The Kraft Heinz Company (KHC) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody. Thank you for being here. My name is Alexia Howard. I've been the U.S. packaged food analyst at Bernstein here since 2005. It's my great pleasure to welcome in-person, Miguel Patricio, the CEO of Kraft Heinz since 2019. And prior to that, he was the Chief Marketing Officer at AB InBev. Certainly, my gosh, it's been a very intense first few years and obviously, not only dealing with the pandemic, but now all the supply chain disruptions that have been hitting the industry over the last year or so. But also, there have been a lot of success stories at Kraft Heinz, particularly over the last year or so as the company has started to introduce a better long-term earnings growth algorithm. They've moved up in the power ranking surveys from Kantar Retail, which really sort of reflects an improving relationship with the retailers here in North America, also being recognized as one of the top marketers across the whole of consumer by the advertising age group. So there are certainly signs of improvement despite some of these challenging headwinds for the industry. Also, most importantly, the company has been returned to its investment-grade rating recently and that's obviously helped out a bit as well. So with that, I want to welcome Miguel to the platform to give some opening remarks. Thank you for being here.

Well, thank you for staying with me today. It's a long day. I opted for talking a little bit, not seated because I've been seated the whole day and saying the same things. So hopefully, you -- I can still be meaningful on what I'm going to say because I'm sure you are tired. I am a little bit, but I had a lot of coffee, so I'm good. Just want to share with you a little bit of the story that we've been going through since the last 3 years and what we have ahead of us in a summarized way. And then answer the questions of Alexia for sure to go further on what I'm going to tell you. Basically, 3 years ago, our company was in the bottom -- was in the bottom of the industry, was in the bottom in terms of morale, morale was very low. Turnover was very high. And it was even hard to identify areas that we could consider excellent areas or parts of the company and at the same time, when you achieve the bottom is where you see opportunity, right? You cannot go even further. And I had the pleasure, the honor to join the company at that time. And we've been working hard to get out of this bottom. And I would say that today, we feel that we are a good company. We are no longer at the bottom. We are a very different company. We are good, and we are proud of the journey. But good is good, and good is not good enough. We don't want to be good. We are afraid of the complacency of being good. We think we can be great. And to be great, it's a very different game, and this is what we expect to be ahead of us. Recently, we had our internal convention -- leadership convention, and the theme was exactly that was we choose greatness and defining what greatness can look like and continue this journey has a lot to be done. And we've done a lot. I mean, in a nutshell, if you allow me to tell this story, we -- today, we have a very engaged organization. We didn't lose a single talent of what we consider talent in the company in these last 2 years even with the great resignation that we are also facing. We have a really engaged organization with great talent that we lacked 3 years ago. We hired a lot of great talent. And that, by the way, was my #1 fear when I joined the company, not anymore. We changed a lot in what concerns the consumer. We define priorities, we define where we would grow and where we would not grow. And what we would do with these brands and these categories where we would not grow. We doubled down on brands and categories that we thought we could grow. We deployed investments under these brands. We increased marketing overall as well. And today, we do a much better marketing than we did in the past. Alexia mentioned that we were -- by advertising age this year, we ranked #4 marketing organization in the country or in North America. We were surprised with that. We were honored with that. And that reflects a big evolution, a big change. And until today, we are proud that we do really good marketing, very different. We have today a digital marketing organization that we didn't have before. We have 9, we call The Kitchens, which are internal digital agencies throughout the world that deploy content daily in an incredible way. Nothing of that existed 3 years ago. We were a 30-second TV commercial type of organization in communication. Still a lot to be coming in marketing. We definitely have to improve innovation and we'll do it. On the customer side, we were as well a very transactional type of company. I mean, I'll sell you ketchup and you buy ketchup, and I want to increase my share. And the customers were telling us that we had to be much more forward thinkers. Remember the day that one of the big retailers in U.S. that I visited on first week, they said, why when you come here from Kraft Heinz, we talk about the last 3 months instead of talking about the next 3 years, never -- we'll never forget that. We are much closer to them today. We have a much better very new, different team today in sales and much more ambitious, much more technical. In supply, we announced at the beginning that we would have $2 billion savings that would feed our growth, and the savings would come from variable costs, not from fixed costs like in the past, by doing better, by continuous improvement, by improving efficiencies in our factories, by reducing waste, by reducing energy consumption et cetera. We've been successful on year 1 and year 2. We are on the way to achieve our targets on year 3. And so I think that we are positive that we have -- we know how to get to this $2 billion in supply, despite the fact of everything that you know that is happening in supply in the last 2.5 years. We also -- on the financial part, our debt was about 4.7x EBITDA, today it is around 3.1, 3.2, very different situation. We lost our investment grade. We got it back in record 2 years, which is awesome. So we are back in the game, excited to get out of the bottom, proud to be good, but super excited with the greatness that is ahead of us. On a nutshell, Alexia, now you can come with all your questions. Thank you.

