what you're seeing in international promotions? Rafael Oliveira: It's not very different than what you described Carlos. I think, and what Andre mentioned, you might see a bit of an increase. We will see a bit of an increase in some marketing and promotional activity through the year to go, but nothing significant that is not included in our guidance. Operator: [Operator Instructions]. One moment for the next, and it comes from the line of Andrew Lazar with Barclays. Please go ahead. Andrew Lazar: I think you outperformed expectations, obviously, in the first quarter on organic sales growth and maintained the full year outlook, I guess, potentially implying slower go-forward trends maybe than originally planned for. Is there something you're seeing in the market that necessitates this adjustment? Or is this more a function of sort of conservatism? And I appreciate the fair outlook is already above your sort of long-term algorithm? Miguel Patricio: Andre, maybe you want to answer that question. Andre Maciel: So there is nothing that changed expectation. We are holding the guidance in top line. And if I look at versus what I believe market was expecting, we over delivered quite a lot in the international zone, which I think people still -- they don't fully appreciate the impact of emerging markets growth in our portfolio and the food service portion of the international market on portfolio as well. They've been performing extremely well, as Miguel indicated and they continue to do. So momentum is very solid. When it comes to the U.S., nothing changes in our internal expectations. We just see that at this moment is good to be prudent. It isn't macroeconomic uncertainties about interest rates and our consumers might expand on that, but nothing special. Operator: Thank you. One moment for our next question, please. And it comes from the line of Ken Goldman with JPMorgan. Please proceed. Ken Goldman: There's been some anecdotal evidence that consumers are beginning to trade down in terms of where they're doing their grocery shopping, either going from premium channel to more mainstream or mainstream to discount. I'm curious if this is something you're starting to see as well, even if it's just on the margin. And if so, is it in any way, I guess, informing your decisions about product mix, new products, things like that? Miguel Patricio: Maybe Andre and Carlos can comment. Andre Maciel: So as you have seen since last year, the channel migration has started. So we don't see like a normal accelerated trend over that. We have seen consistently now for several months, there's the other channel and the mass merchandising gaining ground consistently. And as this is not a new phenomenon, we have been prepared for that for a while. So I'll pass to Carlos to talk about the panel activities we are doing in those channels, but we don't see anything abnormal happening. If anything, it's expected. Carlos Abrams-Rivera: Yes. What I would add in terms of color, I guess, first in retail, I mean there have been some channel shifting which we expected. And for the lower-income consumers, this means kind of moving to more value-focused retailers or into dollar channel. And as Andre said, we anticipated this. Now for high-income consumer, that also means thinking about what are the places that it can go in instead of maybe the specialty retailers to more traditional grocery and club. And for us, what we're looking to do is actually making sure that we have the right solutions for those that are respective channels. So whether that is more club size packagings and brands like Mac & Cheese and JELL-O and adding more dollar SKUs, so that consumers who are stretched are actually able to stay within the category. And then, as we talked earlier, being savvy about how we go about our promotional activities in certain categories so that we can, in fact, be there with consumers with the right overall kind of meal solution. So if you think about what a grilled cheese sandwich can do with Kraft singles, what Kraft Mac & Cheese can do in terms of families, what else [kind of] [ph] others can do, us being able to be there for those kind of meal solutions is part of the answer as well. The one other thing I would say is, if you look at that same channel shift within foodservice, we're also making sure that we are adjusting, too, for that. We are seeing how our business continues to grow in QSR and for us is continued to grow that business. And we are doing that and we're growing share of that business as well. So it's making sure that our consumers are shifting to from certain restaurants to QSR. We are making sure that we are there for them too, to continue to drive our products and continue to drive our growth, which is the way it resulted in Q1. So thank you for the question, Ken. Operator: Thank you. One moment for our next question, please. And it comes from the line of Jason English with Goldman Sachs. Please proceed. Jason English: Two quick questions. First, the gross margin outlook for the year. Great to see it moving up. It implies that your gross margin for the year is going to look a lot like your first quarter, which would, of course, market end to what has been like a sequential build with every quarter moving higher. I guess my question is, why would that be the case, especially given the cost inflation appears to be moderating. Andre Maciel: Sorry, Jason, could you repeat the question talking about the trajectory of the gross margin throughout the year? Jason English: Yes. Gross margin has been building sequentially, right? You did have a chart in one of your slides showing every quarter moving higher. Your full year guidance implies that it kind of goes sideways. So you're going to finish the year at a margin rate very comparable to the first quarter. So my question is, why shouldn't we expect it to continue to grind a little higher as cost inflation moderates? Andre Maciel: No, the gross margin, we've increased a little bit throughout the next quarter. So we should see Q4 will be the highest one. Q2 goes a little bit sideways that is a component of mix in our portfolio as well, given the type of products that sell more during Q1 and Q4 in comparison to last sold in December. But beyond that, no, because the costs are continued to ease. We put a lot of price in the middle of the quarter. So we have two reflection of that now in Q2. But remember as well, and then I'm going to talk to that something from next year, right? But no, the gross margin will gradually increase throughout the year. And expectation is a little bit because of product mix, which is not seasonality. Jason English: Yes. That's helpful. I appreciate that. And then free cash flow, can you tell us what your outlook is for the full year in terms of conversion or level, however you want to communicate that. And I know you talked about working inventory down. It built a lot last year, and obviously, there's still a heavy usage of cash again in the first quarter. How much of that do you think we can get back out over the course of this year? Or do we have to kind of bleed into next year before we can normalize those levels? Andre Maciel: Yes. So free cash flow, as we said last quarter, we expect this year to close in the 75% to 80% range, which is in line with our plan. We even talk about that in CAGNY. And then, we expect by 2025 to go up to 100%. This has to do mainly with the CapEx ramp-up that we have done this year and next year, which is close to 4% and then expect to wind down. Working capital was a drag last year and in Q1 was also a negative. We prioritized service-level recovery because I mean, the payback is obviously there. What I can tell you is we have a very robust plan, very robust plan to bring the inventory down to level before. We have been working with buffers. I mean, as everybody in the industry does, given other circumstances about supply chain volatility and resilience. But we have a very clear line of glide path to break it down throughout the year. So the expectation for inventory is to land the year at similar levels to very well the pre-pandemic level as a percentage of COGS. Operator: One moment for our next question, please. And it comes the from line of John Baumgartner with Mizuho Securities. John Baumgartner: I wanted to come back to promotion in the U.S., Carlos. There were a few categories that drove the bulk of U.S. share loss in Q1. But I think those are also categories where your promotion levels really seem below branded competitors. So is it fair to isolate the share losses to reduce promo and lingering supply chain issues? Or are there other factors employed outside of promo and supply chain? Carlos Abrams-Rivera: No, John. I think there's a fair assessment. But I guess, let me start with the fact that as we think about growing the business, we have a very disciplined approach of how we're going to do that. So as Miguel mentioned, we're going to focus on our growth platforms and the growth they have in our portfolio. We're going to make sure we're building innovation that's disruptive and that we continue to adapt the core to the consumer trends, and we're going to manage the margin with efficiency to reinvest in the business with double-digit investments in marketing, technology and R&D. And as you said, there are a few kind of categories where we saw a slowdown. And let me remind you, too, that we took pricing in the middle of the quarter as we were catching up to margins. So if you think about a couple of those categories, let me highlight a couple of them. One, Kraft Cheese, for example We did see some supply chain challenges that we had in the quarter. Those are things that prevented us from really taking advantage of the eastern time period and in fact, we are now in a position that will be better off as we go into the year to go. Another one, I'll tell you with cold cuts in which we began the year with a low inventory situation in our business. And again, as we think about cold cuts by the end of the summer, we should be in a much better place in terms of complete supply in the overall business. So that sense of the short-term supply constraint -- well assessment of how we see the quarter as well. The one thing I would add too is that there are places where categories, we're simply not going to be chasing volume down. So if you think about bacon, it's a category that probably was about a point of headwind when you look at the data and consumer data, but we are simply not going to be chasing volume that is not profitable. So that gives you a sense about how kind of we're looking at business and what drove the first quarter. John Baumgartner: Okay. Thanks, Carlos. And on the international side, your categories, I guess, historically, your category has been pretty defensive in terms of demand or economic weakness. And I'm curious, if you're doing a lot of good things, ramping distribution, launching new products. But as you transform the business with growth in food service, the new sauces, the BEES partnership with ABI, how do you think about the marginal structure? Are these new outlets and products introducing greater volatility into the business? Or do they benefit you and that they reduce some of the impact of private label and price sensitivities in places like the U.K. and Europe. How do you think about the net resilience you're building outside the U.S.? Thank you. Andre Maciel: Rafael, do you want to answer that one? Rafael Oliveira: Yes. Well, happy to. I think we need to differentiate a bit how we're growing in emerging markets and the developed markets across international. I think I mean, what you described probably applies a lot to the developed market because as you know, has been talking about, across emerging markets, we are growing significantly and the go-to-market and the opportunity having execution of this go-to-market has been significant and continues to be. On the developed market, I mean it's a mix. I mean we've been renovating our portfolio significantly in all the base specialty mentioned Europe. And then launching the products that have been incremental, not only in [indiscernible], Easy Meals category. Like those are the two platforms that we've been growing, especially the sauces of Taste Elevation. So this has been the focus. I mean right now is delivering the results that we expect and again, providing the gains that we need and the resources from the core and the innovation growth that comes from those introductions. Andre Maciel: And just to add to that, if you remember, again international zone, we have developed marketing by emerging markets, right, emerging markets, 10% of our business. We expect to grow double digits like we have been doing. As a decent plant about expanding distribution, but it has to be better in a profitable way. And you might have noticed in the prepared remarks that since we start to require from our emerging markets, a certain level of minimum ROIC or NDA, I think we're seeing a fairly healthy balance between top and bottom line. And we saw very significant gross margin expansion in emerging markets across the board in the quarter. And I think with expectation to continue to improve. So we feel very good at part of the investments that Miguel has said about $150 million, which is going across market, R&D, lead technology and in some cases, sales headcount. But in the case of the emerging markets, we are accelerating the go-to-market expansion. Again, we always keep our stability top of mind here. We don't want to grow without delivering levering returns. And on the developed markets, not only in the U.S. but also in selected countries in developed, we are using part of these incremental investments to restate marketing levels and accelerate in some cases the innovation agenda. So it's still very good because that allow us to continue to build the future growth of the company. Miguel Patricio: Let me mention one thing that you said that you mentioned that entering new categories with innovation, you're right. I mean we launched in U.K. Heinz pasta sauce. And in a couple of months, we achieved 7% share, and we continue growing. We just launched a vodka pasta sauce with Absolut that is being extremely successful in the market. But it's not only in Europe. I mean if you look at the profile of innovation that we are having right now in the U.S., it's very different from the past. In the past, we had a lot of innovation but really not incremental, it's very cannibalistic. I just think about what we've been launching, like NotCo that we are going to -- it's going to be national during the summertime. It's basically 80% incremental to the category or just spices that we just launched in the U.S. through direct-to-consumer, which is spices, which is a huge market where we don't play today. Our Tingly Ted's that we are launching globally throughout the year that is in hot sauces that is a pretty growing category that we will not play or even Kraft Mac & Cheese frozen that we are launching, that we are a leader with Kraft Mac & Cheese. We have a very strong portfolio of frozen, but we didn't have an option of Kraft Mac & Cheese frozen. And I can continue this list and tell you about Home Bake and increased Home microwave, really, really incremental innovation that will start to change the profile of innovation in our company. Anne-Marie Megela: Operator, we have time for one more question. Operator: Thank you. One moment please. And the question comes from Stephen Powers with Deutsche Bank. Stephen Powers: I just wanted to follow up on the supply topic. It sounds like you've made good headway and have good visibility to improvements going forward. But I guess, just framing that, is there a way to think about what the supply challenges in the first quarter cost you? And then as you move forward with those supply bottlenecks resolved, do you kind of resume a more normal growth trajectory in those categories? Were those issues behind you? Do you accelerate ketchup over the next couple of quarters as you dig out of the hole? Or is it more prudent for us to think about a more gradual ramp of recovery, again, as those issues abate. Thank you. Miguel Patricio: Andre, maybe Carlos then. Andre Maciel: Look, we obviously expect as some of the solutions, [indiscernible] Carlos indicated, we expect over time to be review the inventory at the retailer and that should come together with some improvement in the top-line performance. But again, it's all compensated in our guidance here. Remember that our priority in the U.S. is to grow in the growth platforms. and the priority growth platform have performed very well in the first quarter, particularly Taste Elevation and Easy Meals. But we expect [indiscernible] to improve their performance all the year as those problems get behind us. In other categories like in meat, as Carlos also said, not necessarily we're going to be a strong acceleration in growth because we're also trying to be prudent about having the profitability there. So it's about having the right balance but yes. Carlos Abrams-Rivera: Just a minute. Not much to add. What I would say is, we continue to see the improvement in service level. So just to give you a kind of a framework last year. I think at this time of the year, we were kind of in the mid-80s. In the mid-90s actually closer to the high levels of 90s, so as we exit the first quarter. So I feel like we do have a couple of categories that I mentioned earlier, where we had some isolated challenges. But overall, the business we are sectoring the right trajectory to continue to service the business the right way as we go forward. Anne-Marie Megela: Operator, that will be it for the Q&A session. I'd like to turn it over to Miguel for some closing comments. Miguel Patricio: All right. I just want to thank you for the time you spent with us and looking forward to sharing more information and more results with you. Thank you so much. Operator: Thank you. And with that, we conclude today's conference call. Thank you for your participation. You may now disconnect.

Operator: Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Anne-Marie Megela. Please go ahead. Anne-Marie Megela: Thank you, and hello, everyone. This is Anne-Marie Megela, Head of Global Investor Relations at The Kraft Heinz Company, and welcome to our Q&A session for our fourth quarter 2022 business update. During today's call, we may make forward-looking statements regarding our expectations for the future, including related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under News & Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Before we begin, I'm now going to hand it over to CEO, Miguel Patricio, for some brief opening comments. Miguel Patricio: Thank you, Anne-Marie, and thank you, everyone, for joining us here today. Let me first take a moment to say, how proud I am of Kraft Heinz team. We have come so far on our transformation journey. It's quite amazing. And the fourth quarter was no exception. You can see the momentum building across our business, service levels and market share trends are improving. Base volumes are positive. We are outpacing the competition in foodservice and emerging markets and by a lot. And importantly, we continue to invest for growth. Once again, we have unlocked efficiencies over $400 million this year, and this allow us to invest in new tools and capabilities for our teams, a new product innovation for our consumers. From a pricing perspective, 99% of all needed pricing has already been announced for 2023. As we look to the rest of the year, we have no current plan to announce new pricing in North America, Europe, Latin America and most of Asia. I am very optimistic. I'm very excited about how we are positioned to deliver long-term sustainable growth. With that, I’ll ask Andre, Carlos and Rafael to join me. So let's open the call for the Q&A. Operator: [Operator Instructions]. Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Great. Thanks. Good morning, everybody. Your EBITDA guidance for fiscal '23 excluding the impact from the 53rd week is actually in line with your long term algorithm. And when you detailed this, I guess at CAGNY a year ago, you sort of I think said it would take multiple years to reach this level of growth. So I guess in this regard, I'm trying to get a sense of whether -- if I have this right, whether you are ahead of schedule? And if so, what you attribute it to? Like, what's gone better or faster maybe than you anticipated? And I guess most importantly, are you in a place where you see this level of growth now as more sustainable? Thank you. Miguel Patricio: Thank you, Andrew, for the question. Andre, could you answer this question? Andre Maciel: Sure. Hi, Andrew. Good morning again. And thanks for the question and thanks a lot for noticing it. In fact, we feel very proud about what we have been achieving as a company. And I think in 2023, we will mark another step-up in our performance. And as we all notice, we are on the long-term algorithm already on net sales and also on EBITDA, if we remove the effects from currency and from the 53rd week. And I think this is the best way to show that transformation is working through results, right? And it's good to see how 2022 that we finished in very strong momentum, how that's translating into a stronger performance in 2023. This is a consequence of our market share in the U.S. continuing to improve. Still negative but improving, as foodservice continues to deliver at high at above 30%, emerging markets growing double-digits in a strong rate. So all these, in terms of growth, are working in our favor. Supply chain efficiencies continue to happen. And in 2023, as you might have noticed in guidance, we are expanding gross margin and see our path to go back to 2019 levels, which is allowing us to continue to increase the investment in the business for growth. So we are in 2023 increasing investments behind marketing, technology and people, which are critical levers for us to fuel the growth of the company. So we feel good about, where we are moving. We still want to do, but we will. Operator: One moment for our next question. Our next question comes from Bryan Spillane with Bank of America. Bryan Spillane: Thanks, operator. Good morning, everyone. My question is about just the free cash flow, and I have a couple of questions related to that. I guess the first is just simply, Andre, can you give us a little bit more insight in terms of, I guess, the inventory build? Is it finished goods inventory? Is it raw materials, the decision to do that? And I guess, in the prepared remarks, it's tied to service level. So are you going to need to carry elevated inventories through '23? Is my first question. Andre Maciel: Sure. Thanks for the question. Look, as we said, as you have seen throughout 2022, we had to rebuild inventory. Our case fill rate at the end of '21 was in the low 80s, which is extremely low. So we had a lot of recovery to do. So you have seen throughout the year, the effect of us build inventory. Keep in mind that we finished 2022 is still in the low 90s. So it's still not what retailers are expecting it should be and what we expect ourselves should be. Being said that, we do have, compared to historical levels, higher inventory coverage in average in raw and package materials, also, which is normal because we're also trying to build the buffers given all the volatility and uncertainty. So we expect that those raw and package materials should decline over time, including starting in 2023. And in finished goods, even though we need to increase inventory in certain spots where the inventory service levels are still low, we still have a lot of opportunity to rebalance our inventory across the network. I think one of the consequences of the pandemic, the demand volatility is that we started to have inventory straight in the wrong warehouses to meet the demand. And that takes time to sort itself out, right, because of actual cost of product and shipping items across the network. So because of these effects and all the investments that we have made in the past two years to automate demand forecast, we are investing a lot of resources in better supply planning. We are -- we have a big project starting -- that already started to network simplification. So the combination of these investments, plus the rebalance of the network, plus we going back to the more historical levels of averaging raw and package materials should start to system recovering inventory starting '23, but -- or into the future. Bryan Spillane : So I guess this was kind of bridging that now to maybe how we should be thinking about free cash flow and free cash flow conversion for '23. Can you give us a little bit of perspective on, I guess, capital spending? Will inventory or working capital be a tailwind? Like can we get back to more normal free cash flow conversion in '23? Or is it still going to be somewhat, I guess, subdued relative to previous years? Andre Maciel : So free cash flow will be better than 2022. We were still not going to be in the long-term algorithm of 100%, and that's in great part because of CapEx investments. As we have said as well during -- when we unveiled the long-term algorithm, we are investing for growth. And we have stepped up investment in CapEx. You have seen in 2022, we are spending a little more than $900 million, which is a big increase versus $700 million, $750 million that were in the past. We are ramping up this again in 2023 and 2024 as part of our long-term plan. And then we should go back down to closer to 3.5% of net sales starting 2025. That's the current perspective. So when the CapEx starts to come down, that will help us to give the step-up change to go back to achieve the 100% as we said the long-term outlook. So this year, I mean -- if you want to expect something this year, it should be like about 80% or so is going to have addressable back in line. Operator: Our next question comes from Chris Growe with Stifel. Chris Growe: I just had a question for you in relation to promotional spending. And you had some data and some charts that showed it was down since 2019 and down more than your branded competition. I just want to get a sense of -- do you expect to increase that? Is that kind of tied to service levels as those improved throughout the year? And then also to better understand what's the appropriate bogey for that level of rebuilding promotional spending? So what portion of that 5% decline you show in 2019 should rebuild? You've got some good data and capabilities now. Can you be more efficient with promotional spending? I think the answer is yes, but just want to get a little more color on that. Miguel Patricio : Maybe, Andre, you can start and then Carlos comment specifically in U.S. Andre Maciel : Yes. So -- and thanks for the question. We have increased trade investment in a very significant way from 2017 to '19, more than $1 billion in the United States alone. So we have restarted from a very high base. We increased late 2019. We created a centralized revenue management organization. We have more than 50 people fully dedicated to that in North America alone, and we have started to gathering power of our sales organization. We put a lot of discipline and science behind making promotional decisions in a way that benefits us and retailers. And you have seen a lot of that coming to fruition now in the results of the last three years. That is obviously an impact from service level as well. But just to put in perspective, if you look at Q4 volume sold on promotion, we had about 24% of volume sold on promotion in Q4 '22. That's higher than 2021, but above 23% as a 2 percentage point in the past, still lower than the branded competitors in our categories. But in 2019, it was 34%. So that's too much. And if you look at where we are right now in terms of promotional investments, we still have a significant amount of promotions that have negative ROIs. So it's not about cutting promotions, it's about deploying it in a smarter way. So we are in the journey, and we have seen the results from that, but there's still a lot of opportunities for us to go ahead. We will deploy it, and want it step-increasing. It is not for me to give you a precise number of where this is going to land. But what I can tell you with confidence is that we're not going to get anywhere close to 2019 levels. Carlos Abrams-Rivera : Yes. Let me -- it's Carlos here, Chris. Listen, what I would say is just building on some of the comments that Andre just mentioned is that as we think about promotional activity going forward, it really is about being surgical about how we invest those promotion dollars. Thinking through making them around event-based activity. So that way, we are thinking through how do we make sure that we are driving the best utilization of that particular event versus a price-based activity. And I think what happens then is it allows us to actually make sure we are focused in terms of driving positive ROIs. And I think if you -- as you heard from Andre, we have made a huge thrive from where we went to 2019, and we're not going back. In fact, when you look at some of our focus on improving the ROI of our programs, today, on average, if you think of 2022 versus 2019, we've actually tripled the level of ROI returns of our promotions from three years ago. So again, it is a