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

Welcome back. Good afternoon. I'm Steve Powers. I'm Deutsche Bank's U.S. consumer staples analyst, and I am thrilled to welcome back The Kraft Heinz Company to our conference. With us today are Chief Executive Officer, member of the Board, Carlos Abrams-Rivera. Hi, Carlos; and Executive Vice President and Global Chief Financial Officer, Andre Maciel.

We are going to dive right into questions, just have a little chat. So Carlos, I'm just going to start with you because you've now been CEO for, I think, almost exactly 6 months, so you're a veteran in the role. I guess when you think back on the 6 months, because they've been an actually pretty eventful 6 months for everybody, what have been maybe your biggest learnings, your biggest takeaways as you -- and how you're feeling as you look -- I guess how you're feeling about the role and how you're feeling about the outlook for the balance of the year and I guess '25?

First of all, again, thank you, Steve, for having us here. It's always a pleasure to be with you. I would say one thing that I think I brought in as a learning coming into this job is that every successful transformation depends on the people you have around you. So I feel very encouraged because I feel like around me, I have this great group of leaders. And half of them, we promoted into this new job, into this organization, and they were all people who have been internally promoted. So they're only -- I feel like I know them, they have also gone through the transformation and built the foundation of Kraft Heinz that now can help us take it to a new level. So I think this idea of surround yourself with people who you trust or you feel like can be here for the long term and can be help us shape the new company. In terms of the learning, it's interesting. You're right that there's been a lot of changes happen macroeconomically, globally, politically as well as even within our company. At the same time, I feel very confident about the changes we have made in order to improve our overall success. And I think it starts -- if I talk about people, one of the things we did initially was simplify the organization by us being clear on removing a layer of international in order for us to have more operational discussion on my table. So we went from 2 zones to 4 zones in a way that elevated a number of people in the company so that we can actually talk about how we go after opportunities and challenges in a much better way. And I also think that what that has resulted is also being a much agile company in which we can, again, see opportunities and address them quickly as we go forward. And I think the one thing that maybe we haven't changed but I now have continued to drive the importance of it, is the idea of how do we continue to evolve our culture. Culture is one that very much near and dear to my heart and I find is very much a competitive advantage for Kraft Heinz, the sense of ownership, ambition and meritocracy. But we also have added now the elements about the behaviors underneath that. So when we talk about being an owner, it's also about making sure we embrace the red, the idea that we need to call out the things as we see them, that we truly are understanding what the challenges are and that we don't wait for them to get better on their own, that we actually discuss them and deal with them quickly. And the second part is, how do we truly leverage the scale of Kraft Heinz? So we talk a lot about how we are going to simplify the company and make the company feel smaller. And that means creating a level of collaboration across the company so that we can get the benefit of that. And some of the -- there's been 2 structural changes that we have made in order to facilitate both of those things, actually 3. One is we brought the zones to my leadership team. Number two is we created an omnichannel sales officer in my leadership team so that capabilities and execution that happens across the company, we can grow it faster. And then third is we created a Global Chief Growth Officer in order to take advantage of opportunities that we see in marketing and how we are going to grow and renovate our brands as we go forward in a uniform way across the company, too. That's a little bit of what we've been doing now in the last few months.

And I can testify that your celebration of culture and collaboration is very visible on your LinkedIn feed. It's consistent.

Thank you. I appreciate that.

Andre, maybe a similar question to you. I guess it's been a little over 2 years since you took on the role of Global CFO. Maybe what do you think the biggest accomplishments have been for the organization? And how are you approaching the path forward?

Sure. First of all, I like that we have been delivering results consistently. So during the last 2 years, we were able to deliver on algorithm and numbers, our top and bottom line, so start with results. Like a lot that we were able to have our balance sheet in order, so our net debt is at the level that we want right now. We're able to recover investment grade and got upgraded one more time to BBB, which is the place where we feel good and where we want to be for the time being. Our cash flow and our balance sheet got to a position that now we have excess cash, which we start to redeploy in terms of more returns to shareholders. We got authorization last December for our first-ever buyback program, which I think demonstrates not only how strong and solid our results have been but also have the Board behind us to support that for the first time, all of that while maintaining and increasing investments behind the organic business, which has been top priority for us. We have, in the last 2 years, increased our CapEx investments in a very relevant way. We're now at 4%, coming from close to 3%. We have increased market investments, R&D investments, technology investments, all of that to support the long-term growth. We have continued to evolve our operating model. Carlos just highlighted a few of those changes. I like that we introduced to the company the concept of economic profit because we think that's having discipline on return on invested capital, how we deploy our dollars internally. It pays back in the long run. And we have been reshaping the plans that we do and the amount of resources, being very disciplined with the top line growth potential and the economic profit return from each one of those businesses. So there's a lot to celebrate but there's still a lot more to do.