Thank you so much. We appreciate the comments on [indiscernible] the background. So Miguel, you're coming up on your 3-year anniversary at the helm of Kraft Heinz. What are the biggest changes that you have implemented since you joined the company?

Alexia, I think that the biggest changes come from the fact that we changed the business model of the company. I mean until 3 years ago, the business model was very clear and was about inorganic growth -- fast inorganic growth and reducing costs transferring it to bottom line, generating cash and buying the next company. This could have worked. I mean how many companies we know that we have been successful in that sense, but they were not -- I mean, we were not successful. And basically because to buy, someone has to sell. And if you rely only on inorganic growth, that has risks, right? And I think that inorganic growth is great, but it's not inorganic or organic. I think all companies need to have an organic mindset, an organic growth mindset. And then inorganic should come to accelerate the organic growth. And that's what we did, right? But that's a big shift because when you now have to grow organically, that now the capabilities have to be different, the leadership has to be different. But the leadership was basically financial leadership in all parts of the company. But now we need marketing, right? We need to be great in marketing, we need to be creative, we need to know [ which ] sites, we need a great R&D to do innovation, right? Sales become critical and the sales organization, promotional budgets become critical. And when we say that we are not going to be relying on reduction on fixed costs that we need variable costs to be reduced, it's a big shift as well. Now it's a different game, right? You need to get better. How do I improve the efficiency in my lines? How do I reduce water consumption? How do I reduce waste? These are more long-term things. And so the company had to be [ retuned ], right? It's a different mindset. I mean, we kept the fundamental parts of the culture, which were already strong ownership, a real belief on meritocracy and a big ambition, but the ambition be wired in a different way. And then we had to build new capabilities.

Fantastic. A question that's coming from the audience that's related to all of this theme. Would you characterize the company as centralized or decentralized? How are employees at various levels of the organization empowered and may be incented to move the needle.

Yes. This is a very important question. And that I think we are becoming more decentralized today, we were already more decentralized and now we are even more decentralized, especially in the U.S. We recently -- so in this new journey of greatness, that we talked about AGILE@SCALE, hopefully, some of you read about it. One of the things we did was to reduce the layers of the company to make people more accountable and we reorganized the company in certain areas of the company in agile pods -- multifunctional agile pods. We have today 25 agile pods of 12 people each working to solve or to bring the biggest opportunities of the company or to solve problems. And that is, by definition, much more -- it cannot be centralized to make that work. So I think that we are far more decentralized than in the past. I think we are much more forward thinkers as well. I think that we were always looking at understanding the present looking at the past and now we are more obsessed about predicting the future and getting there.

Can we stick with the culture and dig a little bit more into that? So Kraft Heinz were a massive cultural upheaval, as the previous management team took the helm back in 2013 to 2015. There was a lot of employee changeover, they've just a very different way of running the business. And then once again, things have shifted under your leadership to become more focused on rewiring for growth. What are the benefits and challenges of having both of those types of shifts under your belt, that level of upheaval culturally, are there benefits to having gone through that as well as challenges in your view?

I think that the biggest shift in culture was when 3G acquired the company. I mean that was a big shift in culture. I think that under my responsibility, the principles again on ownership, on meritocracy, on big ambition -- the principles are the same. I think that we added a new business model. And with that new capabilities that we needed. I'm a big believer on the principles, but I just think that to get there is a different way.

Excellent. Okay. Now it's hard for us as outside investors, to really get under the skin of what AGILE@SCALE really means at a practical level. Could you describe what has changed in terms of how the company is managed? Where and how are resources deployed? How his decision-making changed? Are there any tangible examples of what you can do now versus what you weren't able to do a few years ago?

