(Reuters) -Kraft Heinz forecast slower annual core sales growth, after missing quarterly sales estimates on Wednesday, a sign that demand for its soups, sauces and meat cold cuts are likely to remain subdued as customers digest past price hikes.
The company has wrestled with weakening organic sales over the past year, hit by a volume decline in its North America meat business, as well as a shift in preference to cheaper private label brands by cash-strapped customers in the face of sticky inflation.
Packaged food peers Mondelez, McCormick, Hershey and PepsiCo have all flagged softer volume growth in their latest quarterly results.
The Heinz sauce maker’s quarterly volumes were down 4.4 percentage points in the fourth quarter, driven by weaker demand in North America, while prices rose 3.7 percentage points across Kraft Heinz’s portfolio.
However, Kraft Heinz CFO Andre Maciel said the company expects a positive contribution from price throughout the year, with volumes inflecting positive in the second half of the year.
The Jell-O maker forecast annual organic net sales between flat to 2% growth. It posted organic net sales growth of 3.4% in 2023.
Kraft Heinz expects its adjusted gross profit margin to expand in the range of 25 to 75 basis points in fiscal 2024, slowing from a 240-basis-point increase reported in 2023.
Higher promotions to pull customers and efforts to limit pricing in a bid to remain competitive is likely to take a toll on its margins.
It posted net sales of $6.86 billion in the three months ended Dec. 30, compared with analysts’ average estimate of $6.99 billion, according to LSEG data.
Shares of the company, known for its Kool-Aid drink mix, were down 1% in premarket trading. The stock was down about 9% in 2023.
(Reporting by Savyata Mishra and Anuja Bharat Mistry in Bengaluru; Editing by Shilpi Majumdar)
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