signal that all the investments we're doing in terms of revenue management are agile still work in terms of better understanding how to read the data and how to utilize our funding is actually driving specifically better ROI in every funding that we're doing. Operator: Our next question comes from Cody Ross with UBS. Cody Ross: Just a quick question around your organic sales guidance. You guided 2023 organic sales growth of 4% to 6%. Based on wraparound pricing from 2022 and the incremental price that you discussed for 2023, we estimate that your volume growth assumption is flat to down low single digits. Is that correct? And then if so, what gives you the confidence that elasticity will remain so low as we move throughout the year? Miguel Patricio : Andre? Andre Maciel : Yes. Hi, Cody, thanks for the question. So as well noted, we are finishing Q4 growing about 10%. And we just have a new round of price that we just implemented. So that certainly has a positive effect in the first half of the year. We expect gradually throughout the year for us to be -- as we circulate the price increases from last year that we end up landing in the second half on something closer to our long-term growth algorithm, okay? Being said that, the growth in 2023 is all driven by price. So volume is still negative. Obviously, it improves throughout the quarters as we start to lap the prices. But even at the end of the year, will still be negative. That's something that as we think about the future, it's not the negative balance that we want. We want a good balance as we think about top line growth between price and volume. And we're going to talk a lot about that the next week in CAGNY. We have contemplated the guidance and increased level of elasticity compared to what we saw in 2022, but still not the way up to the historical levels. In terms of what gives confidence. So you saw the sell-out for the industry to our Q4 was still very strong. In fact, if you look at sell-out elastic, just looking at price and volume based on the sell-out, Q4 was better than any other quarter in the year. Now we obviously need to -- we need to keep actively monitoring and we are because throughout this year, we can see maybe consumers will change the behavior. Carlos, do you want to comment something on that? Carlos Abrams-Rivera : The one thing I would add there, Cody, is the fact that we also are making sure that we continue to expand in terms of -- in the number of formats and price points that we offer within our categories to make sure we maintain the consumers that have been with us over the last couple of years. So that is -- means that if you look at the data, for example, in Q4, those earnings over $100,000 in consumers, actually with that particular group, we actually grew over 13% in terms of consumption. And at the same time, we're making sure that as consumers going to club, we are actually increasing the number of offerings, whether it's Mac & Cheese and JELL-O in terms of club and those consumers are going to dollar stores, we're actually improving the number of SKUs that we have available to them. So that way, there's a point in which they can come into the category and those who are choosing to look at value in terms of club sizes, we also have those formats. So it is for us to be agile in terms of how we think about the consumer continue to change, and we've been having an offer that provides the best value for them regardless of the socioeconomic situation. Operator: Our next question comes from Ken Goldman with JPMorgan. Ken Goldman : Just hoping to get a better sense of the magnitude of the gross margin improvement you're expecting this year. And besides the obvious ones in terms of the cadence of inflation, if there's any considerations we should have about maybe the timing from quarter-to-quarter of that improvement? Miguel Patricio : Andre, please? Andre Maciel : Hi, Ken. Good morning. Thanks for the question. You have seen that in Q4, we happened to have -- that we said we would have a relevant sequential improvement, which put us in Q4 in line with the 2019 gross margins. We expect in Q1 to maybe the gross margin to go a little bit down as we have contracts that are getting renewed and some inflation that was not passed over to us last year, now is going to affect us. And we had that contemplated in our guidance. But then -- but you should expect somewhere close to flattish in Q1 compared to prior year and from there you should start to see expansion on a year-over-year basis. In terms of a ballpark, you should think about 50 bps to 100 bps, so on magnitude of gross margin expansion, which that is what's allowing us to increase investments behind marketing, technology and people, which are so important to us. Operator: Our next question comes from Pamela Kaufman of Morgan Stanley. Pamela Kaufman : Can you talk about the competitive dynamics within your categories? In the prepared remarks, you indicated that private label share is increasing, but that is primarily coming from your branded competitors. So maybe if you could just elaborate on what you're seeing there? That would be helpful. Miguel Patricio : Maybe Andre and Carlos can comment on that. Carlos Abrams-Rivera : Sure. Let me start. Thank you for the question, by the way. As you saw, and let me speak for the North America business first, and then maybe Andre can give you his perspective over other company. We do see the continued share improvements as we continue to go forward. I mean, in Q4, you saw that misadjusted share actually improved by 20 basis points. And when you look at the market share that is now misadjusted in December, it actually was flat. And what we're seeing is that the bet that we're making in terms of continuing to invest in our businesses in terms of renovating our key products, making sure we're invest in innovation, make sure we invest in our marketing, that actually is paying us. So when you see that in terms of those particular platforms and brands that we want to continue to drive our growth are, in fact, driving the share improvements as well, whether that is in places like Lunchables, in places like Kraft Cheese, in places like Heinz Ketchup, Mac & Cheese, all those going to drive actually positive shares as you look at Q4. So for us is, how do we continue to make sure we're built on those. At the same time, that we are also making sure we have relatively the potential still some supply chain constraints that we have in a couple of categories. So for us, it's making sure that as we are driving the investments that we're making in the brands, that those are, in fact, already transferring into share improvements and now making sure that we are continuing to support the brands that are still a little bit challenged in terms of supply chain so that we can, in fact, unleash the continued growth of our retail environment. Miguel Patricio: Andre, do you want to talk about is there anything you would like to add from an international standpoint on this question? Andre Maciel : Probably the only thing is that we have to look a bit of different regions, right? Because I mean in Europe, indeed, the situation is a bit tougher from a private label perspective, growing more. I mean the price gap has been widening, although the private label has been put in price the same, but the gap has been widened. I mean, we have put a lot of initiatives in place like relaunching value brands where we are not like we didn't have to -- like HP being an example, that is in the fast process category. So -- and then also do a lot of activities in price spec architecture. So this is like -- it's really keeping us strong, especially versus branded competition. But then in the rest of the world, in emerging markets, specifically, you don't see that much of private label issue and we continue to gain share. Miguel Patricio : Okay. Yes. Just to put it in perspective, retail in Europe is about 5% of our business, and that's what Rafael was talking about. I just want to add to these points that 2/3 of our growth are coming from emerging markets and from foodservice. And on these two channels, we continue gaining share and growing in a very, very positive way, double digit? Operator: Our next question comes from Stephen Powers with Deutsche Bank. Stephen Powers : Two questions. The first one is on service levels and fill rates. On Slide 16, you got -- you show how you've seen improvement in the fourth quarter, really every month within the fourth quarter. I guess question is -- number one on this is, just has that improvement continued into '23 thus far? And what have you really assumed sort of as the base case for '23 relative to the ultimate goal of getting back to the high 90s. Is that an assumption in the guidance? Or is that more of an aspiration to have some less than allowances in the outlook? Carlos Abrams-Rivera : It's Carlos. Let me comment. So to give you a perspective, I guess, the way we see it kind of in North America, as you said, we are, in fact, seeing progress in our supply chain and our service level. In fact, when I look at December numbers, those were the highest service levels we had across the entire year. Now at the same time, we are still seeing the industry having continued to see some challenges, particularly upstream when you think about ingredients and some packaging materials. Now as we go forward, our goal is, in fact, to get to the kind of service levels that our customers and we did towards the end of the year. I think for us, what we are seeing is that the recovery in some of the ingredients and packages, it comes in very asymmetrical. So if you think about for us, we're still with the remnant of the avian flu and the impact that, that had in terms of the industry, in some of our business in [indiscernible] and in places like in our cream cheese soft business where some packaging materials have been a challenge. And those -- so those are the type of things that now we're working through. It's places where, in fact, while most things are beginning to come in the terms of more stable supply chain, there are still a couple of places where we are seeing some of those kind of challenges. At the same time, our team is making sure that we are adapting to every situation that's happening. And I'll give you an example of that, which is, as you saw, the price of eggs go so high, we need to make sure that we also are adapting the products that go with eggs. So a product like Just Crack an Egg, we need to make sure we actually brought down the inventories to make sure that understand that consumers may not be having a reduced demand on that type of product. So we are both focused on how do we make sure we continue to drive that service levels towards the 98%, which is our goal. And then secondly is making sure that as we do that, we are agile in term responding to those specifically ingredients that may be challenged in the short term, but that we see improving significantly as we exit 2023. Stephen Powers : Okay. Great. If I could follow up also -- sorry. Miguel Patricio : Go ahead. Stephen Powers : I was just going to ask if I could follow up on the elasticity point that you've been talking about. You also exited the year with elasticity sort of at their most favorable point, just kind of going off the data on Slide 9. You've obviously talked about assumption of those elasticities sort of normalize directionally through '23. I guess the question is just what's your base case assumption of the pacing of that normalization? And you talk about an ultimate assumption of not going all the way back to historical elasticity. So just how do we think about that as we expect '23 to be sort of the mirror image of '22 from an elasticity standpoint? Or any more color you can offer around that would be great. Miguel Patricio : Andre? Andre Maciel : Yes. So look, as we have said, right, we contemplated the guidance that elasticities gradually go back to the historical levels, and we expect historical levels in the guidance to be established towards the end of the year. And we expect Q1 to be the way that we contemplated now to be a little worse than it was in Q4, and again, it goes -- if you want to think about that linearly going back to historical levels towards the end of the year. There are obviously things that we keep a close eye on, like we are obviously fully aware and have put the actions in place on its net reduction in the subsidies, which is happening when that has implications and we are ready for that. So I mean we are monitoring each of those things, right? But we believe that elasticities will normally graduate back to the historic plans. Andre Maciel: Carlos, do you want to say anything about the actions that you're taking? Carlos Abrams-Rivera : Yes, I think for us, Andre said, we have seen this coming. So for us, it's making sure that we continue to provide great value to consumers regardless of the situation they're in. And I think as I mentioned earlier, for us, it is making sure we use kind of the full price size architecture in terms of options for consumers so that make sure that we also maintain them in the franchise. And that we talked about in terms of our promotion levels, we're using much more rigorous way in which we can understand the ROIs of investments so that consumers are looking for particular events, whether it's certain key holidays and so forth. We are present but in a way that actually allows us to be in a much more positive ROI than in the past. So it is part of what we see. And like Andre said, in North America, we have seen -- our stance right now is that by the end of the year, we'll go back to historical levels. And we are -- that's the way kind of rebuilding our guidance as we think about 2023. Anne-Marie Megela: Operator, we will take one more question. Operator: Sure. One moment for our next question. Our next question comes from Michael Lavery with Piper Sandler. Michael Lavery : I just wanted to drill into your foodservice growth pillar a little bit more. In Slide 13 or 12, I guess it is interesting with some color here. Can you just unpack a little bit of how you're gaining share relative to competitors? Is it new items in existing customers? Is it broadening your distribution into new accounts? And -- is it -- are those customers gaining share? I'm sure there's some components of maybe a few different things. But what's the primary driver of outperformance there? Miguel Patricio: Michael, we are having a great momentum in foodservice across the globe, both on U.S. and -- or North America and the international zone. So I will ask Carlos and then Rafael to comment. Carlos Abrams-Rivera : Yes. And I would say North America, I would say, is -- in the items that you mentioned, it's all of them. So we grew in the Q4, we grew about almost more than 20%, and we actually gained share. And for me, the way I kind of look at it is the investments that we have put in place are paying us. So we have put new leadership in place. We have simplified our portfolio significantly, reducing almost 50% of the number of SKUs that we had only a couple of years ago. We have renovated our foodservice portfolio. We're bolstering kind of our sales team to make sure they drive distribution in the right places. And more importantly, we're also investing in capacity to make sure we support that growing demand. So as we look forward -- and just to give you a sense of the opportunity here is we still are only in 25 or top 50 QSR in the U.S. So we know that everything that we're doing continues to be an opportunity for us to further drive growth. And then going back specifically to your question is already what we have seen is that we are in fact expanding distribution across all areas of foodservice. We are winning with distributors. So we're actually expanding with key distributors at present. We're actually also expanding with no commercial accounts. So if you think about hospitalities and particular distributors who service those kind of non-commercial businesses, we have also made an effort against those, and those are working. We have expanded in new restaurants, with things like Fast Casual, think about from -- that is a type of restaurants that we actually have now increased the number of items we sell into them. And QSR, which continues to be a focus for us as a company. From Papa John to Pollo Tropical are places in which we are actually now expanding the number of SKUs we sell into. So it's an area that we continue to be bullish on, and we -- and why one of the places that we feel that we can be winning globally. And with that, I mean Rafael, if you want to build on the... Miguel Patricio: Before, Rafael, I'll just build on one thing Carlos mentioned. One of the reasons of our improvement in growth as well is capacity. We've been investing throughout these years on capacity on foodservice, and we continue to do so. So now in May, we will have an extra 25% capacity in the U.S. on pouches and we'll have 50% more capacity on paper and squeeze, which are absolutely critical items for the growth of foodservice. With that in mind, Rafael, please go ahead. Rafael Oliveira : Sure. Carlos, has been already said about our bright spot of foodservice. And I guess you'll see next week on CAGNY, we're going to go deeper on the reasons for success. But I would say two things that are adding up on the international front where we are winning. And indeed, they are growing a lot and winning big timeshare in foodservice. One is global partnerships. We're really leveraging our scale and then global capabilities to offer our partners like more insights and customized solutions. Remember, many times, we compete with local players, but we're having this global insight makes a big difference for us to test innovation on market and when successful scale up to additional markets. And we've been building this model and replicating consistently across the globe and it’s working really well. The second point is what we call the chef-led model. I mean that could be called our secret sauce, let's say, in foodservice. The strategy evolves around like talent chefs. I mean, basically, if you don't have a chef it's very easy to be on a discussion of price-led discussion basically transactional only. And when we bring our chef to the conversation, we're really partnering with the customers in different needs identifying menu concepts fit for their specific projects. And those two things, although sometimes basic, like the execution, the perfect execution of it is what’s driving the foodservice. And just to remind within international foodservice still, although growing very strongly, it's 1/3 smaller as a percentage of the faced attrition than in the U.S. So although like we say size of the business comparable, we mean like we have a lot of room to grow in foodservice. So definitely, we hope we're going to continue to see very good strong success with this within the next quarters and years. Miguel Patricio : Thank you, Rafael. On a nutshell, I would say that on foodservice, I think in the past, we were very transactional, and we define this as one of the strategic pillars for us for growth, and we've been investing on talent, with technology, on people, on portfolio and it's paying off. I mean we are very excited with that. Anne-Marie? Anne-Marie Megela : Yes. So that will wrap up our Q&A session. Thank you all for your call. I am going to turn it over to Miguel for some closing comments. Miguel Patricio : I just want to say that we continue to be very excited about what we are doing. We see our transformation evolving. The journey still very far from finishing but we are evolving every day. And why are we so excited? We are excited because we see the momentum building service level up, market share, especially in the growth platform is growing. Foodservice and emerging markets are gaining market share and with a great momentum. Second, we see a very different level of agility in our company. We have today a very agile organization that is able to change, to adapt, to predict much better than in the past. We are investing to grow. Gross margin expansion feeds investments in technology, in people, in marketing, in R&D. We are excited as well because we anticipated pricing and today, we have 99% of all our pricing for 2023 already announced. We have about 95% of our pricing already accepted, and we have about 90% already implemented. And so the way we see it, we'll continue delivering quarter-after-quarter year-after-year. With that, thank you so much for your attention, and I expect to see you on CAGNY next week. I think we have a lot of excitement to share with you. Thank you. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Kraft Heinz Company Third Quarter Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I'd now like to hand the conference over, Anne-Marie Megela, Global Head of Investor Relations. Please go ahead. Anne-Marie Megela: Thank you, and hello, everyone. This is Anne-Marie Megela, Head of Global Investor Relations at the Kraft Heinz Company, and welcome to our Q&A session for our third quarter 2022 business update. During today's call, we may make some forward-looking statements regarding our expectations for the future, including related to our business plans and expectations, strategy, efforts and investments and related timing and its expected impacts. 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, which accompanies this call as well as our most recent 10-K, 10-Q and 8-K filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information available on our website at ir.kraftheinzcompany.com under News and Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio, for some brief opening comments. Miguel Patricio: Well, thank you, Marie, and thank you, everyone, for joining us here today. We are excited. We are proud. We delivered another quarter of strong results. And as we see consumer demand remaining strong and analytic elasticities, they continue to hold. We see our portfolio of iconic brands strong and very adequate for the moment that we are living. And we continue investing in these brands and seeing that this investment is paying off. Yet at the same time, we realize we know that supply chain remains challenging, particularly with inflation and material shortages. I'm proud of the teams as they continue to anticipate and adapt to these challenges, where we improved capacity and we're able to meet demand, we actually gained share. At the same time, we continue to advance our transformation, then including modernizing our marketing and transforming our portfolio. As we look ahead, we continue cautiously optimistic. We are providing our consumers with solutions that they value, and we continue to unlock efficiencies and reinvest in the business. All of which makes us stronger and positions us well for whatever challenges are still to come. With that, we are very happy to take your questions. Operator: [Operator Instructions] Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Great. I guess maybe to start, the company had moderated its EBITDA expectations back in September 1, third quarter when you were already about 2 months into the quarter. Today, you not only beat those expectations, but came in above the initial guidance as well. So, what came in better than you thought? Are there any timing issues to be aware of that might impact 4Q as a result? And maybe more importantly, do these fluctuations give you any pause with respect to visibility into the business with the understanding that it's obviously still a very dynamic environment. Miguel Patricio: Andrew, thank you for the question. Andre, you may answer this one. Andre Maciel : So, Andrew, first of all, we -- as Miguel said at the beginning, I think we feel very excited and pleased with the results we achieved in the quarter. And I'll tell you that a lot of things happened in our favor towards the month of September. First of all, if you might remember, we have executed a new price increase in the month of August. And the elasticities turned out to be stronger than what is anticipated, which resulted in strong top line. Shipments were very good. I think our team did a great job in the month of September to be able to ship in a much better pace than earlier in the quarter, which also helped us. We end up spending less promotion also that we have initially anticipated, which is fine, as well that we're being very prudent to put all the promotions and expense in our portfolio. And finally, we did have about $30 billion of one-time gains in the P&L, 80% in costs, 20% in SG&A. And those are mostly anticipation from Q4, okay? That's what we're able to do in Q3. And obviously, we also had a little contingency, given the volatility, right? But all in all, I think we're able to have a lot of things play in our favor. I think it is a testimony here that organization is moving with the speed and reacting fast to diversities. And we delivered and maintained our guidance fully here in Q3, right? And so I think we felt confident about the number that we’ve put a lever and I think we’re just reinforcing that now by [regular thought]. And you can count on us, all is true being a transparent dialogue and being -- in a very friendly fashion, like we did back in the September when I heard the first news about the inflationary pressure. Operator: Our next question comes from Ken Goldman with JPMorgan. Ken Goldman: You mentioned that your supply chain tightness is still mostly caused by factors from your upstream suppliers. This is not an uncommon refrain. We're certainly hearing this from many of your peers. I'm just curious, can you maybe help us better understand what the specific issues are. You mentioned disruptions, I guess, on ingredients and packaging. Does this suggest that the issues are somewhat temporary. They can fade when the disruptions have passed? Or are there maybe some structural problems, I guess, that could take longer to fix? Miguel Patricio: Carlos, I think that's related to you. Go ahead, please. Carlos Abrams-Rivera: Yes. What I would say -- first of all, thank you for the question. What I'll say is that I think you can see that the environment continues to be challenging. And what I'm really proud is the fact that our team is doing a terrific job of working through the wave of challenges. So, as we speak, we are both rebuilding inventory and improving service levels, and we have done that through the quarter -- sequentially in each quarter. I think we continue to see that going forward. I think what -- if I take a step back in terms of the overall constraints, what I see is about 80% of those challenges are really due to upstream supply distribution on ingredients and certain packaging materials. At the same time, what I'm saying is it's very asynchronistic the way they're recovering. So, you'll see that in some cases, we are moving quickly and recovering overall in our supply chain. There's a few ingredients that have been a little tighter for us. And I point to things like have affected us in the past and things like cold cuts and lunch -- I'm sorry, in cream cheese. And at the same time, even in those categories, we now have recovered and feel good about kind of our position as we go towards the end of the year. Operator: Our next question comes from Bryan Spillane with Bank of America. Bryan Spillane: To build on the previous 2 questions, you're kind of looking at the current environment now dealing with what you're dealing with numbers and seeing what you're seeing in the marketplace? Is there any reason that we shouldn't expect that your long-term targets, which you laid out back in -- or you talked a bit about back in September are targets that we should expect that those are achievable for 2023? Or is this environment still maybe too volatile to be in line with what your long-term targets would be. Miguel Patricio: Andre, you may want to answer this question. Andre Maciel : Sure. Look, as we said back in CAGNY, when we unveiled our new long-term growth for the reason, we expect to get that over the years. So think of it in terms of 3 years or so. So we feel good in our continued improvement, in our performance and we expect to continue to move towards the algorithm, the way that we have communicated back then. We are probably not ready to give any guidance around ‘23. But yes, the environment is still volatile. As you have been hearing from us and public promoters in the sector about supply chain volatility, which has consequences on availability and they speed up using our costs. Operator: Our next question comes from Chris Growe with Stifel. ChrisGrowe: I just had a quick question for you in relation to, you showed in one of your charts in the slide deck, private label gaining more share in your categories. It also showed Kraft Heinz doing much better in its categories as well. And as we look across the store, private label share has been up at a lesser rate over the past few months, although it seems like it's gone up a little bit more so in your categories. I just want to get a sense of if you see incremental risk in your categories from private label share gains as you take more pricing where you have more pricing that's been put in place? And then just any change in your thoughts on elasticity in relation to your pricing, which has been very favorable for your business? Miguel Patricio: Andre, do you want to answer the question? Andre Maciel : Sure. Thanks for the question. On private label, a few things. First of all, as we have been continuously reiterating our exposure to private label have reduced significantly after the [diversion] mid last year. So now the average market share in our portfolio is about 11%, wherein across food and beverage is 20%. So that were not impacted. Second, during the past 3 years, as part of our transformation, we have been directing a lot of our effort and energy around the core. So resources have moved that. We have been renovating the core in a very systematic way, so our portfolio is stronger. Third, the private label have been increasing the price together with the rest of the players. So as recent as the last 4 weeks, including already 3 weeks of October looking at sellout data, our sellout price is about 17% up, whereas private label is 16% up. So price gaps are widely preserved. You might have seen as well in 1 of this calendars we provided that comparing Q2 to Q3, the price gap with private label remains the same. So we do not see any category where our price gap expanded versus private label except to Ketchup and Lunchables, which honestly the interaction is limited, and we gained share in both of these categories. So yes, I think we feel good about that. We don't want to be even over optimistic that depending on how consumers eventually shifts behavior in a very drastic way, things can change, but there is no indication of that as of right now. And honestly, I mean, despite all the environment, food is proving to be very resilient. The brands are being very resilient. And with unemployment today we see right now, when I was here back in 2008, 2011, we only had this accelerated shift in behavior, but unemployment starts to go up, which is far from the reality today. Carlos Abrams-Rivera: Yes. And I think what I would say is we have continued to invest in the equity of our brands, which if we think about the fact that companies really don't have pricing power brands, have pricing -- pricing power. So the investments we have made with the quality of the marketing we have improved here at Kraft Heinz and the commitment we have to continue to invest in our brands going forward, also give us some confidence as we continue to manage through the current environment. Operator: Our next question comes from Alexia Howard with Bernstein. Alexia Howard: I mean looking at the lineup of products on Page 19 of the presentation, and they really do seem to be meeting the moment in terms of the consumer need for convenience and affordability. But I'm just wondering about your thoughts on the recent White House Conference on Hunger Health and Nutrition that happened last month for the first time in 50 years, I think. And there were a lot of initiatives coming out of that with respect to Front of Pack labels, a very tight definition of what a healthy food is, educating consumers and health professionals on the importance of good nutrition. And I wonder just how you -- it may be too soon, but how you're thinking about those types of developments in the industry over the coming months and years? And how that might shape your plans for innovation and the portfolio going forward? And I'll pass it on. Miguel Patricio: Let me -- I'm glad to start answering this question and then since Carlos wants to complement. Nutrition is part of our long-term strategy. It's part of our agenda. It is a very important part of our ESG goals for the future. We've been renovating our portfolio throughout the years, reducing or eliminating dies and artificial ingredients. And we have global agenda, a very specific agenda on reducing salt and sugar, which are 2 critical things in our portfolio that we have a responsibility to do. We are on the way to achieve the targets that we put in place until 2025. I mean just to give you an example, we changed the formulation of our Capri Sun this year. We reduced 40% of sugar content, and that's -- to put it in perspective, just that is 40 million pounds of sugar per year that we reduced. We continue committed to that for the short, the medium and the long term to make our products more nutritious. Carlos Abrams-Rivera: But I would add to Miguel's point, which I think is right on, is the fact that this is a commitment we have for the long term. Every single time we are renovating our portfolio, we're putting in kind of the view of how do we continue to improve our products overall, not just because it's the right thing to do, but also because that's what consumers want us to do. So I think that is happening and obviously, you can see it very clearly in terms of commitment to sugar reduction, salt reduction, we continue to work with communities and improving the food and security situation. And this is something that as a company we are committed to and we'll continue to as we go forward. Miguel Patricio: We are buyer of tomatoes and beans. And in the heart, we are agricultural company. And we've been investing a lot in that sense in client base. I mean you see what we are doing in Europe with our beans with a project of launching new beans based products with Heinz Beanz Burgerz, with Heinz Beanz [Hams], Protein Pots and a portfolio of innovation for the next 5 years related to that. And here in the U.S., we are very proud to announce this week that we are launching our plant-based cheese, which by the way, is an incredible product, very different from what is in the market. It melts, it tastes like cheese, it smells like cheese and melts like cheese and its very different from everything that is in the market. So we're absolutely committed on the nutritional agenda. Operator: Our next question comes from Stephen Powers with Deutsche Bank. Stephen Powers: I wanted to ask on gross margin progression. Across the consumer goods space broadly, I think we're beginning to see more signs an evidence of gross margin stabilization, if not recovery, with results across many companies either coming in ahead of consensus expectations or improving sequentially or even starting to improve year-over-year. And every portfolio is obviously different, but you're not yet in that position. So I am curious as to how you're thinking about the progress of gross margin? What kind of framing of expectations we should have going into the fourth quarter? And the prospects for improvement as we build into fiscal '23? Miguel Patricio: Andre, you may answer this question, please. Andre Maciel : Sure. Thanks for the question. Look, we have been -- as we said all along, have pricing to protect the dollar inflation, so dollar for dollar, and we have been doing that now for the second quarter in a row. So both in Q2 and now in Q3, price was in line with inflation and price plus gross efficiencies was ahead of inflation. Given that we had in Q3 as we initially said back in September, some incremental pressure in selected places and we took action already on it, there is this continuous lag in effect. So we expect Q3 to be the bottom of our gross margin, and you should expect to see a sequential improvement in Q4 in comparison to Q3. Operator: Our next question comes from David Palmer with Evercore ISI. David Palmer: Just a follow-up on some of the supply chain stuff. Your case fill rates in your slide deck, you say -- they were in the low 90s in the third quarter, and that's better than the high 80s than it was in the first quarter. But I was slightly surprised to see that, that fill rate was the same as 2Q. Is that a result of that upstream supplier effect that you're talking about. And I'm wondering how you're thinking about progress there. Is that -- is that some -- do you have visibilities to getting that fill rate back? I'm sure you want to get back to the high '90s. And what -- when could we expect bigger leaps and improvement in fill rates? Miguel Patricio: David thanks for the question. Carlos, please. Carlos Abrams-Rivera: Yes. Listen, what I'll say is that exactly what you said, it is connected to the availability of certain ingredients in the -- of the upstream. But at the same time, our commitment with our customers is continue to improve that. I'll tell you that as we continue to navigate the situation in terms of those capacity constraints, what I'll say is that we also are looking to see how we lead with the capacity that we have available to us. And let me give you a couple of examples of how we're doing that. We actually are ingesting data directly from our customers in a way that allows us to better deploy our inventory to reduce out of stocks. We started that with a pilot with 1 particular retailer and that allows us to actually reduce the amount of inventory by 40%. The out-of-stocks in their stores, by 40% in a period of about 8 weeks. We now have expanded that program and now we're ingesting more data from different customers that allows you to then make sure that we are then putting the right inventory in the right stores and green the right signals into our production so that we can maximize the availability capacity that we have in our plants. So we're both working upstream with suppliers, but it's also us being smarter and better capabilities internally to deploy our inventory to improve overall service levels, which we're committed to do. Thanks for the question. Operator: Our next question comes from John Baumgartner with Mizuho. John Baumgartner: Miguel, I was wondering if you can touch on the nice rehearsal you had in Q3 regarding market shares relative to your branded competition. How would you break that down between the benefits from some of the supply chain constraints easing, the pricing differentials in the market as opposed to how much of that is derived from just underlying changes to your execution in the market on more of a like-for-like basis, and how sustainable do you think that performance will be in the share gains versus brands going forward? Miguel Patricio: Thanks for the question. So let me give you my perspective, and then Carlos can go further on that answer, right? We are excited to keep the levels of market share even with the problems that we continue facing on supply. I mean, we would be gaining a lot of share if we would not be facing still shortages on raw materials. A good proof of that is like Capri Sun and Lunchables, where in the previous quarters, we had problems with supply charters of raw materials we lost this year, and now we are in rocket -- record share gains on these 2 brands. So I actually am optimistic that we can move further on market share. Carlos, please? Carlos Abrams-Rivera: Yes. I would say to build on Miguel's point, this is a combination of the continuing investments that we have made in renovating our brands, investment in improving the quality of our marketing communication. And then, as you said, unlocking some of the capacity in some key brands. I think the example Miguel gave around Lunchables and Capri Sun in which we saw the improvement on inventory and CFR and then our ability to actually then go into market and then drive event-based promotions that allows to then continue to grow those particular categories during the back-to-school period, which was basically a phenomenal result for us in terms of performance. As we go forward, when you see the places that continue to have challenges in terms of capacity, we know that once we unlock those we also have opportunity to then continue to grow our consumption as we go forward. And those, as I said before, areas like our Cold [indiscernible] and Cream Cheese that are slowly getting into better positioning our inventory. And now as we go into the holidays, making sure we protect the ability to then go into those event-based promotions we were doing the time of year that consumers are really looking for our brands. So when you take a step back, I will say, is a great combination of the work we have done over the last 1.5 years for us to improve internally the equity of our company. And at the same time now, see the benefit of us being able to now go back into the marketplace in a more aggressive way that allows to then continue to drive consumption and whole penetration on our brands. Anne-Marie Megela: Operator, we have time for one more question. Operator: Our next question comes from Michael Lavery with Piper Sandler. Michael Lavery: I just wanted to come back to the foodservice opportunity you've called out. And I think specifically, you said roughly half of the top 50 QSRs are distribution opportunities for you. Can you just give us a sense of maybe what's kept you from already being in some of those accounts? How sticky are those relationships? And what's sort of realistically the expectations or how many of those could come your way? Miguel Patricio: I would ask Carlos to answer that question, and then Rafael is maybe with us on this call to present for International zone, where we have a great momentum in food service, by the way. Carlos Abrams-Rivera: Yes. But I think let me start with the comment Miguel just made. I think if you look at our business in the North America and year-to-date, we're growing and growing market share. So we feel very good about our performance so far. And what I will tell you is, for us, it's a critical channel as we go forward. It is one that we really have thought about how do we continue to transform the organization internally. So we have done things like changing the leadership and reorienting our focus from operators to advance distributors -- we have done things like making sure that our food service now has a different role within North America zone that is from what we used to see as basically a stable contributor to now a growth driver. We have simplified and renovated the portfolio. I'll tell you that we have reduced about half of our SKUs that we had in 2019. At the same time, we have improved quality. And then finally, we continue to enhance our overall distribution, overall. Now part of the point that you made around how do we continue to unlock some of the opportunities we have in QSR is us continue to invest in the capacity of the business. So we're also making strong investments in CapEx in order for us to support the opportunity for us to continue growing in our foodservice channel. Over the last 2 years, that number is over $100 million we have invested, so that allows us now the opportunity to have those conversations with QSR in a way that truly unlocks opportunities for us to continue growing. Now that's a view of North America. Let me pass it out to Rafael to give you a view also of on international side. Rafael Oliveira: Yes. Look, it's not very similar to that. The opportunity in foodservice is significant. And you can see it has been a core pillar for our results in the last few years, and the quarter is no different. You can see that the numbers we released, we are growing actually very fast and twice the size of the industry, twice the rate of the industry. So you can attribute that part of it was the slowdown that happened during the pandemic. A lot of the -- across international, we do compete with some global players but also with some local players and a lot of them specialize in foodservice that during the pandemic, they suffer a lot and some of them either went bankrupt or had to downsize significantly their operations. We didn't. We maintained the same level of investments and consequently coming out of the pandemic in most of the countries across the world, I mean, we are riding ahead of it. So we continue to be excited. I mean, QSR is the core. Our products, especially within the sauces environment goes very hand-in-hand with the QSR industry, and we still have a long way to go. I mean our estimate with the data available that we are about between 3% and 4% market share of the sauces category of food service. So there is significant room ahead. And we are going to continue to do that, driving our chef-led model, where we have invested in chefs that partner with those customers, driving innovations that have been very well received. So it should be a continuous source of growth, sustainable growth for us. Anne-Marie Megela: Thank you, Operator. I'm now going to hand it over to Miguel for some closing commentary. Miguel Patricio: I would like to finish with a quote. A quote from a famous legendary car racer on Formula 1 that once said, "If it's raining, I can pass 15 cars. But when it's sunny, I cannot." Let me tell you, it's not raining, it's pouring. But we are super excited at this moment because we are seeing this as a great moment of opportunity. And we've been able to navigate through the uncertainties of the short term and adapt and rebuild very fast at the same time that we are continue building our future. We are excited with what we have ahead of us. Thank you very much. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Operator: Good day and thank you for standing by. Welcome to the Kraft Heinz Company Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Anne-Marie Megela. Please go ahead. Anne-Marie Megela: Thank you, and hello, everyone. This is Anne-Marie Megela, Head of Global Investor Relations at the Kraft Heinz Company, and welcome to our Q&A session for our second quarter 2022 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call, and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at ir.kraftheinzcompany.com. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio, for a few quick opening comments. Miguel Patricio: Well, thank you, Anne-Marie and thank you everyone for joining us today. I wanted to acknowledge the fact that we are living under a lot of uncertainty in what regards the external world. And in that sense, I want to thank my team and to congratulate my team for delivering another quarter of very solid results. Although, we are mindful of the current inflationary environment and how it affects our consumers and our customers, but we continue to develop solutions that benefit our consumers and our retailers. Our relationships with retailers continue to strengthen, and we have improved inventory and service levels, so we can have now more optionality to execute more mutually strategic programs. Well, with that, we are happy to take your questions. Operator: Thank you. [Operator Instructions] And our first question will come from Bryan Spillane from Bank of America. And your line is now open. Bryan Spillane: All right. Thank you, operator. Good morning, everyone. I had just one clarification question and then a second question. The first one, just as a clarification. Andre, in the slide deck, I think it's slide 27, where you talk about the there's a portion or a section in there about gross margin and it shows gross margin at 30.3%. Just want to make sure that that is not adjusted, right? So, that's just your gross margin. I think, as we did the adjusted gross margin calculation, it was like 31.5%. So, just wanted to clarify that, that margin that you're -- that you put in slide deck is reported not adjusted. Andre Maciel: Good morning, Bryan. Thanks for the question. Very good, by the way. So, yes, you are right. So, this is the GAAP gross margin. So, to get adjusted, we need to increase this number by 110 basis points due to the change of realized hedge on commodities. Okay. And in fact, if we adjust for that, our margin in Q2 is pretty much in line with the margin in Q1. Bryan Spillane: Okay. Andre Maciel: And if you compare to prior year, you would see an expansion of margin if were not for the dilutive impact of repricing to offset inflation. Bryan Spillane: Okay. Thank you for that. And then, my question is just in the prepared remarks, Miguel, you talked a little bit about, I think there's still being supply chain pressures in the back half of the year and -- or currently I suppose. And if I recalling last year where part of what happened in the U.S. was, you had some supply chain issues and they affected service levels, especially around the holidays. Are -- I guess, does the guidance assume that there's still going to be some pressure there and that you won't be fully merchandised for the holidays? Or are we -- are you in a position where you can be more fully sort of supplied and merchandised at the holidays in the U.S.? Miguel Patricio: Okay. Bryan, I think that since your question is addressing more of the U.S., I will pass it to Carlos. Bryan Spillane: Okay. Thank you. Carlos Abrams-Rivera: Thank you, Miguel. I think, first of all, thank you for your question. The reality is that we have continued to improve our production and our service levels as you saw in the presentation. And now that we are approaching kind of the low 90s in terms of service in Q2, they're going to allow to continue to focus on driving the right kind of levels of both service and inventory with our retailers. So, for us, it's important to see the continued progression that we have, and we don't anticipate that to actually going against us as we go forward. In fact, what we are going to continue to see as we go into Q3 and Q4 is the continued expansion of our service. And as a result, the continued improvement in terms of our performance. We saw that in Q2, where in fact, we have able to kind of unlock opportunities within, for example, brands like Philadelphia or Heinz Ketchup, both of which had record shares, in fact, higher share, they ever had in both of those businesses. So, I think as we go forward, we always going to continue to improve our position. Bryan Spillane: Okay. Thank you. Operator: Thank you. And we'll take our next question from Ken Goldman from JP Morgan. Mr. Goldman, your line is open. Ken Goldman: Hi, everybody. Thank you. You mentioned in the prepared remarks that you have the optionality now to execute more, I think, called it mutually strategic programs with retailers. Now that your service levels are in a better place, I just wanted to clarify, number one, is there any major difference between a mutually strategic program and just a really good promotion? That's more than just a discount. Maybe it's just something more in depth or creative than a usual promotion. I just wanted to kind of clarify that definition. And then, the second part of that is I wanted to ask if you're confident that these programs, if you do implement them, that they're being driven from a position of strength, right? Whereby you're doing them because you're able to versus maybe from a position where you're doing it, because the consumer in a position of weakness themselves is demanding it. Thank you. Miguel Patricio: Okay. Ken, I'll give you two examples of these programs that, because we have now much better service levels we can have. So, I'll give you two examples. One is what we call the Art of the Burger, has been a very successful program, especially now during summertime when people barbecue more. And when we can put together our sauces, our teas, together with the bonds of supermarket chains, it has been very good and very well accepted by our customers. I'll give you another example in a moment like this, that we are exploring value propositions, with together -- with customers, I'll give you example of grilled cheese. You can have a grilled cheese for less than $1. And we do programs with our customers putting together our cheese, our mayo, and with their brand as well, right? So, these are just two examples of bringing value, the value proposition, and the customers are receiving. This is extremely well. And this is bringing a little bit of creativity that had never used thinking about value or bringing the value of our products to life together with the customers. Ken Goldman: And then the second part -- thank you for that. The second, doing this, I guess, from a position where you feel it's from strength rather than -- maybe because the consumer is demanding it a little bit. I just wanted to make sure about that. And I -- maybe you answered that a little bit with the second part of that, talking about the value proposition promos, but just curious for your thoughts there. Miguel Patricio: I'm not -- the other thing I would say here, Ken, is on stickiness we continue to have very productive conversations with our customers in a way that makes sense for both of us. But … Ken Goldman: Great. Miguel Patricio: We feel very positive about it. We are excited with the momentum that we have with our customers and with our consumers. Ken Goldman: Understood. Thanks very much. Operator: Thank you. And we'll take our next question from Andrew Lazar from Barclays. And Mr. Lazar, your line is open. Andrew Lazar: Thanks very much. In the slide deck, you provided a breakdown of categories that are sort of more and less sensitive to price gaps with private label. I think 15% of sales are in categories that are more sensitive where gaps are increasing. And I'm just curious, how do you approach these businesses in terms of balancing share and profitability? Do you take the necessary price to protect profit and deal with the short-term pressure on share or protect share and sort of take the short-term profit hit? And you talk about another 25% that are sensitive to private label gaps, but currently stable. And I guess, if those were to expand from here, I guess what gives you confidence you can manage this bigger segment in the context of your sort of growth algorithm? Thanks so much. Carlos Abrams-Rivera: Well, let me start this, I think, Andrew, the question specifically to the U.S., so I'll take a shot. I think for us the reality is that even as we think about those businesses, there may be, as you saw, a very small part of our portfolio is just more exposed to private label. One of the things that we’re actually doing is working differently in terms of how we offering consumer solutions in a moment in which they're looking for different choices across the spectrum of economic development of consumers. So, one of the things we're actually looking at is how we actually allow consumers to stay in our iconic brands because of the number of ranges of our products across our pricing ladder, whether that is -- and let me give you an example, something like Oscar Mayer in which we have from natural to deli fresh to regional Oscar Mayer, that allows consumers actually for, to have an option in which to actually stay within our brands. Knowing that over the last couple of years, we've actually been renovating many of our iconic brands and investing behind it. So, we have improved the quality. We have improved the renovation of those brands in a way now that makes our brands even more valuable to consumers. And frankly, we're seeing that already play out. We see that, for example, you have a product like Kraft Mac & Cheese portfolio in which we also have that kind of full array of products across pricing ladder that in Q2 you saw us gaining share as well. So, for us, it's about being strategic about how we think about leveraging the entire portfolio that we have in a way that allows us to continue to offer consumers different approaches in terms of options. Miguel Patricio: And it's really category-by-category, right? So, even in the 15% where the prices are expanding, the stories are very different. Like instead cheese, similar to cold cuts, we do have a very good price ladder. We have the VELVEETA license and the floor effects even priced at or below private label. We have the Kraft Singles and we have the Deluxe. And we're actually gaining share, so in the last several months, so it's working quite well for us. In Ore-Ida, for example, we have the partnership with Simplot that is now starting and that to unlock a lot of capacity later in the year, which will allow us to start to promote more of these brands, which we haven't been able to do in a consistent manner for years. So, it's really category-by-category. We monitor this very close and makes sense that -- we are doing something that makes sense for both top and bottom line. Andrew Lazar: Thank you. Miguel Patricio: Thank you, Andrew. Operator: Thank you. And our next question will come from Chris Growe from Stifel. And your line is now open. Mr. Growe, please make sure your line is not on mute. Chris Growe: Can you hear me now? Operator: Yes, sir. Chris Growe: Thank you. I just had a quick question for you, if I could, around the revenue growth in the quarter outpacing consumption. I was just curious how much of that was Foodservice strength, for example, and maybe the non-measured channels versus actual inventory rebuilding. I think this kind of fits with an earlier question around, do you see product availability as a constraint for the third and fourth quarter performance in the second half, or is that behind us now is what I'm ultimately trying to get to? Thank you. Andre Maciel: I think it's a combination of these factors. So, Foodservice, as you have seen in our presentation, is growing north of 20%. So -- and that represents roughly 30% of our total revenue. In non-measured channels in the U.S., we have been doing very well in club and dollar, actually been gaining share we are to date in those two channels, because we are already prepared for a gradual shift toward those channels. And we have been guiding what month announced in Q1, in fact, in Q2 was very minor. So, I think it's not attributed for the first two. Regarding service levels, as you have seen, we are still in the low 90s, where the ideal level is in the high 90s. So, we