Sure, Alexia. Look, as I was saying, we got out of the bottom. We celebrate the evolution we had. We achieved targets in the last 2 years. We achieved our budget, which the company had not achieved for a while, and we feel good about that. But at the same time, I think the danger is to become complacent about that. I mean, now we achieved targets. So we are good now. And the majority of people in the world good is good enough. I mean, being average is good, right? And that's very dangerous. And we have to stretch, we have to go to the next level. And that's why we're saying now we have to go to greatness. Greatness is different from good, good is average, right? And greatness is being one of the best, and that is the ambition that we have. To do that, we need to get there in a different speed. And to get this different speed, we have to reengineer the company. And that is what we call AGILE@SCALE is reorganizing the company. I just mentioned that cutting levels, making people more accountable, make them working in pods to solve big questions, multifunctional pods. And at the same time, is looking for partnerships that can help us accelerating this growth and get into this greatness that we are -- that we're talking about without having us to [ reinvent the wheel ]. Let me make some examples of some partnerships we announced recently that excite me immensely. The first one was weakness that we had, plant-based products. So we didn't have any plant-based product in our portfolio. I mean we have a lot of products coming from agriculture, which in essence, are plant-based. We are leaders in -- our #1 product in U.K. is beans, which by definition, is a plant-based product. But we didn't have -- we have dairy, we have meats in U.S. and that is, at the same time, a big opportunity and a big threat. You see what happened in milk category, 20% of category. Now it's plant-based just like that, right, in 3 years, right? And so we could do this in different ways. We could acquire a company in plant-based world that, as you know, are not in a decent price. We would pay billions for that, which we didn't want to. We could try to develop ourselves, right? But we were behind and took a lot of time and resources. Or we could find a partner that could complement us and we could complement them. NotCo is a company that is -- has incredible capabilities on artificial intelligence on developing plant-based products. The problem is that they don't have scale, they don't even have a strong brand. right? And so we got together because we can give them the scale, we can give them association with our brands, and they can give us in a very fast way, solutions for our portfolio. So that's a great example of a partnership of gaining velocity. More recently, we announced a partnership with Microsoft. I love this partnership. I think it's incredible. Again, a partnership [ with ] both sides win. Their growth comes from the cloud, we have a big project ahead of us to have more and more cloud for the future, and they have incredible knowledge, incredible talent, and that's what they are giving us. They're giving us talent to solve big problems. And I'll give you 3 examples of things that we are working right now on: Number one, promotions, right? So promotions, we have -- literally, we spent billions of the dollars in promotions, billions of dollars in promotions. We are better than we were 3 years ago. I mean we are much better. We understand -- now what promotion is better and what is the better ROI. But on average, I mean, we are using with them artificial intelligence to maximize this promotional budget. What is better in New York in the convenience store is not better in California on a [ Hispanic ] supermarket, right? And so by analyzing all the data that we have we can maximize this budget in a much better way, in a faster way. Again, we could get there. It would take much more money, much more time. Number 2 example. We are working with them on planning much better in our factories, supply chain. First example, revenue management, second example on supply chain. They are helping us getting all the data available from Kroger's, Walmart's, Albertsons' on store by store, product availability, distribution, pricing, together with their warehouses with our warehouses, with factories, with all this complexity and bringing this to a much better way of forecasting and planning. This will have incredible results. I mean, for the clients, less out of stocks, right, better revenues for us, the same plus better core working capital, less waste, more precision. And the third example that they are working on with us is innovation. We've been -- on innovation, we are still not on the good part, we are still behind good. We have to get to good and then to great. And we still take a lot of time on innovation. And the success rate has not been the best. So we are working with them on these 2 fronts: on reducing the timing on innovation and on being much more accurate on the success of innovation. Just examples, but these are -- we have other partnerships that I could talk about, but I will take a lot of time. But I think that this concept of partnership is great in this journey of agility. So it's not only about reorganizing, rewarding the company from a functional standpoint, but also on how to accelerate and find solutions for the opportunities and the problems that we have.

It certainly makes sense to me. I was thinking about the industry and the idea of becoming more like -- almost like the tech companies as a platform-based where you are partnering with other groups to maximize sort of knowledge and as you say, agility as well. I've got another few questions that have come in from the group. You're a chatty bunch this afternoon, which is great. So KPIs, key performance indicators. What key performance indicators do you measure at lower levels of the organization? And how have these evolved in the recent past?

