Kraft Heinz (NASDAQ:KHC) reported third-quarter organic net sales declined 1.1% from a year earlier, as weakness in U.S. retail was partly offset by growth in emerging markets and the company’s global Away From Home business. Management raised the low end of its full-year organic net sales outlook while maintaining its constant-currency adjusted operating income forecast.
Chief Executive Officer Steve Cahillane said the company has continued to build momentum during 2026, citing improving volume trends across all regions, stronger emerging-market growth and progress in foodservice channels. However, he said the U.S. retail turnaround remains incomplete.
“Sales and share are recovering, volumes are improving in every region, and the rest of our $700 million investment will be put to work in the fourth quarter,” Cahillane said. The company’s incremental investments are focused on product quality, pricing, marketing, sales, research and development, and staffing.
Third-Quarter Results and Margins
Organic net sales declined 1.1% in the quarter, landing at the upper end of Kraft Heinz’s guidance range, according to Chief Global Financial Officer Andre Maciel. Price was flat, as pricing gains in emerging markets were offset by planned price investments in North America. Volume and mix declined 1.1 percentage points, primarily reflecting North American softness, including meats.
Maciel said the quarterly sales result included an approximately 80-basis-point headwind from inventory pulled forward into the second quarter. Lower-than-expected trade spending provided roughly a 40-basis-point benefit in the third quarter, though the company expects trade spending to increase in the fourth quarter.
Adjusted gross margin declined 40 basis points year over year due to higher procurement and logistics inflation, partly offset by productivity actions. Kraft Heinz said transportation costs were higher than anticipated during the quarter, though favorable costs for commodities including dairy and bellies helped mitigate the pressure.
Constant-currency adjusted operating income declined 14.6%, while adjusted operating income fell 15.2% and adjusted operating income margin declined 230 basis points. Management attributed the operating-income decline to inflation, investments in marketing, R&D and personnel, as well as comparisons against lower variable compensation expense in 2025.
Adjusted earnings per share were $0.53, down approximately 13.1%, or $0.08, from the prior-year quarter. Year-to-date free cash flow totaled approximately $2.4 billion, down 5.2% from a year earlier, while free cash flow conversion increased 11 percentage points to 120%.
Regional Performance
- North America: Organic net sales declined 3.2%, driven by U.S. retail and retailer inventory reductions. Growth in Canada and Away From Home partly offset the decline.
- Europe and Pacific developed markets: Organic net sales fell 1.3%. The company said exits from negative-cash-flow businesses in Australia and New Zealand reduced sales by about 100 basis points, while Europe posted volume-led growth and market-share gains.
- Emerging markets: Organic net sales rose 15.6%, with balanced contributions from price and volume/mix. Indonesia contributed about 3 percentage points of the segment’s growth after a prior-year distributor disruption was resolved.
Cahillane said Heinz grew approximately 16% in emerging markets during the quarter, with growth across condiments, mayonnaise and pasta sauce. He highlighted Heinz Zero ketchup in Brazil, which has gained nearly three points of market share since its launch earlier this year. The company said about 80% of Heinz Zero sales are incremental to the ketchup category.
Global Away From Home organic net sales increased 2.6%, with growth across North America, Europe and Pacific developed markets, and emerging markets. The business grew approximately 8% in emerging markets, while U.S. growth was supported by net new business wins.
U.S. Retail Recovery Efforts
Kraft Heinz said its U.S. retail revenue gaining or holding market share improved to 25% year to date, compared with 12% at the end of 2025. Across the company, the percentage of revenue gaining or holding share rose to 31% from 21% in 2025.
The company said investment has supported better consumption trends in several categories. Condiments returned to growth and rose more than 4% in the third quarter, compared with 2.5% growth in the first half. Desserts grew 2.5%, while Kraft Mac & Cheese consumption increased 1.4% after declining in recent years.
Management also identified continuing areas of pressure. The meat business remained the largest contributor to U.S. retail declines, although Maciel said it is improving following last year’s cold-cuts packaging issue. Cream cheese performance weakened as price investments did not deliver the expected consumer response, prompting Kraft Heinz to pull back part of that investment in the fourth quarter.
Maciel said sandwich cheese remains a challenging category and that the company is not assuming a sharp recovery. Planned actions include a new Kraft Singles creative campaign, price-pack architecture initiatives, innovation and updated product claims targeting health-conscious consumers. Salad dressing has also become a larger drag following a disruption affecting the broader category.
Investment and Outlook
The company is increasing marketing spending to at least 6% of net sales for the full year. Marketing was up approximately 25% year to date and represented 6.1% of net sales, while R&D spending rose 20%. Kraft Heinz said promotional return on investment improved by 4 percentage points year to date, and global return on ad spend improved by 2 percentage points.
For full-year 2026, Kraft Heinz now expects organic net sales to decline between 1.25% and 0.5%, improving from its previous forecast for a decline of 2% to 0.5%. The outlook includes an estimated 100-basis-point impact from reduced SNAP benefits.
The company reiterated its forecast for constant-currency adjusted operating income to decline 18% to 16%. It expects adjusted gross profit margin to be down 50 to 10 basis points, with inflation expected to peak at approximately 6% in the fourth quarter. The company maintained its full-year inflation outlook of slightly above 4%.
Kraft Heinz raised its adjusted EPS outlook to a range of $2.07 to $2.13, from $2.03 to $2.09 previously, primarily due to an expected effective tax rate of about 23.5%. Management said the tax benefits are discrete and are not expected to recur in 2027.
The company continues to expect free cash flow conversion of approximately 110% for the year and net leverage of between 3.2 times and 3.3 times. Cahillane said the company remains committed to supporting its dividend while funding investments and reducing debt.
About Kraft Heinz (NASDAQ:KHC)
The Kraft Heinz Company (NASDAQ: KHC) is a global food and beverage company that develops, manufactures and markets branded products for consumers, retailers and foodservice customers. Its portfolio includes condiments and sauces, cheese and dairy products, meals, meats, snacks, beverages and desserts.
The company’s brands include Kraft, Heinz, Oscar Mayer, Philadelphia, Velveeta, Jell-O, Maxwell House, Lunchables, Capri Sun, Planters and Classico, among others. Products are sold through grocery stores, mass merchants, club stores, convenience retailers, e-commerce channels and foodservice distributors.
Kraft Heinz was created in 2015 through the merger of Kraft Foods Group and H.J.