Yes. I mean I think this point that Andre just made about how we are growing the company differently, I mean, we were -- since the inception, the company was very much a one-dimensional company. For a long time, it was let's just grow the EBITDA, the bottom and cut/reduce our way to success somehow and thinking about the next acquisition, and that would be the form of the growth. When 2018, 2019 happened and some of those acquisition didn't pan out, then it was, let's just change volume. So let's spend a huge amount of promotional dollars [indiscernible] [ efficiently ] in order to drive the [ share volume ]. And I think we are a company now that is looking at both the top line, the bottom line as well as the cash flow. So -- and just to give you a sense for the fact that we also changed our compensation to support that in both the long term and in the short term so that all of our leaders are clear that, yes, we need to grow our share but we also have to make sure we drive gross margin. Even for the long term, we need to make sure we drive the top line, but we need to do it with the right TSR and we need to drive the cash flow. So we are now a company that I think is -- has the healthy tension of driving growth but growing profitably at the same time.

Yes. At the same time, [indiscernible] so all of those points taken, there have been some ups and downs in the past few quarters. Market was surprised in the fourth quarter with trade timing and retail inventory destocking. And then in this quarter, we've got the unplanned maintenance of Away From Home factory in the U.S. It's going to take a little bit of a dent on 2Q. What do you say to critics, Andre, maybe for you, who say that Kraft Heinz hasn't fully turned the corner to being the consistent deliverer of execution that you aspire to be?

Look, ups and downs are something that anyone is subject to happen as part of the day to day. The more important that despite that, we were able to deliver the results that we have set ourselves to do. We were within the guidance that we set up in 2023. We started the year again in line with our expectations, and we continue to be on track to be within the guidance that we have provided for this year. And I think more important that ups and downs happen is how we react to those. And we have been a lot more agile in how we respond to circumstances. I think just to name the specific example that you mentioned on the Foodservice manufacturing facility, I think we are coming out of that. This is already behind us and coming out of that faster than [ what you should anticipate ] which is good news, and that's a testimony of how the organization has evolved and matured and be able to respond to circumstances. Supply chain in general has been an area that we have a lot more stability. In the last 5 years, we have consistently overdelivered versus the expectations that we set to ourselves of the 3% of COGS. In fact, the initial expectation was lower than that. We raised expectation last year to $2.5 billion over 5 years. We have been delivering ahead of that last year. And again, we started ahead of that in 2024, so I think we are a different company and I feel good about where we are now.

Okay. Carlos, back to you. There are two topics that I know are important to you. I've heard you talk about them a lot, but I'm not still sure that the market fully appreciates them, that being the ownership-centric structure that you try to develop inside Kraft Heinz and then the Agile@Scale road map. Maybe just address those two points and try to bring people who aren't fully convinced over the hill.