It's a good question. I can tell you a couple of them that we changed that are very important to change. I mean, one that was extremely important was we had -- in my opinion, we had a distortion in the idea of ownership. I really believe on ownership. They already really believe on ownership, but incentives can distort the idea of ownership. So we had 75 entities inside the company 3 years ago, 55 only in the U.S. So there was the entity on cheese, the entity Kroger, the entity Walmart. And these were run almost as business units. I mean, they had their objectives, their targets, their incentives based on that part. So basically, the ownership was divided in many small parts. And when you do that, you cannot maximize the whole because if you are doing very well on Walmart and you say, okay, let me take money from Walmart to put in Kroger. You are either penalizing one side or giving more to the other side. And so you had a company fighting for resources, and the enemy feeling I had was that was inside the company instead of outside the company. I think this is wrong. I mean ownership is about maximizing the company is to put the company ahead of yourself. So we only have 1 entity today. And so the targets are for U.S. and that changed dramatically the way that people were or are today working together. I mean, it was very silent for this reason. And today, there's much more -- they cooperate much more. Still not where we have to be because that's also almost a cultural thing, but in a much, much better way. Maybe that was the biggest change that we made. There are many other ones on incentives and KPIs that change, but maybe this is the most transformational one.

Great. That's super helpful. On the -- you were talking earlier about innovation, and somebody has asked, can you be more specific or discuss the change in R&D? What percentage of sales is coming from new products? How are you measuring the success of your R&D investment?

So one of the things we did on R&D. R&D was -- we didn't have a head of R&D. We had [ polarized ] by these entities, right? So there was the R&D in meats and the R&D in cheese and the R&D -- and a lot of people in charge of R&D. And basically, they were order takers, right? So the brand manager comes and says, "I want 10 innovations on [ gello ] and these are my ideas. And so let's do it." They were more order takers, very low levels of the organization. We now have a head of R&D that is discussing the strategic direction of what we really have to innovate and what do we have not. He is a stronger [ voice ] in R&D. Without talking about numbers, I'll tell you about my ambition. We want to be -- to have innovation increasing threefold, 3x from where we are today for the future. So a long way to go. We have to be 3x more effective on a creative innovation. This is another very important thing. So talking about KPIs in the future. We made a mistake to put -- the company made a mistake to put net sales coming from innovation as a KPI. And if you just do that, you are going to have people doing a lot of stuff that is not accretive. And we lost a little bit the grip on that like a lot of line extensions that just made the supply world more complex and really didn't change the needle. So it really needs to be with ambition of triple but being a creative cannot dilute the rest of the portfolio.

Thank you. Supply chain. Everybody is talking about it at the moment. Can you talk a little bit about how the company is handling the supply chain disruptions and input cost inflation? Where are the biggest pain points for you? And is there any light at the end of the tunnel?

Supply chain is the hardest part in the [ comp ], not for us, but for all industries at this moment. We're talking about the great resignation. This is where the big turnovers are in procurement and operations everywhere in the globe in all industries because people have to work literally 24/7 in a level of stress. I mean, they've been working on crisis mode for 2.5 years for different reasons. At the beginning, because of contamination in factories, then literally for lack of raw materials, right? And I think that supply today, there are 3 big qualities that we need to have, right? And first one is resilience to survive in this environment. And we need -- for resilience, we need to do a lot in the sense of inspiring this crowd. The second one is predictability. It's hard to predict today this world but predict -- predictability is critical. I'll give you an example. A current example, it's happening right now. So we predicted that we would have -- we would face a shortage of bean gram. Bean gram is the product that gives consistency to ice cream and to cream cheese -- Philadelphia Cream Cheese. And basically because the crop that comes basically from Morocco was very bad, and we had good intelligence to understand that this would be a problem. And so we acquired a big inventory of bean gram, believing that we would have a shortage, that's predictability. The result of that is we're gaining a lot of share in cream cheese because we predicted well. And the other one is adaptability. I mean, with shortage on raw materials, you have to adapt every day and very fast. Our salad dressing was made with sunflower oils. And 80% of that is made [ what ] was coming from Ukraine. So just we have to adapt our farmers. We have to adapt our labels. This level of adaptability on every day, we need to be very fast. And so I think that in supply, yes, it's been crazy. It's been in crisis mode. We have -- we need to have resilient people with adaptability and predictability skills. It's been very high. It's been very high. We have a burn out crowd that needs to be reenergized every day. It's been higher.