still have virtual. Obviously, it's got the average of the portfolio in. Some categories are in great shape, back to the historical appropriate levels of services, some others still working through it. And even to look on shelf availability, we are much closer to the historical levels. So, if you think about shelf availability, I think you are going to see the industry like 93, 94. We are now in the 91, 92. So, we're getting there. There's still some room to grow. Chris Growe: And would there still be some continued inventory build you'd expect at retail as you improve your service levels? Andre Maciel: We might. Obviously, we cannot comment on how -- we don't know how we're going to measure the inventories moving forward. If you were to look capacity historical levels, yes, there could be some room for further inventory buildup. Chris Growe: Okay. Thank you. Operator: Thank you. And our next question will come from Steve Powers from Deutsche Bank. Mr. Powers, your line is now open. Stephen Powers: Yes. Hey. Good morning. Good morning. Thanks. You talked about your outlook contemplating greater price elasticity negatively impacting volume and mix, I guess, over the balance of the year. Is there a way for you to help us think through the P&L impacts of lower volumes at this point? Clearly, there are many other moving parts. But all else equal, if volumes are to move lower in places where you anticipate, how material is that on margins in terms of fixed cost deleverage per unit sold? I'm just -- I'm really asking just how fixed versus variable the cost structure is at this point. Andre Maciel: Thanks for the question. At this point, it is not really a drag because we are still building inventory. Remember, our services in the low 90s. So, as we continue to produce more than what we sell, it actually is a little positive effect at this moment. And we are monitoring the demand curves very closely. So, then, we'll also adjust our labor accordingly to make sure that we don't have an overhang down the road when we start to step down on production to make sure that we don't have more labor than needed and have this effect that you're talking about. But as of right now, this is not an issue. Stephen Powers: Okay. Great. Thank you. And if I could, you gave some good color on the cost outlook for the remainder of 2022. I guess, I'm just curious how you see, if possible, early positioning looking out to 2023. I guess, on the one hand, you mentioned costs hopefully peaking and maybe starting to receive in some cases. But on the other hand, we're still obviously a lot higher year-over-year. And you presumably have some hedges rolling into the year that will roll-off both on commodities and currency. So, just maybe a little bit of color, if you have any, on early positioning, visibility on constant currency looking out to the first part of 2023. Miguel Patricio: There’s still a lot of volatility out there. Yes. The costs have received it. They are still very high. We are working with different senates for next year, but I need to talk about that. See that we have been taken like price throughout the year that we wanted to have a carryover effect into next year, especially in the first half of the year. So that will help, but early to tell. Stephen Powers: Okay. Very good. Thank you. Operator: Thank you. Our next question will come from Robert Moskow from Credit Suisse. Your line is now open. Robert Moskow: Hi. Thanks. Your income statement shows losses on your derivative hedges in 2Q. I imagine that commodity inputs are now falling. And if that's right, should we assume at some point that this necessitates more counts in your existing on any specific products? And then a quick follow-up. Andre Maciel: Yeah. So, thanks for the question. So, a couple of things. First, maybe to answer the prior question you need little bit to this one. We typically price on what -- on market changes, not on our hedges position, right? So, that's important you know that. Hope this is clear. We price based on what we're seeing out in the market, not based on what our internal pricing hedgings are. But the second thing is regarding this effect, what you see in the P&L is the change in the unrealized hedge on commodities, okay? So, it doesn't mean that the hedge is positive or negative. It just made that there was a change period over period. So, we're still having hedge gains. We had hedge gains in both Q1 and Q2. But because part of that materialized, we see this negative effect on the realized portion. But again, what is important thing is we look at the market prices and that's how we make our price decisions. Robert Moskow: Okay. Maybe I'll follow-up. My follow-up is, I think you did shift above [technical difficulty] consumption in 2Q. And I think you said that you'd be refilling shelves in 2Q. Can you give us any number as to how much that might be just in 2Q? Andre Maciel: The inventory effect in Q2 is very small. So, yeah, the 2Q is a very small number. And again, we don't know how retailers are going to manage their inventories. If you were to look at the levels pre-pandemic, net-net, we still have room to grow our inventory retailers. And our shop availability, as I said before, it is still a little below the historical level, which might give further indication that this is a possibility. Robert Moskow: Yeah. Andre, I get it. But you also said you're producing above your sales. So, I don't know, is it a material amount? Or are you just -- it is. And are you refilling your own inventory then rather than retailers or? Andre Maciel: We are now refilling our own inventory because we think -- the historical levels. And eventually, this will go to the retailers. I don't know, Carlos, do you want to add something else? Carlos Abrams-Rivera: Yeah. I mean, I would say if you look at the presentation and the fact that we are able to provide service from the low 80s to the low 90s, it's a result of us being able to actually leverage our entire supply chain in a way that now with right inventory levels in many of our categories that we can provide that service. At the same time, as Andre said, we're still in the low 90s. So, there is opportunity for us to continue to drive that to the high 90s by pushing the right level of inventories internally, so that we can actually be able to better service our customers. Robert Moskow: Thanks. Thank you for the clarification. Operator: Thank you. And we'll take our next question from Alexia Howard from Alliance Bernstein. Alexia, your line is open. Alexia Howard: Thank you. Good morning, everyone. Miguel Patricio: Good morning, Alexia. Alexia Howard: Can I ask about the comments you made in your prepared remarks about the International Zone and the expansion of distribution points? It seems as though in the go-to-market areas, there's been a very material expansion of distribution points in some of those emerging markets. How do you ensure that you've got the critical mass in those new outlets to make money? I don't know whether you can give us data on how profitable you are in some of those regions. But we've seen some other companies kind of dig themselves a profit hole as they're trying to do that expansion. And I just want to find out how you're making sure that you have got guardrails on that expansion. Thank you very much and I will pass it on. Miguel Patricio: Carlos, your view? Carlos Abrams-Rivera: Yeah. No, Alexia, thanks for the question. I mean, to be honest with you, we are extremely proud and happy with what's happening with our go-to-market model, because it's a very comprehensive model that we actually start by analyzing. It starts by where we can make money. So, it starts by looking at the gross profit of each individual either channel or submarket, let's say, traditional modern trade, I mean, depending on the region in multiple countries like you -- as you just mentioned. If you pick up Brazil where we started, Russia, China, they are very vast countries so they have the profitability that you can achieve in different regions and different channels is significant -- can be significantly different. So, we start by analyzing that, flowing through all the way to how we're going to execute the store. So, it's a very comprehensive model of very detailed analytics with execution. So, as you saw and you alluded to on the slides, we started this model in 2018 in Brazil, copied, adapted and copied to Russia, and then to China. And now we are scaling up to -- by the end of the year, we expect to have 75% of our markets into this go-to-market model. And the numbers -- the result speaks for itself. So, everywhere that we implemented the model, the growth has been significantly above the other emerging markets that are also growing. So, we will continue to roll that out. It's a model that, again, requires a lot of analytics to be profitable, but at the same time, a lot of discipline on execution to kind of keep expanding in those regions that still have a lot of distribution to begin. Alexia Howard: Thank you. Andre Maciel: On the profitability side, which is obviously very important, right? We don't want to make sure that we don't put a lot of people out there and we cannot have a payback on that. We're also very disciplined on it, right? So, to give an example, in Brazil, we have about, I don't know, 1 million points of sales that we could hypothetically serve. We are still in the 100,000, 130,000 and 140,000. So -- and part of that is because the limits of our scale, right? So, that's very important. We are halfway exploring alternatives, potential partnership should actually increase the penetration in some markets. So, maybe there will be more to come in the future. But yes, profitability is also an important consideration. Miguel Patricio: Since we are talking about Brazil, I think that -- now with the acquisition of Hemmer that is very strong in the South and Heinz is very strong in the Southeast, this gives us even a bigger opportunity to expand our distribution and the strength of our brands. We are really now with great scale in Brazil that we are very happy with how this acquisition is going and the plans that we have in place for the business there. Alexia Howard: Great. Thank you very much. I'll pass it on. Anne-Marie Megela: Operator, we have time for one more question. Operator: Thank you. And we'll take our last question from David Palmer with Evercore ISI. Your line is open. David Palmer: Thanks. In your prepared remarks about gross margins, you talked about the fact that you're protecting profit dollars and not margin and that was causing 450 basis points of decline and that math makes sense. But I'm sure there's more going on underneath the surface with regard to gross margins. Supply chain, I'm sure was a friction cost and maybe there's some timing with regard to pricing versus input. So, anything that you would call out that was also a factor in gross margins that we can be thinking about even into 2023 as a comparison? Andre Maciel: Yeah. Thanks for the question. Look, this is by very far the highest impact. But other than the need that you have the growth efficiency. Remember that you have the $2 billion that [indiscernible] have communicated and that we are on track to deliver. We delivered the first two years in line with the expectation. And year three, which is now -- we continue to be on track. So, that certainly continues. Mix effect is relatively small. It's now in the quarter, slightly positive as we continue to accelerate the growth platforms where we have higher margins. But the number in the quarter is not significant. So, really in this quarter, it's about the dilutive effect. But again, moving forward, we should expect to continue to deliver the growth efficiencies. And as we continue to price inflation, the inflation events that start to ease, that might put us in a better position for us to continue to recover the margin. David Palmer: Thanks for that. And then, on Foodservice, the -- very impressive growth there. The over 20% growth in North America does imply something's happening there, some big market share wins. What's driving that? And is that sustainable? And I guess, you're just citing that the big global QSRs as the momentum driver for international, and that does sound sustainable in your view? Andre Maciel: Thanks for the question. I think there are two things. One is, I want to highlight that was not in the prepared remarks that our Foodservice now in Q2 is 14% higher than Q2, 2019, which is really remarkable. There is a component of price, right? We've been pricing that channel consistent to what we've been doing in retail. So, price also has a lot to do with the growth that that we're seeing in Q2. But the volume continues to grow as we expand distribution. We have been getting market share in the -- where we have the information in developed markets in North America, Europe and Central. Regarding QSR, our strategies, I'll let Rafa talk a little bit to what we are doing on the International Zone. Miguel Patricio: Before Rafa talks about International Zone, I just want to say that since you, Andre, compared with 2019, in 2019, Foodservice was -- it's a very transactional area for the company, was not really strategic. And it was a small part of the company that we didn't put a lot of attention. I think we have a great team today with a lot of ambition and really looking at this channel as a critical strategic channel that generates penetration of our brands across the globe. If we're having great momentum in emerging markets in part is because our consumers are getting in touch with our brands in Foodservice. And so that's a very different change in mindset. And as a consequence, the team changed, yeah, I think entirely since 2019. Rafael, please? Rafael Oliveira: Yeah. The only thing I would complement, I mean, to build on what Miguel said, we have a say here we use the model we define for Foodservice. We call -- we own the chef, own the kitchen, own the customer. And that reflects the investments we made on chefs, because chefs are extremely important, especially on QSR, global QSRs, as you alluded, because that's how you develop recipes or LTO, limited-time offers, with those customers. And this is the door into developing -- into innovating products for them to put in their stores. So, we've invested on this capability, and this is paying off peak time, because then you develop a relationship with those customers. That takes you to a different level, that allows you to innovate, to price better to get out of commodity competition. And with that, we continue to use the channel as well to build the brand, I mean, in terms of impressions, a fantastic channel to build brand impressions. So, Foodservice is a core pillar for our growth both across International, but in the U.S. as well. And Carlos can complement that. But we've been very successful with this model of investing in chefs and parting with the customers on product development. Carlos Abrams-Rivera: Yeah. I would say, Rafa, the only thing I would add here is just the fact that the model that we have, we're also looking at it at a global basis. So, the same concept of us being able to kind of -- as Miguel and Rafa pointed out, leveraging our points of distribution in away from home in order for us to kind of build our iconic brands in retail. That type of virtuous cycle is something we're going to continue and we see that paying up for us. At the same time, over the last couple of years, not only have we reorganized ourselves and focused our team in being -- having kind of the right expertise and capabilities with Foodservice, but we have also simplified our portfolio quite a bit. I can tell you that since the last two years, we have reduced the number of SKUs in the U.S. Foodservice by app. So that allows us to actually pivot to the things that really matter to our customers in a way that they can help with both in terms of providing the great service and great value in away from home. And with that, let me pass it over to Miguel for some closing remarks. Miguel Patricio: Okay. Well, thank you all for your questions today. As you are seeing, we are a company in the midst of a transformation. We are proud of what we've done so far, very proud, but each day, we continue to improve and to evolve, and we are just getting started. We have so many opportunities ahead of us, and we are all very excited about what's to come. Thank you very much, and thank you for the continued interest in Kraft Heinz. Operator: Thank you. This concludes today's conference call. Thank you for your participation and you may now disconnect. Everyone, have a wonderful day.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Kraft Heinz Company Frst Quarter Results Question-and-Answer Session. I'd now like to turn the call over to your host, Chris Jakubik. You may begin. Chris Jakubik: Thank you, and hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at the Kraft Heinz Company, and welcome to our Q&A session for our first quarter 2022 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and they are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call, and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at ir.kraftheinzcompany.com. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio, for a few quick opening comments. Miguel Patricio: Well, thank you, Chris. I would just like to start by sharing how proud I am of our people, and the truly transformational work they continue to deliver for our company. We've seen 2 years of a lot of disruption, and they continue to successfully address the short-term challenges, at the same time that we are building the long-term advantage of our company and our brands. Our teams delivered a strong start for the year, both on top line and bottom line. We remain on strategy with the strongest growth coming from our priority platforms, brands, channels and markets. We are effectively managing our inflation, improving our supply constraints, while continuing to gain incremental efficiencies. We continue to make progress, building and deploying initiatives to accelerate our advantages in areas like becoming more agile, becoming much more creative in marketing, developing joint business plans between retail and foodservice and capacity unlocks in our Grow and Energize platforms. As you are now seeing, we are doing this through strategic partnerships with technology clients and cutting-edge innovators to accelerate our transformation and redefine best-in-class across our value chain. It is a very exciting time for Kraft Heinz and I don't think we could be better equipped to build on our momentum through what promises to remain a very challenging environment. With that, well, let's take your questions. Operator: [Operator Instructions] Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Chris, congratulations to you. Thank you for all the help over the -- well, too many years to quantify. I appreciate it. My question really is around retail inventory. I guess, where are you currently regarding the retail inventory rebuild versus where you want to be? And how much more opportunity might there be for shipments to exceed consumption going forward related to this dynamic, which I guess, could be somewhat of an offset, should elasticity ramp up a bit from here? And is there any indication that retailers may opt to hold more inventory going forward than they did pre-pandemic, having seen during the past 2 years how problematic out of stocks can be when there are supply dislocations? Carlos Abrams-Rivera: Andrew, this is Carlos. Let me take that one first and also, let me just echo Miguel's comment. I'm just so proud of how our teams have managed through all this and the strong start of the year is a testament to the resiliency of the teams. Now, to your questions about retail inventories, they do remain fluid. If you recall, we exited last year below normal days of inventory from a historical perspective that were both in terms of the trade and in our warehouse. And if you look at in Q1, our actual production volume was actually 10% higher than it was a year ago, and we expect that to continue through the year-end, so that we can support the inventory recovery. And in Q1, the way it looks is that we began to rebuild some of the retail inventories in certain categories. But in aggregate, we're still below historical levels. And our expectations as we continue through the year is that we'll recover our inventory levels by the end of the year, with service levels than returning to pre-pandemic levels early next year. Now, let me tell you kind of our focus going forward is going to be in 3 specific areas. One is recovering the service constrained category and focus on the key power SKUs, and as you saw, our increasing production level supports this initiative. Number 2 is improving the share of shelf and implement shelving principles. We have both detailed plans to do that and a strong collaboration with customers to do just this. And finally, creating in-store destination so that we can launch meaningful incremental interruptive innovation into the marketplace. And you are seeing this already from our award-winning Art of the Burger to creating deepen destinations and breakfast destination in-store and online that leverage our scale in partnership with retailers. Now, you asked specifically about kind of how to also think about the retailers and their inventory normalized. I would say, it's difficult to say where exactly the retail inventory level will normalize. The one thing I will kind of make you think about it is the fact that if you keep in mind that pre-pandemic levels, the inventory levels actually saw quite a bit of inventory reduction in the 2- to 3-year period prior to the pandemic. So I would say it's hard to predict, but we know that as we continue to move forward, we're building that because there's still room for us to do that. Thank you for your question. Operator: Our next question comes from David Palmer with Evercore ISI. David Palmer: Thank you. Interesting comments in those prepared remarks about the partnerships with Microsoft and Google. Maybe, if you can touch on those a bit more and what outcomes do you expect from those? What areas of improvement do you expect us to see, and what's first? Miguel Patricio: Carlos, do you want to answer that question, please? Carlos Abrams-Rivera: Sure. So let me just say that part of the partnership that we're doing is really, is about supporting our AGILE@SCALEs initiatives. And for us, if you recall, when we talked in CAGNY, we talked about how AGILE@SCALE was going to help us in 3 ways. First, it was about us making sure we organize and embed and lead with agile values throughout the company. And we mentioned how we actually evolve our structure to be flatter and leaner, with multidisciplinary teams and missions to attack the largest priority. And in North America, we actually instituted a rule of 5, where only 5 levels between myself and the interposition in the business units. The second part of that, and to your question, is also that we were building a tech ecosystem to create end-to-end capabilities with leading tech companies to accelerate our solutions, to capture efficiencies and create a significant competitive advantage. What you're seeing in our partnership between whether it's in Microsoft, whether it is in a partnership with Google, it also allows them to look for those partnerships that allow us to accelerate and move to an agile scale. Because then, once we build up tech ecosystem, we can then scale up to leverage the proven solutions across -- and maximize the value creation. The reality is that we're also doing this across the entire value chain. I'm very pleased with the partnership we have with Microsoft because it's going to allow us to also look at things like areas and planning, in manufacturing, in logistics and sales and marketing that allows us to get closer to our consumer and making sure we actually are getting real-time information that we improve the customer service by improving forecast accuracy and speed, and that it generates end-to-end efficiencies with new processes, tools and structure. So as you will see, we are going to continue to look for those partnerships in which we can actually work together to accelerate our journey towards AGILE@SCALE. Miguel Patricio: I would just like to add to what Carlos just said that these partnerships go beyond just technology. So as you remember, we announced, before the NotCo and the Simplot partnerships, these are other great examples of us to become more agile in all areas of the company. We didn't have a good pipeline of plant-based products and would take a lot of time to develop. Well, partner with a company that can bring you solutions in a record time and great quality. We didn't have a solution for our line business from a supply standpoint, well, partner with the ones that can solve quality, innovation and volume problems that we would eventually have moving forward. We'll -- these are just great examples of partnerships that will just make us more agile and faster. David Palmer : And just on the marketing side or the actual spending side, what is your advertising as a percent of sales today in big picture? How has that shifted in terms of the percent of sales over the last few years? But also, how -- or have you shifted that spending? I would imagine, digital is a much higher percent today and give us a flavor of what you're anticipating there? Miguel Patricio: I can’t give you a better sense of the percentage of net sales, because with all these changes we are having net sales, I don't want to give you a number that is not precise. But let me tell you that it's not our intention to reduce the investments in marketing. This year will either be flat or growing, depending on how the year continues, because we want to continue investing in our brands. Our investment in digital today is about 2/3 of all our investment, about 70% of our investment. But I would say that more than even the quantity at this moment, I'm really, really impressed with the quality and how we changed the way to communicate. Today, we have, in all our views, our own development of digital marketing that gives us really the possibility of being at the speed of culture and producing from a day to another one, great quality marketing that makes us much more engaging. It is very different, the quality of marketing that we have nowadays. I don't know if you saw, but Advertising Age selected us as the best campaign of the year. It put us among the 5 best marketers in North America, and more recently, they called VELVEETA the best renovation or the best rebranding of the year. And these are all consequences of huge improvement of the quality of our marketing. Carlos Abrams-Rivera: The one thing I guess I would be also to Miguel's comment is that while it's true that we have invested in about $100 million more in marketing to 2019, our focus really has changed and is what Miguel just highlighted, we are focused very much into earned media and which actually we have seen how we have proven that increases the return on that investment. So for us is, how do we make sure that all the personalization and improved creativity that our teams are showing translating us creating more impactful campaigns that generate the earn media that improves the ROI. So it's not just the investment we make, but the amplifying effect of our investment because of the quality of the work that we're putting out. And that's why we continue on this journey. Thank you. Operator: Our next question comes from Bryan Spillane with Bank of America. Bryan Spillane: I guess I wanted to ask about commodities and raw materials and not so much on cost, but just availability. Given some of the supply chain issues, I guess, that have been caused by the war in the Ukraine and some of the agricultural commodities potentially being short supply. Just -- is that a concern on your end in terms of just availability of raw materials? Have you seen it at all crop up, maybe, competitively like, smaller competitors having service issues? And then maybe, if I could just tie to that as well, given that you do have some exposure to it, just bird flu, is that something we should be worried about, given that you do grow some turkeys? Andre Maciel: Thanks for the question. I'll get this one. Andre here. So yes, situations come up every day on the raw material and packaging materials side. So the situation continues to be challenging. And I think the teams have been out for 2 years dealing with these challenges on a recurring basis, right? It requires a lot of resilience from our team, which have been demonstrating very strongly. Now, the great thing is, despite all these challenges, we have been able, throughout the quarter, to rebuild inventories for the first time from ever since the pandemic level, and we have improved service levels. And I think we are now in a good trajectory to continue to do so into the second quarter. So despite the challenges that we continue to face in the whole market, we have been able to navigate through that. I think our scale also definitely helps on this regard. Regarding hedging, as we said before, we have been maintaining a very disciplined approach for hedging. So we haven't been speculating or trying to second guess, what's