Kraft Heinz Beats Earnings Estimates as Condiment Sales Grow

Kraft Heinz Co., formed by a merger of two U.S. food giants last year, posted first-quarter sales and profit that topped estimates after the company cut expenses and made inroads with new condiments.

Excluding some items, profit was 73 cents per share in the period, the company said in a statement Wednesday. The average estimate of analysts surveyed by Bloomberg was 61 cents. Revenue for the quarter was $6.57 billion, beating an estimate of $6.48 billion.

Kraft Heinz has made a bigger push into mustard and barbecue sauce over the past year, aiming to build on its leading position in ketchup. The company also has updated some of its products to adjust to changing consumer tastes. That’s included removing artificial colors and flavors from Kraft Macaroni & Cheese and launching an organic version of Capri Sun juice. The company’s food-service division got an additional boost from a partnership with Burger King, which recently started serving Oscar Mayer hot dogs.

Kraft Heinz, overseen by the famously thrifty private equity firm 3G Capital, is showing that it can increase sales in addition to reducing expenses, said Brittany Weissman, an analyst at Edward Jones.

“They’re starting to be more than just a cost-cutting story,” she said. “Sales were pretty strong across the board.”

The stock rose as much as 4.6 percent to $83.67 after the results were posted late Wednesday. Kraft Heinz had gained 9.9 percent this year through Wednesday’s close.

Cost-Cutting Zeal

Kraft Heinz, which generates more than 70 percent of its sales in the U.S., has relied on staff reductions and other belt-tightening measures to cope with an industrywide slowdown. The strategy is a hallmark of 3G, which was founded by Brazilian billionaire Jorge Paulo Lemann.

The investment firm teamed up with Warren Buffett in 2013 in a buyout deal that took Heinz private. They got together again last year to engineer the merger that created Kraft Heinz.

Chief Executive Officer Bernardo Hees, who ran Heinz before heading up the combined company, cut more than 7,000 jobs in the 20 months after taking over at the ketchup maker. Since the merger, Kraft Heinz announced factory closings and more than 5,000 job cuts. The company has said it will eliminate $1.5 billion in annual expenses by the end of 2017.

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