After experiencing a strategic “sharp turn”, the multinational food giant kafheinz, once lost, rallied.
“The transformation we have made at Kraft Heinz is significant. Frankly, we are very proud of what has happened in the past few years.” Rafael Oliveira, executive vice president and President of international business of kafheinz, said at the Deutsche Bank global consumer Conference on Wednesday.
Xiaoshidai noticed that he talked about the transformation process of this food company backed by 3G capital and “God of stocks” Buffett at the meeting, and pointed out the growth opportunities it faces in emerging markets such as China. At present, kafheinz is mainly engaged in Heinz tomato sauce and other Western-style sauces, Weishida sauce and other Chinese-style sauces, as well as Heinz infant rice noodles, noodles, fruit purees and other supplementary food businesses in China.
Rafael Oliveira, President of kafheinz international business (information picture)
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“Want to be great”
“Compared with 2019, kafheinz has become very different in terms of operation and strategy. How do you see this transformation process and how kafheinz has become stronger as a result?” Oliveira was asked at the meeting.
He said that if we look back at kafheinz three years ago, “we were at a low point, we were really depressed, internal morale was low, and investors lacked confidence. At that time, we did not invest enough in the brand.” Oliveira said that for this reason, kafheinz has promoted a lot of transformation work.
The first thing is about people. “As I mentioned, the morale of (the previous team) was very low, and then we began to invest more in personnel and capacity-building. At the same time, we also hired experienced external talents. Therefore, our team has indeed changed. Now our leadership and other employees are very confident to promote the transformation of the company.” He said.
The second thing is the strategy of the consumer platform. “We have clearly divided the roles of different platforms, including taste elevation, easy meals made better, etc.” Oliveira said that this would help Kraft Heinz invest in different platforms.
As introduced by snack generation, in September, 2020, kraft Heinz disclosed its new development plan. When managing many of its products, it no longer divided them according to the previous 55 categories, but divided them into “six platforms” to manage the product portfolio. They are: improving taste, better snacks, real food snacking, fast fresh meals, Enjoy easy dessert and flavor drink.
Under the new business structure, “improving taste” (including condiments and sauces) is kafheinz’s largest platform, with sales of about $7billion. The products under this platform include Heinz ketchup and Weishida soy sauce sold in China.
The third thing is to focus on consumers. “Frankly speaking, we didn’t focus on consumers before, but we have changed this point. Two years ago, our CEO Miguel Patricio made this point very clearly. Therefore, we pay attention to the changes of consumers, and use relevant insights to do a good job in the market and develop appropriate products.” Oliveira said.
He said that the fourth thing is the retail partnership, that is, to cooperate with major retailers to jointly develop their businesses. “We have been interacting very closely around the world (with retailers), especially now, you need this partnership to deliver inflation. Now, in working with retailers, we make good use of our scale and our knowledge of categories, and continue to develop on this basis.”
The fifth thing is the supply chain. “As I said, we have not invested enough in assets. Our (changed) mentality is not only focusing on costs, but also focusing on efficiency and continuous improvement.” He said.
“We must be different now, and we believe this is just the beginning.” Oliveira said, “I think we have made progress after the transformation in the past three years. I think we are good now, but the reality is that good is not enough. We want to be great. We believe that we can become great. This is the journey we will embark on.
“Three months ago, we held a global leadership conference with the theme of ‘we choose greatness’. This is our ambition. We have been doing a lot of work to clarify what greatness means and how we will achieve it.” He said.
Opportunities in China
Oliveira believes that among all the transformations taking place within Kraft Heinz, the emerging market strategy and the go to market model are one of the most attractive opportunities.
“For the international market business, our two very clear strategic priorities are to improve the taste elevation (including condiments and sauces) and emerging markets.” He said, “first of all, emerging markets are still relatively small for us. Three years ago, our business in emerging markets accounted for about 7%-10%.”
China is undoubtedly one of kafheinz’s most important emerging markets.
When disclosing the transformation plan earlier, Fu Meikai said that kafheinz’s six platforms focus on three key objectives: growth, activation and stability. The growth oriented business accounts for about 50% of the sales, and will be a priority investment place. They are both Kraft Heinz’s growing platforms in emerging and developed markets, with the fastest growth coming from Russia, Brazil and China.
Oliveira has also pointed out that the Chinese market is “the largest growth opportunity” for kafheinz’s international business. The growth opportunities of kraft Heinz in China mainly fall on the condiments and sauces business; The company also set a “small goal”: relying on local brands such as MasterCard, it will become the second largest Chinese sauce brand in China and the first Western sauce brand in China.
Thanks to the new channel strategy, kafheinz’s emerging market business shows a good growth momentum.
At the meeting on Wednesday, Oliveira revealed that in the past two years, kafheinz has been growing at a double-digit rate in emerging markets. “What is more wonderful is that where we have implemented the market access model, the growth has exceeded 20%, and in some cases even exceeded 30%.”
He said that the food giant started to implement the new market access model from Brazil four years ago. “We start from the analysis, determine the distribution network map of the whole country, and make clear where to land, what product portfolio, what level of profitability, etc. when we go to the store for implementation, employees need to know exactly what they must do in the store and what SKUs they want to display on the shelves.”
“Modern trade channel shelves (display modes, etc.) in many developed markets are preset, while in emerging markets, you can (have more space to strive for) win at the point of sale.” Oliveira said.
This new model, which started from Brazil, has been brought by kafheinz to more emerging markets such as Russia and China. “This year, we will also land in Indonesia, Poland and Egypt. By the beginning of this year, about 1/3 of our emerging market businesses had adopted this market access model, and it is expected to reach about 75% by the end of the year.” Oliveira said.
He pointed out that this is a great opportunity, because kafheinz has proved that this model works in more than one place. “Now, we are selecting this replicable model everywhere and are making achievements. In the first quarter – last year, we saw double-digit growth (in emerging markets). We hope to continue this momentum and accelerate it. Emerging markets should play a more important role in kraft Heinz and make greater contribution to its performance.”
“Emerging markets do have challenges and macro volatility. If you rely on only one market, you will be more vulnerable. When you spread to 5-10 key markets, you will be more able to resist risks.” Oliveira said, “the U.S. market is the largest part of our business, but when our management team spends a lot of time looking at where long-term growth will come from, I think our investment in emerging markets is paying off, and we expect there is still a lot of room.”
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