going to happen in the market. I have been maintaining our strategy to maintain a consistency. And as we mentioned, some of the commodities have been the most impacted by the Ukraine conflict, like grains, oils, energy, we are hedged on those until Q4, which put us also in a good position. Carlos Abrams-Rivera: But Bryan, the point about availability has been around for a long time now, before the war. Every day, there's one raw material that is short because the supply chain is very tight, overall. I think that in that sense, company with our scale should be able to navigate better. And there are examples every day. I mean, there's a shortage -- just as an example of Bingham, which is raw material to do cream cheese, and we have a good inventory of that. So the smaller companies will have difficulty to have access to that business. And every day, we really have to adapt every day to a new problem. I think the teams have done a great job in that sense. Bryan Spillane: And then if you could touch just on bird flu, is that a concern at all? Carlos Abrams-Rivera: Yes. Let me touch on that then. I think first, let me give you a little bit of historical context. I mean, we have seen this before. And one thing that is different about this time around, is that we have the insight from the lessons we learned last time. As we looked at it this time around, we are flexing our portfolio to address the short-term kind of poultry disruptions. We've had some experience doing this in the past 2 years on how we actually flexed our portfolio, so we can actually be very dynamic in our response. The regions from which we buy Turkey have not been impacted so far. Now, we have seen price increases, that is true. So what we're using is our strategic sourcing network that Miguel spoke about to provide those supply and will remain agile as we go forward. And we're working closely with our retail partners so that we can navigate as the situation evolves. But again, I think we have seen that we have learned in the past, we're applying those lessons, and reality is that we're flexing our portfolio in order to navigate through this. Rafael Oliveira: Bryan, Rafa here. Just to compliment to you, you asked about exposure to Ukraine. For us, it's negligible, it's very small, okay, the exposure to raw materials in Ukraine. Operator: Our next question comes from Jason English with Goldman Sachs. Jason English: Good morning, folks. Thanks for slotting me in. To echo the earlier sentiment, congrats, Chris. Your legend will miss you. And Marie, congrats on the escalation. Looking forward to working with you more closely going forward. To the questions I have, great to see your foodservice momentum. I think you gave 2 statistics, the growth in U.S. and growth internationally. Can you give us the blended growth rate like across all of foodservice, 12% of sales growing, what on average? And how close are you to back to pre-pandemic levels? Have we pretty much closed the gap? Is that what's driving the majority of the growth? Or is this momentum over and above the recovery from COVID? Andre Maciel: Okay. So look, I'm not going to quote specific numbers, but both -- across international zone in North America, we are growing north of 20% on both, okay? And gaining share, as also indicated across the board, which put us in a very good position. And the way things are trending so far, it's possible that already going to be ahead of 2019 levels, the list in North America, which is also great. Miguel Patricio: And I would add on the comments from Andre, that we are very excited with the foodservice. We see as the different from the past, there was a very transactional channel. Today, it’s a truly transactional -- sorry, a strategic channel for us. It's a great way for us to launch new products, to test them, to sample them with the consumers and then to leverage that sampling to the trade. In the presentation, you have a very recent example of that, but it's our intention to keep doing that through -- to through the future. Jason English : For sure. Makes a lot of sense. And I appreciate the comment earlier on ad spend and the commitment to have it be flat, if not, up as a percentage of sales for the year. But can you unpack a little bit more on the SG&A efficiency this quarter? It's down pretty sharply year-on-year. Is that the efforts of your productivity? Or is there some unique timing dynamics that we should be aware of? Carlos Abrams-Rivera: On the SG&A, we have in the first quarter having a onetime gain from last year that do not get repeated. So pretty much, that's what's driving the entire impairments that you're asking. Operator: Our next question comes from Ken Goldman with JPMorgan. KenGoldman: And just to echo the prior comments. Chris, thank you for all of the help, you'll truly be missed and Ann Marie, congratulations as well on the new role. I wanted to ask, you've highlighted your reduced exposure to private label in the U.S., so I don't want to suggest Kraft is at any particular risk here. I'm really just curious if you're starting to see retail customers leaning in a bit harder to their store brands recently, whether it's via incremental displays or other efforts, I guess, to try and maybe highlight for consumers some other offerings that are at lower prices. Are there any behavioral changes you're seeing from those customers? Carlos Abrams-Rivera: So let me take that. I would say, so far, what we're seeing from private label is that they're actually increasing their prices in line with the branded players. The reality is the cost escalating for everyone. And in terms of Kraft Heinz, I mean, what I'll tell you is that we are stronger today than we have been in the past in 4 specific areas. One, we actually have relatively low private label exposure. So today, we're about 11% of the portfolio exposed to private label versus 17% just a couple of years ago. And if you think about that number of 11% versus an industry average of about 20%, it certainly puts us in an advantage situation. We're also making sure that we are launching products that are differentiated at each round of the price ladder. So whether it's entry to mainstream to premium, so that consumers can stay with our franchise as their circumstances may change. Whether it's a -- in a blue box Mac & Cheese to an Easy Mac, they have something to come into and stay with our icon brands. And we also continue to improve the product design so that we can offer better value for the money and greater ingredient flexibility, less waste and lower production cost and actually, you'll see that in our marketing also as we go forward. And then finally, we're also leveraging the breadth of our portfolio across categories so that we can provide comprehensive occasion-based solutions that the whole family can enjoy. So we are in a very good place right now in terms of our exposures, and we are seeing kind of a private label being affected by the same way that we have. Ken Goldman: And then a quick follow-up for Andre. Andre, you mentioned that as inflation plateaus, you expect to see your margin percentage rebound. I understand that futures curves are volatile, but is there an estimate you have for when you expect your gross inflation, including hedges to have peaked? Might we be a little bit closer to that than maybe, some bears you're thinking about? Andre Maciel: Thanks for the question. As we said before, we have been taking actions consistently to protect our margin dollars at this point. right? And we want to maintain our ability to invest in the business, as Miguel and Carlos pointed out, what is critical to us. The current percentage margin is lower than our run rate, I can tell you that, and we expect those margins to recover as costs stabilize and the price realization comes through, as re-pricing at our last batch of inflation like the whole market is. So it recovers over time. Remember as well that beyond the short term, our adjusted EBITDA margin evolution, this should remain consistent to the strategy that I have outlined before, which is to have better gross margins from variable cost efficiencies, stronger pricing mix, and that will help us to fund high investments in brands, people and capabilities. So that's what we are seeking here. So even though I cannot go to a specific time or when we are going to recover the percentage margin, that should happen over time, okay? So if you look at the pre-pandemic levels, we were in the 24% range. So… Chris Jakubik: If we can take, maybe, one more question. Operator: Our next question comes from Robert Moskow of Credit Suisse. Robert Moskow: Thanks for the question. And Chris, I congratulate you, and I'm jealous of you also. But I guess, my question here is, can you drill down a little bit more into -- I think the comment was that your production volume will be up 10% versus a year ago. But this is an environment where there's a lot of unknowns about elasticity. And I think a lot of your peers are expecting elasticity to really accelerate by the end of the year. So can you give me a sense as to what that 10% increase really means? And is it contingent upon what you see in the demand environment, obviously? Carlos Abrams-Rivera: Well, thank you for your question, and I think we're all jealous of Chris, by the way. What I will tell you is that we expect an increase in elasticity going forward closer to historical levels. So prices are -- everything is on the way up, and we know that most of the stimulus is gone. Now, today, we're seeing that elasticity is running about 30% to 40% below historical levels. Now, the reason we're confident about our production is that we are also growing consumption sequentially as we rebuild retail inventory levels. So understand that we are actually making the advancements, again, many of the supply chain challenges that today, are actually holding back our market share performance. That's why as we think about the Q1 production up 10%, it is to support the rebuilding that inventory levels that have been still below our historical levels. And that we feel confident about us continues into that kind of level of support. Andre Maciel: And Rob, just to add to that. So to be clear, right? So the production in Q1 was 10%. It doesn't mean that we definitely go up 10%. We are just now ramping up production to rebuild the inventory levels at the retail and in our warehouses, okay? So we are not changing our inventory policy for the future. We just did to get to that level. Robert Moskow: Okay. So if you're not saying that production is going to be up 10% throughout the year. I thought that was what the comment meant. Carlos Abrams-Rivera: Well, it's 10% in Q1. Robert Moskow: Right, just Q1. Okay. Last question. If volume continues to kind of be down in this, like, 4%, 5% kind of range, I think that's what your U.S. retail volume was down. Does that do anything to your fixed cost leverage at the end of the year? Or is there just going to be so much pricing it doesn't really matter what happens to the fixed cost leverage? Carlos Abrams-Rivera: Look, we -- I think that's where the inventory review discussion comes from, right, which is important. Because we are rebuilding inventories right now. So despite the volumes are being down, we still need to produce a lot to recover the inventory level. So we don't expect any relevant impact from fixed COGS in this fiscal year. Operator: Our last question comes from Chris Growe with Stifel. ChrisGrowe: Thank you. And Chris, congratulations to you. Just thinking, 68 or so earnings reports over those 17 years. So it's kind of crazy when you put it in those terms. I just want to ask a quick question, if I could, on the supply constraints to your volume. You outlined it in a chart, like a 50 basis point market share decline as a result of those factors. How much of a revenue burden was that in the quarter, if you can say that? Carlos Abrams-Rivera: The pause means that it's difficult to kind of back into that right now, Chris. I think from the perspective of kind of rebuilding the inventories and then, netted against some of the supply constraints and how that translated through the shelf, in addition to the Easter shift, there's a lot of variables moving through that. So that's something we'll have to try to circle back to you. Chris Growe: Fair enough. No problem. Go ahead. Andre Maciel: It's a low single-digit impact, right, to revenue. But I think that the important thing is that we said in the last call, we expect it to continue to lose market share, but we expect it to improve, and we did, right? And we did it in the places where we said we would, which is mostly coming from the places where we have like a big constraint at the end of last year. And our perspective is to continue to improve the trend moving forward as the service level recovers. Chris Growe: Okay. And just one other quick follow-on would be in relation to pricing. You had more pricing coming through in the second quarter. When you account for that pricing along with -- you've got a lot of productivity savings as well, do you believe this pricing, along with the productivity savings would be enough to offset inflation once it's in place? Are you going to sort of be caught up now with the level of inflation based on the pricing you have currently announced? Andre Maciel: We expect -- We have been taking actions with the inflation that we have seen. And in the guidance that you have provided, we are already contemplating the inflation that we are seeing even in the forward curves, which, by the way, they have been increasing a little bit since the peak. So our -- as of right now, in the graphs provided to you, our price year-over-year will be ahead of inflation. Obviously, we are still catching up a little bit with the inflation that starts to rise at the end of last year, but on a year-over-year base, our price will be ahead of inflation. Chris Growe: Okay. Okay. Thank you for that color. ChrisJakubik: Great. Well, thanks, everybody, for joining us today. Let me turn it back to Miguel for a couple of closing remarks. Miguel Patricio: I opened today's call saying that it's a very exciting time to be at Kraft Heinz, and let me tell you why we think that way. First, we are very proud because we've been able to navigate through all the uncertainties over the last 2 years, at the same time that we are building a much better tomorrow. And that's not easy in moments like this. We are a very company -- in a very different company today. We are much more growth-oriented. We have improved our portfolio mix, and today, just the platforms where we are working, and we have focused, Taste Elevation is about 30% of our business today. It's big and growing, and profitable. And just to put it in perspective, it's bigger and more profitable than McCormick, just to give you an example. We have consistent double-digit net sales growth in emerging markets. Our business in foodservice is strong and growing. And we are investing more in marketing in our brands and doing a much better job, so really, the profile in terms of growth is very different. From an efficiency standpoint, I think that we are in a much better place, not only because of the $2 billion that we talked about 3 years ago, when we delivered last year and the previous year on gross savings and supply, but efficiencies across the board, I mean, from marketing to distribution and these partnerships now with technology companies that will help us accelerate these efficiencies. Finally, I think that we have a very different situation from a financial flexibility standpoint. With the discipline we had in the last 2 years, put us back in investment grade, and in a record time, just in 2 years. And going forward, we will continue generating free cash flow conversion at a rate of 100%, and we'll look to acquire business and capabilities that can be much more powerful when combined with the scale of our portfolio. All is, of course, with a lot of discipline in pricing. So that's why it's exciting to be at this moment working at Kraft Heinz. Thank you. Andre Maciel: Thank you, Chris. Thank you, Chris. You're pretty good. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Operator: Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Fourth Quarter Results Conference Call. [Operator Instructions] Please be advised today's conference may be recorded. [Operator Instructions] I'd now like to hand the conference over to Chris Jakubik, Head of Global Investor Relations. Please go ahead. Chris Jakubik: Thank you, and hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at The Kraft Heinz Company, and welcome to our Q&A session for our fourth quarter 2021 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call, and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted on ir.kraftheinzcompany.com. With that, let's take your questions. Operator: [Operator Instructions] Our first question comes from Bryan Spillane with Bank of America. Bryan Spillane: 2 questions for me. The first one for Miguel. Just given how fluid the environment is using, I guess, Paolo's words and just the macro pressures that we're seeing in the market, how has that impacted your ability to execute? And are you not executing as an organization, I guess, up to or as well as you would like, just given all the pressure? Miguel Patricio: Bryan, thanks for the question. I mean, the macro pressures that you are mentioning, they've been here for a while now. And at the beginning, it was hard to adapt. But I think that this is the new normal, and we are absolutely embracing the change of the macro pressures every day. I'm personally very confident about the path forward. First, because of our people. We have today a great team, a very engaged and with a low turnover, which is very different from 2.5 years ago. Our business is growing and we've been relatively strong when we talk about gross margins despite the inflation that we are seeing, which in a way has enabled us to keep investing in our brands, and our cash flow and balance sheet is almost much, much stronger than 2 years ago. Now moving forward, I think that what we have to do is even to accelerate the path and the speed to accelerate profitable growth and unlock greater efficiencies. But on that one, I will leave for the CAGNY for us to speak a little bit more next week. Thank you for the question, Bryan. Bryan Spillane: All right. And then, Paulo, I wanted to just ask if you could give us a little bit more help with phasing for the year. And I guess more specifically, as we're looking at the first half, are there anything we should consider? I guess we're thinking about first quarter versus second quarter in terms of, I don't know, is inflation more pronounced earlier in the year, the impact of pricing to help offset inflation like how that flows? And also in the prepared remarks, you talked a bit about or there was some discussion about supply chain. So are some of the supply chain disruptions may be more pronounced earlier in the year or earlier in the first half than the back half. So just any help you can give us in terms of the shape of the quarters would be really helpful. Paulo Basilio: Sure, Bryan. So if -- stepping back a little bit, like we closed 2021 very strong. Our EBITDA was $6.37 billion. And in this number, we had approximately $400 million of divested business, okay? So we start from there. We are going to see -- we are expecting to see the benefit of our sales growth, the combination of pricing plus efficiencies that we have in our plan, mitigating the inflation, the higher inflation that we are seeing. And also we expect some headwind from volume mix, and we are assuming a more conservative levels of consumption and elasticities as the stimulus and government support states, okay? And again, as you said, we are expecting closer to 47, 53, H1, H2, and this reflects where we are currently on the inflation versus the price curve that we are implementing. Also, the recovery, as you mentioned, of the supply chain constraints that we have that we expect this to improve through the first half. There is also here in terms of the curve, we are going to have this year 53rd week that will benefit our Q4 in the magnitude of $60 million to $70 million. That's what we're expecting. And in terms of inside the first half between Q1 and Q2, we expect Q1 to be softer in relation to Q2 because of the timing of Easter shipments that we're going to have this year and also the timing that we are executing our pricing. Operator: Our next question comes from Andrew Lazar with Barclays. Andrew Lazar: I was hoping to get a bit more clarity on the various buckets you broke out in the prepared remarks with respect to the supply chain constraints and market share. Maybe could you be a bit more specific on sort of what the one-time issues were in the fourth quarter and why you've got visibility to this being fixed by the end of Q1. Is the second bucket you mentioned of supply constraints simply demand outstripping supply and not necessarily execution-related? And then the third bucket, I assume are brands that are losing share for other reasons than supply constraints. So maybe if you can just sort of give us a little more clarity on those 3 buckets, that would be really helpful. Carlos Abrams-Rivera: Thank you, Andrew, and it's Carlos and I'm happy to take it. So as you said in the prepared remarks, I broke this out, but let me give you a little more color on each of those. So firstly, the 40% of our share loss in Q4 was, as you said, was due to one-time supply and similar challenges. And what I mean by that, it seems like we saw in places where Philadelphia Cream Cheese, for example, given some packages issues that we had that we know what happened. Those are related more to whether with packaging materials in the case of Cream Cheese, whether it was labor in case of Oscar Mayer Bacon, so we have visibility on those, and we know that we are able to actually come back and recover in Q1. The second bucket is around the 30% that was really due to more -- think of those as more production constraints that we actually expect to resolve in the first half to exit them in a good place as we end Q2. And those are things where the actual production was driving the constraint. So think of those as Heinz Gravy where capacity is limited, and we were able -- but we are now doing things in order to free capacity to work service the high demand that we're seeing, whether that was in places like launchables where we have some ongoing labor constraints that we are solving and we'll be able to, again, execute to in a much better way. And then the third bucket, in some essentially is they are in categories and frankly, they're tilted towards growth in categories where we're actually looking to implement new game plans this year. And think of those essentially as new creative ways in which we can deliver a strong demand. And when you put it all together, I can tell you that we have the clear visibility on what needs to be done, and we actually have clear actions as well to make sure it happens. So we feel very good as we exit both Q1 and Q2 to recover this. So thank you. Operator: Our next question comes from Chris Growe with Stifel. Chris Growe: I just had a quick question for you to understand, and I think this kind of follows on your answer there, Carlos, on Andrew's question. The production constraints you had, I think you said like 30% of the share losses. Can you help quantify like what that -- how much that weighed on sales, what the listing opportunity was in the quarter? And then I also -- I'm just curious around that. You did talk about in your prepared remarks -- the pre-recorded remarks about a real focus on market share in 2022. So I just want to get a better sense of kind of your expectations there and then how that could affect, say, volume and pricing and promotional efforts, that kind of thing, for the coming year? Carlos Abrams-Rivera: First of all, thank you for the question. I would say I think it's a little bit difficult to quantify the share to the volume. What I can tell you is those are in the last 30%, those are categories, again, that we continue to see opportunity for us to service the consumer demand in a stronger way. So we have something that is focused for us. And we are -- the reality is that we have been -- we are actually thinking through very creative ways in which we can actually satisfy that demand going forward. And to your point around our focus on share, absolutely. For us, it's something that we as a company take very seriously. We mentioned the fact that we have great bright spots within our business, big iconic brands that have been growing quite a bit of share. But as we think about going forward, we want to make sure that it's consistently across our businesses and us being able to deal with recovery, both in Q1 and Q2 as we exit the first half is going to help us actually continue to grow in that perspective. Chris Growe: If I could just add any -- sorry, go ahead. Carlos Abrams-Rivera: Please. No, go ahead. Chris Growe: Okay. Just real quickly just at many times a focus on market share can imply heavier promotional spending or those kinds of things. It sounds like you've got more new product innovation, those advertising, those kind of consumer pull more than a consumer push to generate that market share. Is that fair to say? Carlos Abrams-Rivera: Listen, I think for me, whenever I talk about market share, think of it as profitable market share. I've been working in food company for a number of years. And there is no substitute to make sure that we -- whenever we think about market share, it has to be done in a proper way. We have to make sure we do -- everything that we do is with a consumer-first approach to make sure we, in fact, bringing consumer solutions, whether that is location-based, in-store and online, we'll always focus on making sure that it's done with a drive on profitable market share growth. Operator: Our next question comes from Alexia Howard with Bernstein. Alexia Howard: Can we ask about what came through better than expected in the fourth quarter. When you reported at the end of October, you were talking about adjusted EBITDA, I think, in the $6.1 billion to $6.2 billion range, and it came through at $6.4 billion. That's a big step-up for the last couple of months of the year. So could you just walk us through what the positive surprises were and whether those are likely to continue? Paulo Basilio: I think -- Alexia, Paulo here. I think I can take this one. I think we saw -- we were able to, even with many constraints, we were able to produce better. It's fair to say that if we're able to -- if we had more capacity, would have sold even more, but we were able to operate in terms of volume and capacity better than we planned. And also our promotion strategy came in better than we promoted less than we were expecting initially. I think those 2 areas together with over-delivering in terms of efficiencies, I would add to this third point were the main factors to our strong performance in the fourth quarter. Operator: Our next question comes from Rob Dickerson with Jefferies. Rob Dickerson: Just a question and the commentary around expected stronger consumption in '22. Obviously, that's despite higher pricing and you said you're being somewhat conservative, it sounds like on the volume side as you look to your internal forecast. I'm just curious, when you come up with those forecasts, as we think about like back half of the year, is the feel that you might just be a little bit better positioned given price points, maybe a little bit more -- or let's say, better position with respect to trade down risk? I'm just trying to get a sense as to why you think consumption would actually be up at least in the at-home channel. And then I have a quick follow-up. Paulo Basilio: Right. I can start here and maybe Carlos can complement if he feels the need. What we have embedded in our outlook is that we are -- again, we are going to -- we expect, as we said, low single-digit organic sales growth in this year with greater contribution from the growth platforms that we have. Our foodservice channel is also recovering and gaining share in all the emerging markets performance and our continued strong performance through distribution. And also, as I was mentioning before, some relief of the key supply chain constraints that -- as the year progresses. But we -- as we were discussing, we also are embedded in our forecast, in our expectation, some headwinds in volume and in fact, in volume '22 because we are taking into consideration the fact that we are going to be having stems from the government support that happened and also a more conservative levels of elasticity than we saw before. But net-net, so that is that we are -- we have assumptions that are more conservative in terms of elasticity and consumption that we're seeing today, but we think it is the appropriate way to go in our outlook. Carlos Abrams-Rivera: Yes. The one thing, I guess, I would add to what Paulo just said is that as we're doing that, we also continue to make investments to make sure we improve our brand value proposition. And we're doing that through renovation of our brands, driving disruptive innovation and continue to service new occasion-based solutions, whether that's for in-store, online