Kraft Heinz cut expenses too deeply under private equity management, its new CEO says

• Kraft Heinz got "too lean" after budget cuts over the past decade, CEO Steve Cahillane said.
• The company behind Kool-Aid and Lunchables cut costs under private-equity ownership.
• Now, Kraft Heinz is looking to reinvest in its business and improve its financial results.

Kraft Heinz, the company known for hot dogs, ketchup, and mac and cheese, has gone hungry for too long, according to its new CEO.

The company, created in 2015 through a high-profile merger by private-equity firm 3G Capital, made deep cost cuts a focus of its strategy for managing big food brands like Oscar Mayer and Jell-O.

Steve Cahillane, who became Kraft Heinz's CEO last month, says the cost-cutting went too far.

Speaking on Thursday at the Consumer Analyst Group of New York conference in Orlando, Cahillane said that the cuts hurt Kraft Heinz's financial results. The company's shares are down roughly 74% from their 2017 high, and it expects organic net sales to decline between 1.5% and 3.5% this year.

"If you don't have the people and the capabilities, it's really difficult to deliver," he said. "We've been operating too lean, and we acknowledge that, and we're going to fix it."

Under previous management, Kraft Heinz cut costs through zero-based budgeting, a method that requires managers to justify every cost anew rather than carry them over from a previous budget.

The approach led some Kraft Heinz employees to bring their own coffee to work — the food giant owns Maxwell House coffee — and pinch pennies on office supplies, Business Insider reported in 2021.

3G Capital exited its investment in Kraft Heinz in 2023, according to a filing with the SEC. Berkshire Hathaway, another major shareholder over the past decade, appears to be considering an exit of its own after taking a $3.8 billion write-down on its Kraft Heinz stock last year.

Under Cahillane, Kraft Heinz plans to spend $600 million in order to rebuild some of that lost muscle by investing in several parts of the company, from research and development to marketing.

The company is also hitting pause on a planned break-up, Cahillane said when the company reported its fourth-quarter earnings earlier this month.

Kraft Heinz is also experimenting with new products. At Thursday's conference presentation, for example, Cahillane said the company has started selling its Capri-Sun drink in plastic bottles, which are easier to sell as single servings than in its traditional pouches. Early results show that the bottles are increasing Capri-Sun's popularity with teenagers, Cahillane said.

"These brands are so iconic, so special, so well known," Cahillane said. "But unfortunately, for too long, we have been relying too much on only that."

"We need to make these brands relevant for today," he added.

Have a tip? Contact this reporter at abitter@businessinsider.com or via encrypted messaging app Signal at 808-854-4501. Use a personal email address, a nonwork WiFi network, and a nonwork device; here's our guide to sharing information securely.