Yes. I think it's been hard for everyone.

Everyone, for everyone.

Can we shift to pricing as well? Can you talk about how pricing power has evolved over the past decade and the push and pull between yourselves and the channels? And I guess linked to that, if the consumer weakens and trades down to private label, are you well positioned to fund private label [ well ]?

I'm not sure about the last decade, that's a lot of time. I'll give you a more recent perspective on that. Since the pandemic so since '19, we increased in U.S. prices by about 13.9%. And the good news is that we've been -- we have a great followship both from other brands and from private label. Private label in this period increased by 13.7%, so basically the same gap as we had before. And that is good news, and that was not the case before. Normally, private label never increases as much as brands. So first, we are happy that we led these price increases in the categories where we are leaders, not everywhere, we are not leaders in coffee; we follow. But in the categories where we are leaders and we are leaders in the vast majority of our business, we led this price increase. We were concerned about that. Followship has been great. Why followship has been great especially in private label? Because in the past, we never had a situation like this of inflation growing through the roof in all categories. And as a consequence, chains had the flexibility to -- okay, coffee increased, but price decreased. So I'm not going to increase on average, I don't have to increase. But the coffee producer had to increase because it's what he does, or she does. And so now these price increases are across the board, which makes it absolutely necessary the followship to be in much higher levels. And that explains, I guess, why elasticities have been different from the past. We are still not seeing big change from private label with the exception of categories that are really correlated to commodities. The good news is that we are far less dependent on commodities nowadays. We sold our nuts business. We sold our cheese business for that reason because we -- these were the business that were closer to commodities and to private label. And we thought that was very hard to give a competitive advantage to mozzarella slices or to peanuts to build this competitive advantage. So we decided to sell it. And so we reduced the dependency on categories that were private label. But we are seeing in categories where that are more correlated with private level like bacon, like meats, like cold cuts, but overall, we continue with incredible different levels of elasticity and with very high consumption in U.S. U.S. is 70% of our business. Different, it's different, what I'm saying in Europe, I can give you more color on that. It's harder to increase prices in France or in Germany, for sure, and in China. But these are smaller parts of our business. I think we've been successful in U.S. You saw that on the first quarter, you're going to see that on the second quarter as well. So hopefully, I answered your question. Did I [indiscernible] -- am I forgetting anything?

I think you did. Yes. No, we hit pricing and we hit private label. That's perfect. Can we move on to the $2 billion in gross cost savings by 2024, now when you announced that at the Investor Day a couple of years ago, it seemed a pretty lofty goal, particularly considering what the previous management team had done. And I know you talked about focusing on more on variable cost rather than fixed costs as perhaps they did. What were the biggest savings before you arrived? And where are the biggest savings that you've done?

Up to date.

Yes.

So maybe it was a lofty goal. Because it was an intention. We knew where this money was. We didn't know exactly the ZIP code, right? But we had an idea of benchmarks and what we could do to reduce variable costs in the company. I think that previously, the focus was more on fixed costs. And now the -- there's not a lot of space to decrease fixed cost in supply. Actually, I think that sometimes to improve your variable costs, you have to increase your fixed costs to improve your -- the performance in your lines, the efficiencies in your lines, sometimes you have to increase maintenance levels, right? So that's what we said in our mind, the most sustainable way to reduce costs and the only one in supply is to do better every day. It's the mentality of continuous improvement. It's not about cutting fixed cost because fixed costs, you cut only once. And if you cut again actually, this can increase your variable costs, right? So if you put too much maintenance without changing processes, suddenly, you have less productivity in your lines. But if you have a program to invest in efficiencies and every day, you can do that. It's possible by raising the bar every year by doing better every year, but investing in technology, by investing on maintenance, by investing on your people. And that was the belief. So where are these $400 million coming from? From reducing waste. We reduced almost $150 million in 3 years. We reduced water consumption. We reduced energy. We reduced wages. Even under the circumstances that we were by planning better, by having less overtimes, not in the peak of the pandemic, that was impossible, but overall. By doing better every day, having better quality in our factories, less accidents, et cetera. So continuous improvement is a very different -- it's a mindset. And the skills you need for a supply organization are different. You need different people, you need different thoughts, different thinking. And it's a long-term thing. I mean, we announced $2 billion. When we get to the $2 billion, we're going to announce another 1 because you can always raise the bar. Our efficiencies in our lines are better than they were, but they are not at a world-class level. There's still a lot to go and a lot to improve.