for today's consumers' needs. So that continues even as we are continuing to progress throughout the year. Thanks for the question. Rob Dickerson: Super. And then very quickly, Paulo, you've done a very nice job of improving your leverage positioning at the end of the year still with a decent cash balance. Should we just be thinking as you go forward that kind of use of cash would either be for kind of smaller add-on acquisitions or just kind of an ongoing deleverage cycle as you get through '22? That's it. Paulo Basilio: Sure. We -- our leverage target is below 4x, and we are well below that level today. And we expect to remain consistently below that going forward. Just want to highlight 1 point here, investment grade for us remains really strategically important and we have enough flexibility today in our balance sheet, in our capital structure to continue to evaluate opportunities to accelerate our strategy in an accretive way and with price discipline. But we are really closing now the way that we are today in terms of flexibility in the balance sheet that we have we feel the company in a very strong position. Operator: Our next question comes from Pamela Kaufman with Morgan Stanley. Pamela Kaufman: Can you comment on where overall inflation came in for 2021? And what assumption you're making for inflation in '22? And then I guess, just how much of your costs are covered for the year and what your visibility is on the cost outlook? Paulo Basilio: Sure. So let me take that. Our Q4 inflation were higher than we expected in our October call. We ended up like with a low double digit. But for 2022, we are likely to see or expecting today near inflation of low teens for the full year, okay? And we expect this inflation to be higher in the first half than in the second half. And just to complement the -- by the end of next -- last year in '21, we took the necessary actions to mitigate the inflation we were seeing. And since then, more inflation has come and we are taking these additional actions as we've been discussing. And we are -- when you look about -- in terms of our hedging position, we normally hedge -- although we hedge a more significant part of the commodities, when you talk about our total COGS, we only hedge around 20% to 30% of the COGS. So -- because there are a lot of other costs that are not only commodities in our cost. So again, that is the range that we have ahead. So it's not material when we have a situation that we're having today that we are seeing inflation in pretty much all the lines of our COGS. Operator: Our next question comes from Ken Goldman with JPMorgan. Ken Goldman: I'm curious in your guidance for 2022, how much does the outlook require or bake in, I guess, what I would consider rational behavior from your competitors? In other words, are there any assumptions that as the consumer maybe gets a little bit more stretched as prices rise a little bit as some of your competitors also add to their capacity. Is there any expectation built in that there might be -- yes, you talked about elasticity certainly being there, but maybe a little bit more of an aggressive stance from some of your rivals. I'm just trying to get a sense for what's baked in. Carlos Abrams-Rivera: The other thing, I think that -- I'm not going to comment on what they're doing, how they're going to run their business. So let me tell you a little bit about how I see our business and why I feel good about the way kind of we think about us going forward. For us, the important thing is to make sure we continue to stay investing it in a differentiated portfolio. And we're doing this because we actually are able to provide consumers whether it's an entry into the category, a mainstream product or premium products, consumers actually have a way in which to acquire product from Kraft Heinz. And you see that in places like Mac & Cheese, where it goes from an Easy Mac to the original version of Mac & Cheese. We also are continuing to strengthen our portfolio because, as you know, we have made some important divestitures that really have reduced kind of our exposures to private label and other places where historically have been more competitive. In fact, we've gone from 17% of exposure to private label to now 11, which -- and I think its industry average is around 20%. So we also -- we only -- we are making investments. We have a place in which consumers can come into the category. We're less exposed to historically private level businesses. And we continue to make sure we're offering great quality products at prices that consumers can afford. So we are focused on making sure that everything we're doing is around delivering great value, meaning quality products and a way that is accessible to consumers. That's what we're focused here in Kraft Heinz. Ken Goldman: Makes sense. And then very quickly -- Paulo, thank you. For the gross margin, the Street is modeling a pretty flattish figure in 2022 versus '21. Recognizing you don't provide specific guidance for this line item, just directionally, I guess, is it fair to say that gross margin is more likely to be down than flat? Just especially in light of, I guess, your reminder this morning that in the context of inflation, you're aiming to recapture gross profit dollars, not necessarily percentages? Paulo Basilio: Yes. Listen, when you think about as costs stabilize and price realization and efficiencies continue, our margin percentage here will normalize, okay? As we have mentioned before, we are expecting lower run rate margin percentage levels in the beginning of this year and our actions are to protect the dollar profitability. So we are protecting the dollar margin year-over-year. That's how we are thinking here. Operator: Our next question comes from Steve Powers with Deutsche Bank. Steve Powers: Yes. Following up on the topic of elasticity, I just wonder if you could provide any more context in terms of your assumptions for the coming year in that regard. And really, any variation you're thinking about and we should be thinking about, about how elasticity is anticipated to maybe very across your platforms or across your geographic regions? Carlos Abrams-Rivera: I think, I'm guessing that you're referring mostly to our U.S. business. So let me just take that up first. I think so far, and Paulo spoke to this a little bit earlier, other expectation for elasticity have proven to be conservative. So as we go forward, we're expecting some of those more, I would say, normal levels of elasticity to impact in 2022. And just to be clear, our outlook contemplates both those elevated levels of elasticity and the continued investments on our brand value proposition. Now when you look at overall kind of how the way we look at the business is that demand really has remained pretty much intact. So the inflation, which is, as you know, being broad-based and not specific to one category is really kind of impacting everywhere similarly. Now if you look at it deeper, personal spending on food has been more stable than disposable income or even discretionary spending over time. And if you go even further, when you look at Kraft Heinz specifically, the reality is that we have, as I said earlier, quality products in categories in which we can compete at a price that is affordable to consumers. I mean just to give you a sense, I mean, when you think about Kraft Mac & Cheese, Blue Box is about $0.50 per serving. If you think about Oscar Mayer hot dogs, it's about $0.25 a piece. If you think about Heinz Ketchup, it's about $0.10 an ounce. So those are things that we continue to feel strong about because we have a way in which to create great quality products in a way that consumers can afford. But we're also taking more actions than that. We also are using our designed to value to make sure that we're thinking around how do we boost quality in our products while reducing cost, essentially making sure that we give consumers exactly what they're looking for and not the things they don't need. And lastly, we're also making sure that we're investing in better creative and communication so that we have, in fact, stronger relevance of our brands that actually are helping us make sure that we continue to drive better renovations, innovations in a way that matters to what consumers are looking for today. Steve Powers: Okay. Great. If I could follow up on a different topic actually. There’s a good deal of discussion about your strategy to expand and drive growth in emerging markets. And I guess as we think about the strategic investments that you’ve embedded in the ‘22 plan. Can you just talk about the sort of the allocation of those investments in your developed markets versus your emerging markets? And just how much of an accelerated push towards the emerging markets you’re thinking about and we should be thinking about as it relates to the new year? Rafael Oliveira: Maybe I can take it here, it’s Rafa speaking. Look, we continue to be very optimistic of our strategy we focus on emerging markets, right, on Taste Elevation. And – I mean, we continue to expect double-digit organic growth, further gains of market share in the future and leveraging our repeatable go-to-market model. I mean this has been live in about 30% of the countries we operate today in emerging markets, and we look to continue growing this and boosting our go-to-market for the -- in 2022. So I mean, the strategy remains the same. We’ll play the – as we’ve been doing, we did 4 acquisitions in 2021 and add-ons in different markets that enable us to expand within our Taste Elevation focus in specific countries that we see a big opportunity for growth. So that strategy should remain is paying off and we will continue. A –Miguel Patricio: And Rafael, I would just add that the engine for growth in these emerging markets is really the brand Heinz that is an unbelievable shape and getting better every day from a consumer standpoint, which gives us a lot of opportunities for growth to expand Heinz further, not only Ketchup, but other products. So emerging markets will continue being a great engine of our growth. Operator: That concludes today's question-and-answer session. I'd like to pass the call back to Chris Jakubik for closing remarks. Chris Jakubik: Well, thanks, everyone, for joining us today. For follow-up questions, myself and the rest of the IR team will be available for any additional questions. But thanks again for joining us today, and we'll see you at CAGNY next week. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: Thank you for standing by. Welcome to The Kraft Heinz Company's Third Quarter 2021 results conference call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised today's conference may be recorded. [Operator Instructions]. I would now like to hand the conference over to your host today, Chris Jakubik, Head of Global Investor Relations. Please go ahead. Chris Jakubik: Thank you. And hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at The Kraft Heinz Company, and welcome to our Q&A session for our third quarter 2021 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties and these are discussed in our earnings release and our filings with the SEC. We will also discuss the non-GAAP financial measures today during the call. And these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at ir.kraftheinzcompany.com. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio, for a few quick opening comments. Miguel Patricio: Well, thank you Chris, and good morning everyone. I would just like to start by sharing how encouraging it is for us to see our Company leaning into a scale and agility that we have been talking about for some time, addressing short-term challenges at the same time that we are building the long-term advantage. We are today a much stronger Company and we are better positioned to address inflation that we're seeing. We are taking actions now to protect profitability through 2022 and our actions, and not just branching, we are also implementing price pack architecture, value-engineering, and leveraging our scaling procurement. At the same time, our team has continued transforming our business for long-term growth and advantage. Our momentum with the consumer is strong, and our consumer-focused platform-based approach is taking us to new occasions. We continue to invest, to improve relevance of our brands. They are making greater, more creative marketing investments. And at the same time, we are building agility that will deliver the 2 billion of gross efficiencies and looking to unlock more. We are continuing to pay down debt and improve our net leverage. And we continue to invest in our most important assets, our people. And as we mentioned in our remarks, we have done all of these while delivering better 2021 results than previously expected, which speaks to the strength of our business. Well, with that, let's take your questions. Operator: Thank you. [Operator Instructions]. And our first question comes from the line of Andrew Lazar with Barclays. Your line is open. Please go ahead. Andrew Lazar: Great. Thanks so much. My question is actually for Rafa, if I could. We've been taking a look at some Nielsen trends and some key food categories in the U.S. and Western Europe. And while consumption obviously in the U.S. has certainly remained elevated, trends at least in some categories in Europe seems to be decelerating meaningfully, or I guess normalizing is a better word for it as those markets reopen at a faster pace than what we've seen here in the U.S. So I'm curious if KHC is seeing this dynamic play out at all for the Company, and if you see maybe certain trends in Europe as a fair leading indicator of what's to come in the U.S. around stickiness of demand. Or if maybe there are some differences suggesting that not a great set of data points to necessarily use to compare. Thanks so much. Rafael Oliveira: Hi, Andrew. Rafa, here. Thanks for the question. From an overall market perspective in Western Europe, we have seen indeed more of a return to pre -pandemic consumption patterns than in other developed markets. That said, there is quite a bit per category, and we are seeing much greater stickiness in our base elevation platforms as the consumers continue to look to us to elevate their views. And this is quite positive to be honest to us, because if you recall, we have three key pillars on our international growth strategy and our base elevation platform, emerging markets and food service channel. So these demand stickiness in base elevation, and we will continue to see favorable levels of consumption, growth, and absolute terms on the platform. And we do the best when we are focusing at. So we continue to see this elevation demand sustaining. And in food service in particular, Western Europe is rebounding very fast. It is approaching 2019 levels. And on top of this, I agree we've been gaining a lot of share in almost every market in -- we operate in food service, so is another strength. As I said, overall, it's true is most of the market is coming back to pre -pandemic. In some platforms, they continue to be very strong and that has played out favorably for us, this elevation. Andrew Lazar: Great. Thanks very much. Operator: Thank you. Our next question comes from the line of Jason English with Goldman Sachs. Your line is open. Please go ahead. Jason English: Thanks, folks. Appreciate you slotting me in. I guess I'll lean into price a little bit. You reiterated the comment today that during the prepared remarks that you expect the price to catch up with costs by the end of the year. Can you confirm that that's not just ingredient costs, but that's sort of the total supply chain pressure? And then looking at slide 8, is it fair to look at that as a price index? So, to say you came into the year with the index around 103 and you plan to exit a bit north of 106, you'd be carrying around 3 points of price into next year, or is that 106 a bit of an average and the real exit rates closer to 107 or 108? Thanks. Paulo Basilio: Hi, Jason, I'm Paulo, here. Let me try to help with this question. We expect to see similar level of inflation at the beginning of '22 as we are seeing now in the second half of '21. Most of the inflation that we're going to see is carried over for '21. We expect to enter '22 having executed the price plan that protects our profitability from current levels of cost. Current levels of cost that we're seeing now. And this should address the inflation that's expected in '22. So we are seeing our execution of pricing, protecting our profitability given the cost levels that we're seeing now and this should protect our profitability when we're entering into '22. Jason English: So we're probably looking at something closer to a mid-single-digit pricing as we enter next year if you're carrying high single-digits percent of COGS. That's just that the math on that. Is that unreasonable? Paulo Basilio: Listen, I don't want to get into the actual forecasting of pricing but I can tell you that the actions that we're taking now will protect the inflation that we're seeing, and it will protect our profitability from these inflation that we're seeing in the current cost levels. And this could put us in a good position to enter 2022. Jason English: Okay. Miguel Patricio: Just complementing what Paulo is saying. I think that if eventually more inflation terms, well we'll have to take action. Jason English: Sure. It makes sense. And congrats on the pricing success so far. It's better than I expected. Miguel Patricio: Thank you. Chris Jakubik: Thanks, Jason. Operator: Thank you. And our next question comes from the line of Pamela Kaufman with Morgan Stanley. Your line is open. Please go ahead. Pamela Kaufman: Hi. Good morning. Miguel Patricio: Morning. Pamela Kaufman: Can you elaborate on what drove the sequential softening in market share trends that you highlighted? Has that primarily been driven by the capacity constraints or have there been other competitive dynamics contributing to the share performance? And then how are you addressing the capacity constraints that you highlighted, and I guess, what do you see is driving improved share performance going forward? Rafael Oliveira: Thank you Pamela (ph) for the question. I imagine a lot of those questions you had there, I think there were 3 I counted, but they were related to the U.S. so I'll take it. I guess for me I will say, yes, first of all, the way I think about the business is we want to make sure we continue to drive household penetration and repeat rates, which we are doing. And while there were some short-term share pressures, and during the back-to-school as really their demand really out grew in our capacity in a few categories, over the long term effect that we are driving household penetration and repeat rates shows the strength of our portfolio interest of our business on how we are actually managed through all that. Miguel Patricio: But I will say yes to that. I'm very much focused on making sure that we win by maximizing the controls. And our recipe for winning is to be essentially consistent with focus on solidifying the consumer needs better than anyone else, and it doesn't matter exactly what's happening at this particular moment. As we go forward, I'd tell you, I see three specific advantage that for us it's going to be a play which we're going to win. We have continued to renovate our portfolio, we have controlled the cost in our brands so that we can optimize the value with our -- for our consumers and really that is the best recipe for us to withstand against any competition that comes in. And essentially what we are doing -- we're increasing the equation of what it's worth buying for at the shelf. The second event is where we have also -- we're making sure that we are differentiated at each rung of the price ladder, whether its entry to mainstream to premium so that consumers can stay within our franchise even if their circumstances might change. And if you think about Mac and Cheese, we've got everywhere from an easy mac to the original version for consumers. And then the third piece I will say is we are transforming our portfolio through all these divestitures that actually have a significantly reduce our private level exposure. So we have continued to renovate and manage our costs. We have continued to bring -- making sure that we have differentiated products within our categories no matter where the frequent consumers are. And we have a private -- we have a portfolio that is mostly going to reduce this private label. And frankly, we continue to see opportunities to capture profitable growth focusing on our consumer platforms. So we are executing with excellence and leveraging this broad renovation, the innovation, and the rest is creating that our teams are doing. I think, Pamela, you also spoke a part of your question within other supply chain constraints that we're seeing. I think the way I would look at it is, across the industry we're seeing a supply chain that is being tested on a daily basis. And what I will say is our supplying chain team has been very agile, taking advantage of our global scale. We're showing agility in labor, in manufacturing in logistics and I will give you some examples of what I mean. We are reducing the amount of time to hire and significantly increase the applicant pool by leveraging new digital tools at Kraft Heinz. We are improving the flexibility in terms of the materials that are available with a reeling ownership mindset across sales, procurement, and manufacturing. Carlos Abrams Rivera: And those things will change in our plans, 39 of them across the U.S. sometimes on a weekly basis. And then, in logistics we've actually increased the throughput on warehouses by shifting more of how we operate 24/7 and increasing the automations since the pre -pandemic time. So having said that, I will tell you that we do have a good line of sight of continue to improve our customer service levels as we move forward. And because frankly, restoring the top-tier customer service to the pre-pandemic level is a continued focus for us and the entire team. And thanks for your question, Pamela. Miguel Patricio: You also asked about moving forward in terms of capacity. On top of everything that the Carlos is saying, I just to add to that, we have been adding capacity. We increased substantially Heinz ketchup capacity, Mac and Cheese, on frozen snacks, [Indiscernible] max and bagel bites, on crops of cucumbers, on meal, and on kid's juices. So it's -- this investment in capacities is a great proof on our belief about the demand for our products in the future. Pamela Kaufman: Thank you. Very helpful. Operator: Thank you. And our next question comes from the line of Bryan Spillane with Bank of America. Your line is open. Please, go ahead. Bryan Spillane: Hi, thanks, Operator. Good morning, everyone. So my question is, I guess, tied to some of the themes here, just in terms of inflation and pricing and margins. Maybe if we could just step back pre all of this inflation and pre -COVID, there was a transformation in your supply chain in which that work had started. We look at gross margins or profitability of the gross profit line, and you've held up pretty well, relative to your peers; if anything, probably a little bit better. I guess as we're thinking about profitability going forward, knowing that there's some pricing that's coming through to cover inflation. But how much are you also still benefiting incrementally from some of the supply chain work you've done, and how much of that is going to be also a contributor to helping to offset all of the inflation and supply chain disruptions? Paulo Basilio: Let me start here and then we can maybe build -- someone else here can put -- build on top of my answer. What you said is true. When we come back to when the time that in 2019 when we close our strategy beginning of 2020, the -- we were very focused on improving our gross profit overtime. And in order to do that, we developed on many programs in terms of efficiencies in supply chain, in terms of focusing on these -- also pricing. A new pricing strategy and revenue management strategy and this is taking place. You can see that today with all the inflationary pressure that we're seeing in the gap that we're having between the pricing realization and the cost inflation, we're keeping the gross profit margin, the same level that we had pre -pandemic. And this gives us a lot of confidence in our brand going forward. So I will say that our strategy to improve profitability, to gross profit margin is working. Carlos Abrams Rivera: What I would add to and think about our overall progress in our transformation, in -- both in terms of some of the things that you heard from Miguel earlier. We are in fact, making a significant portion on fast-track in critical projects on our capacity. So as Miguel give you some examples, I will give you a couple of more, which is if you think about ketchup, the fact that in Heinz dip and squeeze kind of shares a small package, we have nearly doubled our capacity and by the end of next year, if you think about Mac and Cheese, by the second half of next year, we've actually increased about 20% of our cups' capacity and even in Frozen snacks, by -- also by second half of next year, we will have increased about a third our capacity in areas like daily mix. And so both across -- this are some of the examples of things that we saw earlier in the pandemic. We made fast-tracking of projects and we continue to do that, more work to do ahead. The other way I look at it is in terms of our -- how do we make sure we get more of our utilization of our assets and for me, things like improving our OEE, which we have now done '20 versus '21, and -- I'm sorry, '20 versus '19, '21 versus '20. It is also the way that we're going to continue to make sure that as we go forward, we attack in both ways, making sure that we are being smart about investing in our capacity. And we're getting more of our assets through improvements in our OEE. Thanks for your question, Bryan. Bryan Spillane: All right. Thank you. Operator: Thank you. And our next question comes from the line of Robert Moskow with Credit Suisse. Your line is open. Please go ahead. Robert Moskow: Hi, thanks. I just wanted to try to square the outlook for 2022 slide with your comments about pricing catching up to costs. Because if pricing is really catching up the cost that would imply that your EBITDA growth on a core basis divestitures should be able to grow in 2022. So if you're confident enough that the pricing is really catching up, why not take the extra step and, and talk about it in your outlook? As it stands, the slide is pretty general. It says that things are going to be strong, stronger than you thought post-pandemic but I'm not quite sure it points to EBITDA growth on a core basis yet. Paulo Basilio: Hi Rob. Let me start saying that we are not providing guidance for '22 and we're not providing also at this time any outlook for '22 besides the ones that we shared. We can say that we are very confident with our bets and we're very confident about our ability to retain consumers and retain volume that we're having today. And we're also confident in our ability to sustain these strong margins that we have. We -- our focus here is to protect the margin dollars from inflation as we mentioned and again, to give you a little bit more color if you can say that, and also we shared that in Q3, and we discussed that in Q3, we have lower the rate percentage margins and we expect these margins to improve as profit realization comes. But that is as far as we'll go in 2022. We're very confident with the fact that we have -- we are in a better space. We are a better Company in a better space with stronger consumption and with confidence in our ability to price the short debt inflation that we're seeing. Robert Moskow: Okay. Well, I appreciate it. Thank you. Paulo Basilio: Thank you, Operator: Thank you. And our next question comes from the line of Chris Growe with Stifel. Your line is open. Please go ahead. Chris Growe: Hi. Good morning. I just had a question for you in relation to promotions and you've talked about how you're rebuilding promotions in your business, especially in the US. I think you talked about a normalized promotional environment. So I just want to understand, and this gets back to a degree around pricing, as you recover promotions, especially against the period a year ago where they were lower, can you achieve price realization on a net basis that offsets inflation? And maybe related to that, would that rebuilding promotion or recovering promotion continue in the first half of 2022? Maybe a bit of an offset to the pricing you're taking in retail. Carlos Abrams Rivera: So Chris, let me answer that and try to explain. I think there are a couple of things you mentioned in your question. First, let me just put into context of the transformation that we've been having here at Kraft Heinz. I mean, if you think back, a critical aspect of our transformation is a consumer first approach to all that we do so -- which essentially is why our plan is to invest behind our consumer platforms during those even t windows where actually consumers are looking to us for solutions. So if we think about the gains that we have made so far, the fact that we have continued