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Packaged foods company Kraft Heinz (NASDAQ:KHC) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 6.4% year on year to $6 billion. Its non-GAAP profit of $0.62 per share was 3% above analysts’ consensus estimates.

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Kraft Heinz (KHC) Q1 CY2025 Highlights:

• Revenue: $6 billion vs analyst estimates of $6.02 billion (6.4% year-on-year decline, in line)

• Adjusted EPS: $0.62 vs analyst estimates of $0.60 (3% beat)

• Adjusted EBITDA: $1.43 billion vs analyst estimates of $1.42 billion (23.8% margin, 0.8% beat)

• Management lowered its full-year Adjusted EPS guidance to $2.59 at the midpoint, a 3.5% decrease

• Operating Margin: 19.9%, in line with the same quarter last year

• Free Cash Flow Margin: 8%, similar to the same quarter last year

• Organic Revenue fell 4.7% year on year (-0.5% in the same quarter last year)

• Sales Volumes fell 5.6% year on year (-3.2% in the same quarter last year)

• Market Capitalization: $33.32 billion

StockStory’s Take

Kraft Heinz’s first quarter results reflected pressure on sales volumes and ongoing challenges in the packaged foods sector, with management pointing to disciplined investments in marketing, research and development, and technology as the company's core response. CEO Carlos Abrams-Rivera explained that Kraft Heinz is “playing offense with discipline,” emphasizing continued spending on brand renovation and digital tools despite macroeconomic headwinds and declining volumes.

Looking ahead, management’s revised guidance for the year incorporates both heightened cost pressures—such as commodity inflation and tariffs—and a broader range of potential outcomes stemming from policy changes. CFO Andre Maciel stated that the company is increasing its marketing investment to reach closer to 5% of sales and is allowing for more flexibility in spending to address shifting market dynamics, but expects this will weigh on margins in the near term.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to disciplined investment amid a challenging consumer environment, with strategic focus on brand renovation and operational efficiency as key responses to volume and cost headwinds.

• Elevated marketing and R&D investment: Kraft Heinz is increasing spending on consumer-facing marketing, product innovation, and technology, aiming to improve brand value and operational efficiency. Management highlighted the scaling of its brand growth system, which now targets 40% of its portfolio by year-end, up from 10% the previous year.

• Brand growth system rollout: The brand growth system—a framework for identifying renovation opportunities in products and packaging—has been credited for recent progress in key brands like Philadelphia cream cheese and in international markets. Management cited its expansion as a differentiator for future competitiveness.

• Promotional activity and pricing discipline: The company is planning a step up in promotional activity during key seasonal periods such as Memorial Day and back-to-school, but emphasized a disciplined approach to avoid short-term volume boosts that are not sustainable. Price investments remain targeted and are not expected to materially increase beyond levels previously contemplated.

• Commodity and tariff pressures: Management identified increased input cost inflation, notably in coffee and meat, and the anticipated impact of new tariffs as key factors driving higher cost of goods sold (COGS) for the remainder of the year. Some mitigation is expected through alternative sourcing and productivity initiatives.

• Emerging market momentum: While developed market volumes remain pressured, management noted ongoing acceleration in emerging markets and specific product categories, such as Mexican foods and cream cheese, which are delivering double-digit growth.