Thank you. Being dragged back to the retailer discussion because I think people are curious about it. How are discussions evolving with U.S. retailers on mitigating inflation impacts like reformulating pack sizes? Pricing we've talked about. Can you provide examples on [ the ] categories?

Sure. So pricing, let me start again building on price. I guess I'm already confused because I'm saying these things from the morning, I don't remember I said it or not. But we anticipated prices. We lead prices. And from everything in U.S. that we wanted to do in price, we already announced and approved 92% of the price increase. We still have 8 to announce and to bring to the table, but we are very confident that we're going to be successful on that as well. Maybe if we had waited to do that, it would have been harder at this moment. So I think that in that sense, we are in very good shape. But it's not only about the price increase. Price increase is just part of the equation. And if we only rely on price increase, we're going to have problems in the future. I'll mention 2 other things we are doing. You mentioned packaging. So we are waiting -- we're working right now on renovation of our pack assortment, both working with out-of-pocket solutions, so smaller sizes, smaller packs for Kraft Singles cheese, smaller packs for Mac & Cheese, smaller portions that reduce the out-of-pocket. And also economy packs, the opposite, 12 packs of Mac & Cheese, 12 big bottles of -- huge bottles of ketchup or multiple packs of ketchup, and we are doing this on the vast majority of our -- not the vast majority, on all our core products. So this is a big change, getting ready for eventual recession, which we are -- to make it very clear, we really don't see any signs of recession at this moment. Consumption continues very strong. Had a strong first quarter, continue April, May strong, April, May from a consumption standpoint. But it can come, and we have to be ready for that. Another thing we are doing that I'm excited about is related to communication. I -- as always, I'm surprised on how fast food could bring such value propositions. I mean, their value meals are incredible, right? How they bring a meal for $5 that brings fries and cokes and burgers. And so what we found out is that we have even better propositions from a value standpoint if we communicate it the right way, right? I can have a Mac & Cheese for $0.75 of a $1. That's a meal. I can have a grilled cheese with bacon and mayo for less than $1 or for $1. I can have meals for an entire family for lunch, a lunch for entire family of 4 for a week for $20, right? And by the way, I have the ham, I have the ketchup, I have the cheese. And so I can really provide the ingredients, I have the cucumber. I can really provide the elements of that meal for the families. I just never communicated that. And we are testing these right now because we always communicated the pack, singles pack, 12 slices, it always costs money. It's -- but we never really explored how effective we are from a value standpoint when you think about meals, right, not the pack, but meals. And we are testing this right now. We are -- I'm very excited with that possibility. Just think about what it does for a value proposition in fast food. And we are -- we have far more affordable solutions for that than fast food.

It might be linked to this that we're discussing right now, but how important are direct-to-consumer efforts across the company, and why? What are your ambitions in that area?

So direct-to-consumer. Great that we are asking this question. I mean we had nothing direct-to-consumer. And we had a hard time on imagining how we would do that. And we start flooding with that possibility in U.K., in Australia at the beginning of the pandemic by offering solutions to consumers, just selling direct-to-consumer solutions or like for baby food, for exclusive new products, for merchandising and that was great for us in terms of data, learning from consumers. But it's not really big from a sales standpoint. We made a decision to acquire a company recently in Germany. It's a spice company. We never worked with spices. It's a new area, but it's under the Taste Elevation platform that we have, right? And the great thing and the reason why we bought this company is first because they have 70% of the sales in direct-to-consumer. And we visited the company, we saw that it was a very different type of company. They were born digitally. They were developing formulas on -- through artificial intelligence. They were selling 70% of spices, spices directly to consumers. They had an amount of followers on Instagram in Germany that was higher than ours in -- for Heinz in the entire Europe. They were converting consumers directly to their social networks and an amazing loyalty and love for the brand. We are learning a lot from that. So that was an acquisition we made to learn more about capabilities, still believing that we can launch this -- just spices across the world, specifically on developed countries where our strength is, but more for the capabilities. And I can say that we are very happy with that acquisition because we are learning a lot.