to drive brand household penetration and repeat rate, it is exactly because we have done that. We have been able to make sure that in moments during the year that consumers are looking for those specific solutions, that we can offer, essentially, the scale of what we -- of our products in a way that satisfies their needs better than anyone else. And we have been and expect to be as we look into 2022, more active with better execution than 2020 during this critical windows, but clearly not as deep as we were in 2019. And frankly, we continued to see opportunities to capture the growth. So as we are going to move forward, we are going to remain diligent on making sure [Indiscernible] satisfies our consumer needs better than anyone else, guided by our platform and our renewed focus on making sure that again, everything we do, as far as transformation, is with that consumer-first approach. Thank you. Chris Growe: Thank you. Operator: Thank you, and our next question comes from the line of Alexia Howard with Bernstein. Your line is open, please go ahead. Alexia Howard: Good morning, everyone. Miguel Patricio: Good morning. Alexia Howard: Okay. So in your prepared remarks, you alluded to an appetite for more acquisitions in the emerging markets. I think you referenced the FM Foods and the [Indiscernible] deals that you've done so far. Can you talk a little bit about what additional or where you're focused in terms of potential future deals? Are there particular categories, particular regions that you're looking at? Can you say anything about the kind of scale of the pipeline in terms of which would you be looking just at tuck-ins or potentially something more medium sized? Thank you. and I'll pass it on. Miguel Patricio: Sure, Alexia. Maybe I can comment and then give the word to to Rafael, since he's responsible for emerging markets, among other things. We have, of course, today a portfolio that is better than we had 2 years ago and a much stronger balance sheet. And with that comes more flexibility, right? And you are right. I think that if we have opportunities for acquisitions, we'll look at them and always with price discipline. We like a lot to follow our strategy and as a consequence, taste elevation, which is the really one of the critical strategic pillar of the strategy of the international zone is in the place where we're looking for opportunities. And that helps also food service business. So yes, some business in Turkey that we acquired is the leading Company in food service. And we expect to grow to the retailers with that place in Turkey as well. And I will give the micro for the word to Rafael so he can give you more color about carriers that we're looking at. Rafael Oliveira: Yeah. No. Thank you. The reason we are so excited about Assan Foods, about Hemmer is exactly as you have said, it's all strategy. They are strong margin categories in the right countries, as you said, base elevation and emerging markets and food service, those are the pillars for our strategy and what they can enable us in the future. I mean, each of those two businesses, I mentioned Assan and Hemmer. They are just short of a 100 million each. But with Assan we will not only be able to build Heinz as a bigger brand in Turkey, but we'll have capacity to grow much faster across the Middle East. And with Hemmer, I mean, Hemmer, we have announced, but we're now waiting for regulatory approval. It will not only strengthen our distribution, especially, in the south of Brazil, being we'll be able to participate in much more the gradual ladders of the the chain within Taste Elevation. And we can really leverage their portfolio to build our scale faster in [Indiscernible] and the food service channels. So they are definitely like, again, as I said, on strategy and that's what makes it the most exciting is Taste Elevation and within the core emerging markets that we want to grow. [Indiscernible] see a lot of opportunities. Alexia Howard: Great. Thank you very much. I'll pass it on. Operator: Thank you and our next question comes from the line of Ken Goldman with JP Morgan. Your line is open, please go ahead. Ken Goldman: Hi. Good morning. A couple of U.S. based food producers, they've suffered through some worker strikes recently. I'm just curious how you're feeling about your labor relations in general at the moment. And I guess how investors should think about the risk, if there is any, of Kraft Heinz perhaps facing some incremental challenges on this front? Carlos Abrams Rivera: Okay. Thanks for your question. I'm obviously not going to speak to anybody else's business. What I will tell you is that our teams, as I mentioned earlier, have shown tremendous agility of making sure that we are in fact, continue to have a focus on engagement of our workforce. As we sit here today, what I'll tell you is that we have seen pockets of some places where we've had some labor challenges in terms of shortages, but also they will have been very much focused on a few and isolated locations. As we move forward, I am actually confident that we have been able to actually and we'll continue to manage through specific areas where there have been some isolated situations in which we have had some labor shortages. But in a way that it's actually not a concern for us on a regular basis or on an ongoing basis as we move forward. So actually, I feel very good about where we are and how we continue to manage this in an agile way. I don't -- anything else you went to build up, Miguel? Miguel Patricio: No, I think that's -- the only thing I would add is that we've been working hard to improve the engagement of the Company overall and that brings us more confidence about the possible labor issues for the future. At this moment, we don't see any risk of a strike, but that doesn't mean that that's not possible. But we are confident about that. Carlos Abrams Rivera: No, I think as Miguel said. I think we're in a good position and really feel good about our -- the way to our teams have handled it and with the agility they have shown during this really difficult time. So thank you. I think we're about out of time there. So you -- we'll end it there. Thanks everyone for joining us today and for anybody who has follow-up questions, I'll be available to take your questions and for anybody in the media, Kathy Krenger and her team will be available for your follow-ups so thanks, everyone and have a great day. Miguel Patricio: Thank you. Operator: That concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.

Operator: Good day and thank you for standing by. Welcome to The Kraft Heinz Company Second Quarter 2021 Business Update Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]. I'd now have to hand the conference over to your speaker today, Chris Jakubik (ph), Head of Investor Relations. Please go ahead. Chris Jakubik: Thank you. And hello, everyone. This is Chris Jakubik Head of Global Investor Relations at the Kraft Heinz Company and welcomes you to our Q&A session for our second quarter of 2021 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties. And these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at ir.kraftheinzcompany.com. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio for a few quick opening comments. Miguel? Miguel Patricio: Thank you, Chris, and thank you, everyone. I just like to add or summarize and tell you that we are very optimistic about how we're progressing in our transformation at Kraft Heinz. We've been taking advantage of the scale that we have, and we've been building the agility that we need to build a better business for the future. We posted sustainable top line and bottom line gains versus ‘19, and we are encouraged because the strongest growth comes from priority platforms and markets what we call the growth platforms, taste elevation, and in emerging markets. And we continue seeing retail very strong, and we are coming back with food service. It's recovering and recovering fast. Transforming Kraft Heinz is what we all have in mind. And we want to do that, maintaining industry-leading profitability. We are investing more in our brands and better as well building a much more creative Company. We are also on track to deliver the $400 million of gross efficiencies in 2021 and effectively managing inflation. At the same time, we continued strengthening our portfolio and improving financial flexibility. We're adding capacity to our products to drive, grow, and energize platforms, and in the emerging markets. We, as you know, closed the Nuts divestiture and we expect to close the Cheese divestiture in the second half of this year. Recently, we acquired Assan Foods in Turkey. It's a very small operation, but is a very important step into our strategy, because it accelerates taste elevation and is in emerging markets. And we continue to pay down debts and improve our net leverage. We continue to expect to have a very good 2021 actually to deliver a stronger 2021 than we projected when we provided our initial outlook in February, and that speaks to the strength and potential of our ongoing business. Thank you. We are now ready for your questions. Operator: [Operator instructions]. Please standby while we compile the Q&A roster. Our first question comes from the line of Chris Growe from Stifel. You may begin. Chris Growe: Hi, good morning. I just had a quick question for you, if I could please, in relation to pricing, and I was just curious if you could maybe give a little more color around the price realization and how you expect that to kind of build through the second half of the year. And just as a backdrop, as I look across your categories, in some cases Kraft's pricing is above your category, some a little below, but all-in-all, like the IRI data in the U.S. would say, you are pricing at a little slower rate than what the categories are overall. So I'm just curious if that's strategic in helping drive your share gains or if that's just timing and there's more pricing coming in the second half of the year. Thank you. Miguel Patricio: And thank you for your question. Let me start and then maybe Carlos and Paulo can give you more color on that. As I mentioned on the call, we believe that inflation in our business remains manageable. And even with inflation, we expect to deliver, as I said, a stronger 2021 than we projected before. We continue to invest in our brands at the anticipated levels to drive our transformation, and we will continue to monitor things and take further action if of course is necessary, but Carlos, maybe you can give more color on it and maybe Paulo as well. Carlos Abrams-Rivera: Sure Miguel. Thanks for the question. But first, I think I will say is in the U.S. we have said in the past is that we are proactively managing against the incremental inflation we see. And actually, we feel good about our ability to implement those actions when and where we see the need. So, if you look at inflation we saw in Q2, it is mainly coming from ingredients, things like soybeans, edible oils, packaging, and some transportation as well. And it is very similar to what we saw in the first quarter. And most recently, we also saw some increases too but driven by rising [ph] costs and some higher transportation rates. Now from a pricing perspective, as I mentioned on the call, we are restoring key promotional activations to drive the business versus the pandemic-induced pullbacks that we had in 2020. Now, as we have mentioned earlier in the year, our goal continues to be to connect with consumers that now have discovered or rediscovered our brands and drive the repeat rate among those households. So in that context and versus inflation, again we feel good about our ability to achieve the net pricing we need to offset inflation and maintain a strong household and repeat rate. Given that we are renovating our Portfolio to drive better value for consumers, improving the creative content of our marketing, and strengthening and diversifying our media impressions. What I will also add is that we're doing this primarily through four key revenue management initiatives. First, we are optimizing the frequency and depth of our promotion while we'll restore retail activation levels that I discussed in the call. Second, we're doing broad-based pricing actions, which we have announced across our Portfolio. Third, we're continuing to manage key commodity pricing. And lastly, we're using all other revenue management levers, including price pack architecture and managing category price ladders. If you look at our revenue management initiatives, they are guiding our smart trade investments so we can optimize returns on those investments and manage through the current inflationary environment. Now, in the near term, the timing of cost inflation versus price realization may lead to some degree of margin pressure, but this is reflected in an outlook, and we see net pricing and cost coming into balance as we exit the year. And then with that, let me pass it over to Paulo. Any other comments you want to add Paulo? Paulo Basilio: Sure, Carlos. I think if you want to explain inflation and pricing from a total Company perspective, so break it down first on inflation. We're going to recall that in April we said that you're expecting inflation in the mid-single-digit range as a percent of COGS, but at the lower end of that range. Since April, our costs have continued to move higher. Now, we're expecting inflation still in the mid-single-digit range for the full year, but now slightly above the midpoint of the mid-single-digit range. Regarding pricing, as we are mentioning and Carlos has just said, we are using multiple revenue management levers including lease price actions to manage inflation, but I think it's important for us to keep in mind that we are going to be facing an unusually difficult pricing comparison in the second half of last year. Just to remind, just for context last year, second half our price was more than 4% higher than the prior year as we pulled back promotion to better protect customer service. In terms of the timing and the pricing realization, while we expect the timing of the cost inflation versus price realization to soften, our margin percentage to lower than the run rate levels in the short term, I think it's important to note that all of those impacts are already considered in the outlook that we have for the year. And again, as we mentioned in the beginning, we're still expecting – we are now expecting even stronger EBITDA dollars than we anticipated before. Chris Growe: Thank you for the color. Operator: The next question comes from Alexia Howard from Bernstein. You may begin. Alexia Howard: Good morning, everyone. Paulo Basilio: Good morning. Alexia Howard: Thank you. Can I ask about the gross margin? I know that it doesn't really appear anywhere except in the formal numbers in the press release, but it looks as though it's down about 150 basis points year on year. I imagine that some of that might not be adjusted gross margin. But in a situation of such intense commodity cost pressures, as we're going through now, I am just wondering how you're expecting that to shape out in the back half of the year, possibly out into 2022. Any commentary would be much appreciated. Thank you. Paulo Basilio: Alexia, I can start here with this answer. I think yes, there are some adjustments to make in the gross margin. But when you think about year-over-year, I think we need to remember that we’re going to be left – we were lapping in Q2 a big quarter last year with the all-pantry loading that happened in the quarter. Our overall margins of the business are very healthy in these Q2. I think in the second quarter, we were able to price, and we had enough pricing to offset, pricing plus our efficiencies were more than enough to offset our inflation that we had, but we work compared to a very heavy mix that we had in the last quarter. Alexia Howard: Great. And -- and going forward, how do you expect it to change in the back-half? Paulo Basilio: Going forward what is exactly, I think the key components that we are going to see in the back half is that we are going to start to have -- and that's already embedded in our outlook. We're going to start to have the restoration of some promotions that Carlos mentioned. Also, the mix impacts that we're going to see as the year go on. And also, this timing between pricing and pricing realization and inflation will impact our gross profit, but all those impacts are already inside the outlook that we disclosed. Alexia Howard: Great. Thank you very much. I'll pass it on. Operator: Our next question comes from the line of Andrew Lazar from Barclays. You may begin. Andrew Lazar: Great. Good morning and thanks for the question. I guess obviously it's way too early to talk specifics around 2022 as we know much can still change, but I wanted to go back to the slide presented at the Investor Day in September of last year, and from that presentation on the base business, so excluding divestiture impacts, it looks like EBITDA was expected to be roughly flattish in '22 versus '21. And I guess I'm just trying to get a sense of, at this stage, would that still be the expectation such that we just have to strip out divestitures to get a sense of it or maybe has the inflation environment and longer-tail to at-home eating benefits shifted this thinking at all? Thanks so much. Miguel Patricio: Let me answer and then maybe Paulo, you can bring more precise numbers to Andrew. We are expecting 2022 to be better than the strategic plan that we presented to you. And why is that? I think our transformation is ahead of our plan. We've been beating our plans and our budgets, and we are optimistic and continue investing toward the future. I think it is still too early for us to be talking or to give you guidance about 2022. With all the volatility in the market, I think it's prudent not to go further on that. Paulo Basilio: Andrew, just to complement here, I think as the year progresses,as Miguel mentioned, [indiscernible]late in the year, we will be providing more clarity about how we're seeing 2022. We're not discussing this today, but we can say that we see inflation as a consistent theme for us and the industry ahead of '22, and all those initiatives and actions that we are doing in terms of revenue management initiatives to manage the inflation, we're seeing based on expectations that inflation will continue into the next year. I think those initiatives together with our savings program, the $2 billion savings program will be sufficient that together with investments that we're making to improve the relevance of our brands. So again, we are very confident around our ability to manage the inflation and support the investments behind our turnaround as we are exiting '21 and entering '22. Andrew Lazar: Thanks, everyone. Operator: Our next question comes from Bryan Spillane from Bank of America. You may begin. Bryan Spillane: Hi. Thanks, Operator. Good morning, everyone. So I've got a question, I guess for both Carlos and for Rafa if you could both comment on this. In the quarter or even year-to-date, currently, we're seeing basically all channels are up. I think that's been one of the surprises as we move through '21 is that, as away from home and food service channels have improved, the at-home consumption has also stayed relatively elevated. So I guess my question for both of you is just simply, how long do you expect this to continue and I guess, as things normalize, would you expect the foodservice piece of it to really begin to accelerate more and somewhat offset the at-home consumption? So just trying to get a sense of how you're thinking about those two channels, especially since right now they're both up. Carlos Abrams-Rivera: Listen, first of all, thanks for the question. I think it's very fair. Let me start and then [Indiscernible] give a perspective on international. I think from an industry perspective, you're right. Channel trends are still normalizing. But I have also to say too early to tell how the share of [Indiscernible] between away-from-home and at-home, ultimately, it's going to hold it out. Now recently, it does seem like the old channels are growing, but that's probably no likely to remain the case and that's not built into our expectations. Now, in terms of our business, what we see is we are optimistic about our plans that we can actually drive sustainable growth in both the retail and the foodservice. And I think it's fair to say that we also have big ambition from the away-from-home business. We believe food service is actually both a generation of insights and innovation that can actually help in the retail side of the business. And is also capable of driving outsized growth because we have actually put a reduced focus on culinary distribution and channel expansion. And some of those channel trends, while still normalizing it's still a little bit early to say predicting exactly whether it's all going to happen now. But I do say that I do believe we're going to be stronger versus what we saw pre-pandemic, and essentially for two key reasons. First, because our foodservice mix favors the QSR. And actually, that stands to recover and we are seeing that are already faster than the rest of the foodservice channel. And we also see that to be more resilient post-pandemic. And frankly, early in the pandemic, we also made a strategic bet to support that growth in QSR and that bet is paying up. We now have 30% more capacity in our small package of ketchup and sauces, so that actually has been seen to be working. And secondly, we see a more durable step-up in-home consumption that comes at the expense of other categories and brands without necessarily sacrificing food service recovery and growth. And then lastly, let me just give you a little more color on the away-from-home. I mentioned that we gained a point of market share, food service recovery begins, and most of that actually was fueled by the actions we took in 3 areas that I mentioned, culinary distribution and new channels. So in Q2, we actually executed 9 co-branded culinary limited-time offers with QSR partners. Now just one of those was actually so successful because it became part of our permanent menu item and now is going to be in '22. And if you think about that context of the fact that we've been able to drive those kinds of limited time offers with QSR, in 2019 we had none of those. So, we are certainly driving a different level of execution with QSR. Now, the second part of that, which is distribution, we actually grew key account by 20% over this Quarter. And then finally, as consumers continue to evolve how they cook and they eat and including the use of meal delivery kits, we're actually inserting our Kraft Heinz brands into that equation. So, we are working with one popular direct-to-consumer Company to develop things like a recipe specifically for our Philadelphia Cream Cheese as the main ingredient of their products. And that actual product was ordered over 200,000 times by consumers are really an all-time record for that sales partner. So when you look at it holistically, I feel very optimistic about our away-from-home business and that it actually is going to be a springboard for us to continue to drive retail growth. Now that's a perspective in the U.S. and Rafael (ph), do you want to add something in terms of the international business, how you see it. Rafael Oliveira: Yes. Thank you, Carlos. And hi, Bryan (ph). Look, on balance, our developed markets are experiencing very similar trends to retail and food service in U.S. and Canada. Emerging markets on the other hand, and foodservice has actually rebounded stronger than in developed markets. Then in most countries that either had shorter or even stricter lockdowns, that kept their economies open during the pandemic overall. So I mean, the consumption obviously differs country by country, in-home, and out-of-home. The best of the pandemic lockdown approached vaccine availability changes a lot. And given the delta variant now it's a bit early to tell how the channels -- where the channels will stabilize in the second half. But all that said, we're seeing a lot of improvements on the retail channels and giving us a lot of confidence that we will come out of the pandemic well-positioned right after the pandemic. On the foodservice side, our mix is even more weighted towards QSR than the U.S. is and this format is recovering very quickly. So with distribution gains in emerging markets and the potential of the foodservice that we still have across our overall international, I'm still quite optimistic that after the pandemic hence, the net will be quite positive. Bryan Spillane: Okay, thanks Rafael (ph). Thanks, Carlos. Operator: Our next question comes from the line of Ken Goldman from JPMorgan. You may begin. Ken Goldman: Hi, thanks. Would you ever reconsider your policy of not guiding to annual sales and EBITDA. I realize it's been a Company policy for a long time except in rare cases not to give much. But I imagine you could avoid some confusion about let's say, I guess quite good or not quite as good print if outsiders had a basic bar against which to compare results. And I guess in that way we could give you more credit when you do come in ahead of expectations. Just curious if that's a possibility and I guess there's nothing else to it, probably makes Chris ' life slightly easier too. Paulo Basilio: Thanks for the -- thanks for the comment. Again, we will discuss this internally and we will let you know. Ken Goldman: Thank you. Paulo Basilio: Welcome. Operator: Our next question comes from the line of Jason English from Goldman Sachs. You may begin. Jason English: Hey, good morning, folks. And thanks for slotting me in. A couple of quick questions. So you guys mentioned that you've implemented pricing actions, began to raise those prices. Can you give us -- can you give us some quantification there? Overall, on average, what is the price increase that you're pushing through and how does it vary across the different products? Carlos Abrams-Rivera: Well, let me just say, Jason, that let me give a little bit of more context, which is, if you think about our portfolio, we're really more diverse than most of the peers that we compete with. So, our approach to pricing is no unique in terms of just having one solution. We have to be more precise in certain categories than really broad strokes across an entire portfolio. But I can say you our actions that we have taken in pricing have covered the majority of the portfolio and that actually has quite a bit of wide range of percentage increases, so it's hard to give you a specific answer. Now, what I will tell you is that we have taken actions to mitigate those incremental inflations that we're seeing, that we feel comfortable at our approach, that we feel very good about how we are managing, and that we're going to continue to monitor things and take further actions if necessary. Thanks for the question, Jason. Jason English: Thanks. But you don't know what your weighted average price increase is across your Portfolio? Carlos Abrams-Rivera: I mean, I think is something that for us it isn't something that we're going to be discussing and but happy to continue to have conversations about how we are responding in this moment and how we're feeling that very much a manageable solution from us. Jason English: Okay. And one more thing just on the inflation, can you give us a quantification of what the rate was in the quarter and what you expect in the back half? I see the total for the year going from low-end to mid-singles to high-end. I'll just zoom in a little bit on the near term. Thank you. Paulo Basilio: Jason, an experience achieved that in that range. Jason, we need to remember also that in Q2, we have higher pressure on the meets commodity specialty in Bacon. I can tell you that in the first half of the year, our inflation rate was in the low-end of the mid-single-digit range including this Big 4 component. And that's the range that we saw for the quarter too. Jason English: Okay. Thank you. I'll pass it on. Paulo Basilio: Welcome. Operator: Our next question comes from the line of Carla Casella from JP Morgan. You may begin. Carla Casella: Hi. You mentioned that you're maintaining your leverage target below four times and you're currently at three. Would you ever think of changing that target to lower it or are you leaving that flexibility, just given your outlook for either the business or other potential, either M&A or shareholder-friendly activity? Paulo Basilio: We are. Thanks for the question. We are keeping. We are not changing that target of leverage to be below 4 times in a consistent way. Let's remember also that this 3.1 times that we closed that would go to 3.4 if we adjust by the EBITDA that we lost, that we're going to lose right at pro forma adjusted body EBITDA, of note that was the date that we divested. But, yeah, our idea is to keep the same policy and to give us more flexibility to accelerate our strategy, and again, we're going to operate with this flexibility going forward. Carla Casella: Okay, great. Thank you. Chris Jakubik: Maybe just one more question. Operator: And our last question will come from the line of Robert Moskow (ph) from Credit Suisse. You may begin. Robert Moskow: Thanks for the question. Maybe a two-parter. One