Great. Thank you for that. The idea of that number of consumers at a 1 tiny digital company in Germany being bigger than Heinz coming from the U.K., that's impressive.

It's great. We are launching right now in U.K. by the way.

Great. Okay. So as we're coming into the home stretch here, I've got a few more. What are the biggest avenues for growth for the company by region, brand and product category, just the high-level messages?

Yes. [indiscernible] already said. So I think that Taste Elevation is 30% of the business. Profitability standpoint is more than 30%. So it's a part of the business that is very profitable. It's growing, it has momentum, it's global. It's the part where we have our best and most important brand in the company, Heinz. It is a very healthy brand in every part of the globe. It's not only about Heinz, but the most important brand inside Taste Elevation is Heinz. Second, foodservice. I mentioned that foodservice, we have, again, great momentum. It was always a tactical thing of selling pouches of ketchup in the past. Now we are looking at it as a way to launch innovation, launch in foodservice first, generate penetration and then bringing these solutions to retailers. Our #1 product in foodservice is Heinz Ketchup, #2 is Philadelphia Cream Cheese. Not a coincidence it's where we have the highest penetration in households in the country. Why? Because we teach consumers how great these products are through foodservice and then they buy it on trade. Although what I'm saying is very simple, that was never really the thought behind it. Thought behind it was to sell more pouches of ketchup. And I think that this is basically a huge opportunity. We are growing 17% year-to-date in U.S., we are growing 30% year-to-date in international zone, both parts growing market share in foodservice. Number 3, the big avenue for growth are emerging countries. Again, not a coincidence that 3 out of the small acquisitions we made last year were in emerging countries, 2 in Brazil, 1 in Turkey. We have, for the 3rd year in a row, double-digit growth in emerging countries. We are excited with that possibility. It's just 10% of our portfolio. We can have a much bigger slice of our sales moving forward, both by growing organically or by growing inorganically as well to help the organic growth. I was in Brazil. Came back yesterday from Brazil. The acquisition we made is make us leaders now in ketchup in the country, leaders in mustard, #2 in mayo. So suddenly, a country that where we didn't have really scale, now we do. And they were strong in the South. We were strong in Southeast. Huge opportunity now to cross distributions and grow in a faster way. So that's what I meant about accelerating the organic growth. We already have great organic growth in the country. Now with this acquisition, inorganic; we can accelerate the organic part of it.

Perfect. We have 2 minutes left. What do we as investors not understand about Kraft Heinz as a culture?

No, that's -- thanks for asking this question. That's my preferred question. We were 3 years ago on the bottom. It's true. We were on the bottom. We are no long on the bottom. As I said, we are a good company today. Huge opportunities moving forward, continue this transformation, get to greatness. But I think what I still see people writing and talking about is like still positioning us on the bottom. And repeating examples of things that we were 3 years ago. That is really not the reality today. I hear people saying, you are very exposed to private label. No, we are not. Now we sold the 2 biggest exposures on private label. [indiscernible], you don't have focused on the consumer in marketing. We are not, we are being recognized that we are doing great stuff with consumer. So this $2 billion on savings. This is not possible to get, we're getting there year after year. So you don't have good relationship with customers. Now that's not true. We were just ranked 5 best sales organization in America, and we grew big time in Canada as well. That's part of the past. It's not part of the present. So we are not on the bottom. And I think that part of the market still is valuing us being there. If the price of a stock is not what you are today, but the expectations or the expectations of being in the future, I think we should already be in the greatness part, but part of the market is still putting us on the bottom. So I think that's why you are not seeing. It's -- and a big part of it is our thought because I think we are not communicating well enough to you. Pandemic was part of it. I mean, I think that being on Zooms and Teams is a much harder way to be communicating to you. I'm going to take every little moment moving forward to be closer to you and to show you and to share with you to be much more transparent in that sense of the progress that we are making. So I think that's how I see it.

Well, that's a fantastic way to wrap up. I really appreciate your time and sharing how much progress the company has actually made. I mean the -- as I say, there are so many third-party indicators now that things are moving in the right direction. So thanks for the time. Great to be here in person, and we'll do it again soon, I hope.

Thank you, Alexia. Thank you very much. Thank you.

Thank you.