is, do you think that you will increase media again in 2022? And then the 2nd question is, I think you entered the year expecting market shares to grow. So maybe you could decompose those 2 things as to which of those really drove the outperformance in 2021. And then also for your back half guidance, second quarter categories have been pretty resilient. Are you expecting a drop-off in category performance in 3rd and 4th, as people go back to work and consumers go back to school, specifically North American retail? Miguel Patricio: Let me -- let me answer the first part regarding marketing and media. And -- and I will pass the second one to Carlos to talk more specifically about categories in U.S. Let -- let me say that, first, we are excited about the changes that we have been making in our marketing programs and capabilities. We've been investing not only in our brands but also in our people. Miguel Patricio: This is an area that I'm very passionate about, and given the important state has to drive our growth. We are driving improvements actually in a couple of ways. The 1st one is more marketing dollars that we put. We have $100 million more in marketing than we had in 2019. And we said that we want to increase marketing moving forward. So it's our intention. However, I think it's not only about increasing marketing, it's really about efficiencies. We're today achieving 30% more of our consumers with the same spend by doing better marketing, and not only better marketing, but also better media. Third, I think we're excited about stepping up on creativity in our Company. Today, we started an internal agency in digital media in Canada in May last year and today, we have 12 of these internal hubs in different places covering more than 30 markets around the world. And that is critical for marketing efficiency because it's faster, better, and much more creative. And we can really have marketing linked to the culture and need to be very fast on that. So, overall, that would be my answer for marketing. Carlos, you may answer the second one. Carlos Abrams-Rivera: Sure. I can just build on your point, Miguel (ph). Specific to market share and our performance, I would say we are off to a very solid start to the year. And you saw in the presentation, we are seeing household penetration and repeat rate, growth rates, but higher than pre-pandemic levels. And we are regaining share and actually 58% of the business and is an improvement from last quarter, Carlos Abrams-Rivera: and certainly from what we saw in 2019 pre-pandemic. When you take a step back and you look at our overall performance, I think what we are proving is that our consumer platform approach, our focus on renovation, innovation and marketing, and our resale activations, they're all working. Now as we going forward, we will continue this agenda. We are going to increase support around key holidays while using price promotional [Indiscernible]. As I mentioned earlier, all the revenue management tools to manage inflation. Now, for our total business and I think your point about asking about the future, there's several factors impacting the category performance, but I will tell you the most important is that we believe we're in a strong position to balance share, risk profitability to continue to deliver strong returns. Thanks for the question. Paulo Basilio: Just one comment on that, just to build on to what you're saying and the question here on the outlook. I think it's also relevant to say that while our outlook implies a lower EBITDA margin in the short-term, what is in the second half and Q3 and we don't think that EBITDA margin is representative of the run rate that they said, and we expect that to improve back to normal levels as we enter into 2022 and when our price realization starts to catch up in our results. Robert Moskow: I'm sorry, I want to press a little bit more. This is really a question about your categories. Like do you expect your categories to face pressure in third quarter and fourth quarter compared to the first half, because of people going more to work and because of students going back to school. What do you think will look more similar to second quarter? Chris Jakubik: [Indiscernible] Carlos Abrams-Rivera: Yeah. Let me just give a perspective at least in the U.S. piece. I mentioned that there were several factors that is taking into consideration how the categories are behaving, and I think that there are 3 things in particular that we are looking at. There are certain things around the fact that there are hybrid working schedules. We've to see the home purchases, and the renovations, and a new consumer preference that would actually likely to keep people at home, the higher level of home consumption that we have seen in the past. We've also now seen the delta variant and the rising case counts across the U.S., and those are factors that we're also closely monitoring, and in particular, because they are important in terms of thinking about how families are preparing for the upcoming school year. I think there are all things that are making it very difficult for us to say at this point is exactly how this is going to all going to shape out. What I can tell you is that we are focused on those things we can control. So we are focused on making sure we improve our agility and execution as Miguel said, that we continue to invest behind our brands to build relevance and compete for those locations through our consumer platform-based approach, regardless of how we see this happening, and unfolding. And so far we're pleased with how we are showing up. So we believe we can continue to see. And the fact that we are able to drive helps operates ratio repeat rates. And I mentioned earlier in the call, right now you see all channels growing, but realistically that is not right now our expectations as we go through the second half. Robert Moskow: Okay. Thank you for indulging me. Appreciate it. Chris Jakubik: Great. Well, thanks to everyone for joining us today. If you have any follow-up questions, Investor Relations and the media teams will be available for your follow-ups, but thanks everyone for joining us today. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by and welcome to The Kraft Heinz Company First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will follow at that time. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Chris Jakubik, Head of Global Investor Relations for The Kraft Heinz Company. Please go ahead, sir. Christopher Jakubik: Thank you and hello everyone. This is Chris Jakubik, Head of Global Investor Relations at Kraft Heinz Company, and welcome to our Q&A session for our first quarter 2021 business update. As you know, during our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties and these are discussed in our press release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release. Before we begin, I'm going to hand it over to our CEO, Miguel Patricio for a few quick opening remarks. Miguel? Miguel Patricio: Yeah. Well, thank you Chris. I just wanted to start our discussion today with a few overall thoughts. First, that we have had a very, very encouraging start of the year, both topline and bottom line with our strongest growth in priority platforms and markets, especially in under-developed countries with a very strong result. We were able to hold household penetration gains even as markets begin to open and effectively managing inflation and supply constraints. We are also very encouraged by our progress with the initiatives to accelerate our advantage in different areas like in marketing, be more agile and more creative in retail and foodservice joint business plans, in unlocking capacity in Grow and Energize platforms. And also on bringing efficiencies - growth efficiency gains that we continue tracking to be about $400 million in the year. That said we feel that it's still too early to change our outlook for the full year. We could expect 2021 financials to be ahead of our strategic plan and we are expecting mid single-digit growth in Q2 2021 versus the same period in '19. At the same time, we should see stronger but manageable inflation beginning in Q2. Finally, we are pleased with additional financial flexibility that we are building. We continue to aggressively reduce debt and our divestures are on track to further increased flexibility. I will now hand it back to the operator and we can start the Q&A. Operator: Thank you. [Operator Instructions] Your first question comes from the line of Andrew Lazar with Barclays. Andrew Lazar: Miguel, I know that organic sales growth guidance for 2Q is a bit better than what consensus was expecting. But it does represent a notable sequential deceleration versus 2019. And I'm trying to get a sense of, is this - I assume this is primarily just, a, 1Q was quite a bit stronger than you probably thought and maybe you're also trying to be thinking through and being prudent about what further sort of reopening and mobility means for sales trends going forward. And then I was hoping maybe Rafael could you comment even briefly just how you see the durability of the emerging market strength that we saw in the quarter? Thank you. Thank you. Miguel Patricio: Hi, Andrew. Thank you for the question. Now keep in mind that in the second quarter we are going to have a different mix. Foodservice will be stronger and for sure with opening of the market because of COVID fading the mix will change and so that is one of the reasons. The second reason also let's remember that McCafe that was in the numbers of '19 and that is not in the numbers of '21 and that has a strong impact. I don't know if Paulo, you want to complement that question before passing to Rafael? Paulo Basilio: Miguel, thank you. I'll highlight the right points. We are calling down versus prior year low single digit growth and the impact of McCafe is always 1.1 percentage points. So it's not that dramatic of deceleration although as you are saying that we are seeing the reopening of the developed markets and there is some mix impacts that we're going to feel in the quarter. Miguel Patricio: But that said, yes, first quarter was a very strong quarter as you mentioned in terms of net sales when compared with '19. Rafael, please? Rafael Oliveira: Yes. Hi, Andrew. Thanks. Thanks for the question. I mean for us emerging markets consumption has held up relatively well during the pandemic, and I would say 2Q reasons. One is availability. I mean our customer servicing across international has been quite consistent during the whole pandemic. But also like the focus, right, second is the focus. We remain very focused on our emerging market strategy, I mean centered around Taste Elevation platform, right, and combined with localized — the proven go-to-market expansion model. And this has been performing quite well. There are two factors that - these two factors helped us during the pandemic, right, and you can see on the results, it added a point of share. We've been gaining share also during the last three quarters in a row. So we do expect this momentum to continue as we move throughout the year and based on the strong initiatives that we discussed during CAGNY. Andrew Lazar: Great. Thanks very much. Operator: Your next question comes from the line of Robert Moskow with Credit Suisse. Robert Moskow: Hi. Thanks for the question. I was wondering if you look at your U.S. retail mix as maybe more exposed than some of your peers to kids going back to school. You have Mac and Cheese there, you have Kraft Singles, Oscar Mayer Lunch Meats and that's a lot of, I guess, parents making lunches for their kids when they're at home. When they're going back to full time schooling, do you think that these brands will face more than normal headwinds or does it somehow kind of - is it - does it make up for itself somewhere along the way? Thanks. Miguel Patricio: Well, first of all, thank you for the question. Listen, we feel good about controlling the controllables. I mean, and if you think about the gains we have made in household penetration. Those are coming from younger more diverse families and we're seeing that those families are actually increasing the consumption across different day-parts and that's happening whether it's Mac and Cheese, whether that's Oscar Mayer hot dogs, very consistent. Plus even if you think about brands that typically - kids use at school like a lunch box, we're actually also seeing gains on those even over the last six months. So what I would say is our focus on continue to retain those new households regardless of the circumstances is working and it will be the things that we'll continue to do moving forward. Thanks. Robert Moskow: Okay, thanks. Operator: Your next question comes from the line of Bryan Spillane with Bank of America. Bryan Spillane: I've got two questions related to inflation. The first one, I think the guidance is for mid single-digit cost inflation. And just wanted to get an understanding there of is that gross inflation or is that net of cost savings and if not, just if you can give us a breakdown between the gross inflation versus net inflation? Miguel Patricio: Bryan thanks for the question. So, the guidance that we provided in mid single-digit is growth, so it's a percentage of our total COGS as gross inflation, okay? Actually we are seeing that it would be - currently in the low end of the mid-single digit range and that's our view. And when we see this happening today as we mentioned before, we also saw as many peers, the escalation of this inflation since our last call but when we add, as we mentioned our cost efficiencies that we highlighted around that we still seeing like $400 million in efficiencies in our supply chain. And all the levers that we have for revenue management we believe that the final number will be manageable for the company. Bryan Spillane: Okay. Thank you. And then if I could follow-up Rafael, just for you — just in terms of inflation, could you just give us a little bit of perspective on what tools you have available, especially in developing markets, but also in Europe in terms of managing inflation? So is it different I guess in terms of the way that you'll work through inflation in your markets than what we'll see in North America? Rafael Oliveira: Yes. Hi, Bryan. Yes, look, so let me break down the two. In emerging markets, I mean, in general acceptance of pricing is better, right, because inflations are more normal on the local economies. In developed markets, I mean what I can tell you is we've already successfully closed negotiations with all our key retail partners and especially in key countries like France, Germany and we remain to achieve the pricing and premiumization behind the brands that we needed. So we feel quite confident about that. I mean, in terms of comparison, you said comparing to the US, I mean there are similar and differences, right, like similar to North America, the costs have moved against us in ingredients, in packaging, but different in North America overall, logistics is not a major contributor to inflation in international. So in terms of numbers is what in line with what Paulo said comparable to mid single-digit range for the total. Bryan Spillane: Okay, thank you. Operator: Your next question comes from the line of Rob Dickerson with Jefferies. Rob Dickerson: Great, thank you so much. Miguel, I just had a question around your innovation plans, marketing plans kind of vis-a-vis SKU rationalization, right. So as we heard for over a year, right, there has been a lot of optimization for the retailers to kind of focus on those core SKUs, right, to just essentially maximize the benefits of velocity and scale, which you also speak to all the time. So I'm just curious as you kind of look forward kind of around that creative development of the innovation, are there sizable pieces of the portfolio that you kind of foresee rationalizing such that those tails come off, new innovation comes in, but still focused on the core on those high [ph] velocity items? Thanks. Miguel Patricio: Let me answer your question and I ask Carlos to complement my thoughts. We see this as a great - we have seen and this is a great opportunity for us to - exactly to focus on SKUs with higher rotation and also from a supply standpoint to improve efficiencies in our factories and also on costs. So we see this move as a very positive. Carlos, do you want to comment more precisely in terms of numbers of what's going on for us? Carlos Abrams-Rivera: Sure Miguel. What I would say is a lot of it - we have done [Technical Difficulty]. So if you go — as we go into this year, we have reduced probably 20% of our SKUs versus what we had in '19. And I think this has been done to duration [ph] with our retail partners. So we're building together kind of level of trust and transparency to make sure that we impact, focus on our core but drive better velocity and actually allows us to have - to better service with our customers. So overall, I feel good about where we are and the progress we have made in this area. Thanks. Operator: Your next question comes from the line of Alexia Howard with Bernstein. Alexia Howard: Good morning, everyone. Can you hear me okay? Miguel Patricio: Yes. Alexia Howard: Perfect. So I wanted to ask about the promotional path from here. You talked, I think in the prepared remarks about pulling back on promotions in January and February during Q1. Does that mean that we're likely to see a more elevated level of promotion year-on-year given the pullback that happened last year? And what does that mean for net pricing over the next couple of quarters? Thank you and I'll pass it on. Carlos Abrams-Rivera: I can start. Let me at least give you a perspective to first of all about the overall view of how we're thinking about our pricing and how that fits in terms of our promotions. I can tell you is, I feel good about our ability to pass through our cost inflation and as we see it and where we need to do it. Miguel Patricio: We lost Carlos. So let me just pick up on that. I think Carlos froze out a little bit, Alexia. So we're going to come back, but I think where Carlos was going is in terms of the - what we're seeing going on in the marketplace and what we see unfolding is in Q1 we were able to sort of build further on, sorry, Carlos why don't you go ahead. He froze out at the start there. Carlos Abrams-Rivera: Sorry, my apologies. Hopefully you can hear me okay now? Alexia Howard: Sounds great. Carlos Abrams-Rivera: Okay. Listen, this is the new world that we're still working through. So I appreciate the people patience. What I was getting at is — within the context of our pricing that we're looking at do know that in the, if you think about our quarters, seven of the last eight quarters, we actually were able to actually drive pricing as a positive contribution to our net sales. So we are seeing that our iconic brands are actually showing the pricing power. Now, when you look going forward, we will return to supporting key promotional window. So if you think about coming up Memorial Day, we also are going to be making sure that we show up in those moments. At the same time, we will implement the revenue management initiatives to drive share growth and improve the returns. And if I sit back and I try to summarize kind of how that we're thinking through this, the way I think of it is this three-prong approach. One, making sure we continue to renovate our portfolio to drive better value for our consumers that we improve the creative content of our marketing and that we strengthened and diversifying our media impressions. So all said, I feel good about our ability to deal with the inflation that we have and making sure we do this in a way that is positive for the company. Alexia Howard: Great. Thank you very much. I'll pass it on. Operator: Your next question comes from the line of Jason English with Goldman Sachs. Jason English: Hey. Good morning, folks. Thank you for sliding me in. to put a finer point on Alexia's question, do you expect pricing, net of everything to be positive in the U.S. in the back half of the year? Paulo Basilio: Hi, Jason. Listen, as a matter of practice, we do not forecast pricing. But as we - and again, we are seeing that we're going to have - we're going to be up in the second half against some unusual comparisons in the back half. But as Carlos mentioned, we see a lot of levers for us to manage inflation through revenue management, through savings. So we're feeling pretty very good about where - how to manage our profitability that's coming from this inflation impact. Jason English: Maybe to help us get a little more comfort on that let's flip to the cost side. I know you said sort of low end to mid singles plus $400 million of cost saves, I mean, that's - like a 2% sort of net inflation, I think. You can tell me if I'm wrong on that, but what does the cadence look like as we go through the year? I'm guessing given the move to some of these costs, your exit rate in the back half of this year is going to be substantially above that. And if I'm off base on that please correct me. Paulo Basilio: We have a ramp up of gross inflation as the year progresses. But we also have a ramp up of our sales initiatives going on as the year progresses. And on top of that, we would have our - also our revenue management initiatives so again, I'm not going to give exactly quarterly number levels here, but that's how you should think about the progression of our base, our cost base. Jason English: Okay, thank you. Paulo Basilio: You're welcome. Operator: Your next question comes from the line of Ken Goldman with JPMorgan. Ken Goldman: Hi. Thank you. I'm going to start beating on the debt inflation horse here. I know we're talking about it a lot but I just wanted to get a sense of how locked in you are on your raw materials for the rest of the year? I guess, putting in another way, is it fair to assume unless there's some big spikes in items that are harder to buy ahead - mid single-digit inflation is fairly safe to build in. I'm just trying to think if items like cheese and meat and coffee rise a bit higher - these are items that historically Kraft has locked in many months in advance at time. So I just wanted to get a sense of the risk either up or down to that - the guidance of mid single-digit inflation. Paulo Basilio: Hi, Ken. This varies. And again, we have specifically in our Big 4 — our key Big 4 commodities for the full year, we are seeing just a slight inflation, okay? We are going to have our heaviest comp in Q2 that you're going to be lapping a very low price in cheese last year in a high price of pork bellies this year. But overall, in terms of the Big 4 we are seeing a slight inflation. In terms of how we manage and hedge, it varies by type of areas. So there are some commodities that we go longer, beyond six months, nine months, there are other that are shorter, but this varies a lot. But what I can tell is overall when we see the scenarios of course there is a lot of volatility in these markets. But overall when we see where the commodities start today — the range of mid single-digit is what we're seeing. And again, as I said, we are seeing as overall as a percent of COGS in the low-end of this range. Ken Goldman: Very quick follow-up, what are your experts telling you about how valid some of these prices we're seeing for corn and soybeans and meat given supply and demand? I guess I'm asking is there is a little bit of froth created by traders in the market right now. Paulo Basilio: Ken I would not like to enter in this type of forecast. We are more focused on to be sure that we manage our cost for different levels of price and if we provide to our business specific hedging profile that allow the business to plan itself. Operator: Your next question comes from the line of Laurent Grandet with Guggenheim. Laurent Grandet: Yeah. Thank you. Good morning everyone and thanks for squeezing me in. So two questions, one on Canada. So Canada is definitely improving. So, could you please give us a bit more color about what's going on there and how sustainable and the gross and the rebound it is for the next few months and quarters? Miguel Patricio: Well, let me answer that question. I think you are absolutely right. Canada is definitely improving, had a very good quarter. I think that we did much better job in terms of promotional calendar for Canada that last year we started with big promotions and that the ROI was not exactly - it was great. And we are being much more disciplined on our promotions and that's what it reflects, so there was a big increase in margin from 16% last year to about 22% this year. But it is not only on margin that Canada is improving. I'm very satisfied with the way that we are evolving on innovation pipeline, with marketing and creativity and digital marketing. I think we are having a very different Canada than we had just one - a year and a half ago. Laurent Grandet: Thanks. And maybe a broader question on your straight [ph] brands so compared to [indiscernible] you laid down on that last year and now we are six, eight months within the implementation of that plan. So could you maybe tell us what you think - you've been very successful in implementing and you're ahead of what you expected and maybe some space or some strategic initiatives where you think you are sitting behind and why? Miguel Patricio: I would say that, overall, we are very excited with our transformation plan. And it's deep and it's in all areas. We are all evolving and after one year, I would say that we are going in a much more accelerated rate than we could imagine and especially in a year that we are doing all this through Zoom meetings, working from home. So it surprised us velocity, the agility that we are having in all areas, in all areas from supply to marketing to finance to all areas of the company. But this is a journey. Using an analogy of baseball, I would say that we finished the first inning. We are now going to the second inning. But there is still a big game ahead of us to play, but we are excited about the possibility, the evolution. Laurent Grandet: Thank you very much. I'll pass it on and [indiscernible] plan. Good work. Thanks. Miguel Patricio: Thank you. Operator: Your next question comes from the line of Steve Powers with Deutsche Bank. Steve Powers: Yeah, hey, thanks. And maybe to build on that last question a bit. I think it's been a little while since we spoke in detail about employee engagement and morale at Kraft Heinz. And to some extent also about retailer engagement - Miguel you did speak to helping improve customer satisfaction in the prepared remarks. I guess as you step back and think about the journey over the past year and the progress made since 2019, can you update us on how you perceive your current standing against those teams today and how that feeds into your outlook as you go forward into '21 and beyond? Miguel Patricio: Sure. I will comment on our employee engagement. I will ask Carlos to talk about customer satisfaction engagement specifically in U.S. We have great progress on that part as well. I would say that among everything — all things that we have been doing maybe employee engagement is where we have the biggest shift with our people much more engaged. And when I say this, this is of course is from quantitative research, but also qualitatively. So, our team is much more engaged working in a much more cooperative way. We've been eliminating silos that we had in the company and this year of this pandemic was - we were already organized in a different way and we had to be much, much faster in that way. I would say that morale is much higher. We have a much more engaged team. They understand the strategy we have ahead and they are excited about the journey that they are leaving. That being said, again, we still have a room for improvement and we'll continue working in that sense. Carlos, maybe you can comment on the customer side? Carlos Abrams-Rivera: Sure, Miguel. Thank you. And I can testify to what Miguel is saying that we have seen that across entire company. The level of engagement, the way that the teams are working with an agile mindset we do. Related to our customers what I can tell you is we are now in a much different place than we were a year ago. We have now been able to build trust with our key retailers. We are working in a part that includes a level of transparency, that we hadn't seen in the past and in fact our retailers are also - and partners are recognizing that. So I think that now when we hear from them directly that it feels like a new Kraft Heinz. We take that we've tried because it's - because of the work that we have now - and the collaborations we know we're doing with them in a way that we hadn't done in the past. So something for us to continue to build on, but thanks for the question. Steve Powers: Thank you. Operator: And at this time, I would currently would like to turn the call back over to Mr. Chris Jakubik. Christopher Jakubik: Thank you and thanks everybody for joining us today. For analysts that have follow-up questions Andy Larkin and myself will be available to take them. And for the media Michael Mullen will be available for your calls. So again, thanks everybody for joining us today and have a great day. Operator: Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.