Right. Let me start with Agile@Scale and then I'll go to the ownership piece. I think for me, one of the critical aspects of coming into the company is that it gave me the chance back 4 years ago when I started in the U.S. to look at how do we rebuild a company that didn't have a lot of the foundation of correct in the company. And one of the things we did is we looked at how those other companies have transformed themselves. And frankly, one of the things that we found is that using technology and digital tools was absent for most CPG companies. In fact, the people who have really transformed themself is indeed on technology, have been in places like pharma and banking, certainly software because they're native to it. So it gave us an opportunity to think, how do we bring that agile mentality and the methodology that you see many times in software companies, that you see in places like Pfizer and other companies where they are applying the sense of dedicated agile pods. So people who are not in the everyday business but very dedicated to how we're going to solve the particular problem, bring the methodology of design thinking into the challenges that we have. And we started with some -- about 8 pilots about 2.5 years ago in the U.S. Today, we have 34 different agile pods working in the biggest priorities that we have, everywhere from revenue management, logistics, manufacturing, marketing, innovation. And also supported by the fact that we have people who are data scientists, scrum masters developing our own AI models in order for us to accelerate our transformation. We've also now been able to teach people how to think in the agile methodologies kind of way. So when we do innovations now, we're thinking in terms of the way a software company does, which is we go in with a better version, we test that out, we continue to improve. And just because we launched something doesn't mean that's the last time we're going to touch it. We're going to continue to improve as we see from consumers, and we adapt ourselves better as we continue this program. But this sense of us creating dedicated teams with the right kind of capabilities inside the company, it is the cornerstone of us reengineering Agile@Scale as a part of our strength in the company. Having said that, Stephen, it's been mostly a North America endeavor until now. So part of my direction is to think how we're going to take this now to be a global advantage, not just a North America advantage. So that's a little bit about Agile@Scale. And by the way, people sometimes ask me, so how do you decide this is good money that you're investing here? So first of all, we are treating everything through the sense of the value that it creates. So every time that we have an opportunity to create an agile pod, we go through the discipline of saying, what could be the value that this captures? And if we go through the sprint process, if we don't see the value capture, then we stop the project and we dedicate resources to something else that has a better value. And then to your original question about the ownership, I go back to growing up in Puerto Rico, my dad had an 8-hour job but he also had a small pharmacy and that I worked every weekend and every summer. And for me, when I joined Kraft Heinz, what I loved is that there was all these people here, 36,000 people who were focused on treating the company like it was their own company. And I love the sense of ownership, and it's the same idea of how do we now make sure that every time that we are changing a process and we're thinking efficiency, that we're thinking this is my money. This is how I'm going to grow the business. This is how I'm going to make sure that I keep this company running for the next 150 years. So there is a sense of accountability that comes from being an owner of the company, that love of our company is something that we continue to promote. And maybe something that I haven't spoken about or talking about so much in LinkedIn is that it's also part of the fact that it affects our recruiting as well, too, both in terms of we have a strong training program, people who come out of college who are thinking globally about how they continue to be disciplined in terms of the culture that we are promoting. And also when we bring people from the outside, you'll find that there are people who have the right fit for the sense of ownership that we want to have in the company. And I think what happens is just like me, that people become very jealous of protecting their sense of ownership in our company.

Yes. Great. Okay. I want to pivot to the here and now. As you probably heard in your meetings today, all eyes right now are on the state of the U.S. consumer, the health of that U.S. consumer as it relates to Kraft Heinz and the broader food industry, the recovery of volume and organic growth. As I think about the last 12 months for Kraft Heinz, I think coming off of lots of pricing and SNAP benefit headwinds, it took pretty tangible efforts to improve volume share and market share. And I think definitely saw some progress in those metrics, but we're still waiting for the actual volume inflection. As we stand here in June, how are you feeling about the trends in volume, the trends in market share? And how are you approaching the back half?

So I think there's 4 questions there, Stephen. I'll try to -- let me break that down a little bit. First of all, I think in terms of the U.S. consumer, they're going to -- consumers are still looking for value, and we need to make sure that we provide that for consumers no matter where they shop. And certainly, they're shopping in more channels today than they were before COVID, which is part of the reason why we have increased distribution in club by 20% this year, in dollar stores by 10% this year to make sure that we are agnostic of where consumers are going looking for value. Part of the value creation is also making sure that we bring the right benefits, the right quality, the right differentiation with packaging, which we are doing as part of renovation of our core products. In terms of the actual results, what I would say is if you look at -- there are 2 categories that are, right now, driving a disproportionate amount of headwinds for us, and I can speak to those in a second. But if you take those 2 out, we would actually be growing already volumes in the most recent 4 weeks. So we said at the beginning of the year that we would expect to be in long-term algo by the exit of the year, and we still plan to do that and we will see volumes turn positive in the second half of the year. And I don't see anything that will sway me from having that same view today. There's 2 categories that if you look at the last 4 weeks and the last -- in the year-to-date, our volume in terms of units has been pressured about 3.5% is a negative, and it's almost all of it driven by Lunchables and Capri Sun. And in fact, between those 2, it's about 3.7%, so it's actually even more though. Now one of them we knew and we're planning in Capri Sun. So last year, we changed completely the formulation of our Capri Sun. We removed a huge amount of sugar. We put in monk fruit. And the reality is a number of kids just didn't like the taste of the monk fruit. Because it's with kids, we've spent some time working through the reformulation of those products, get the right data to make sure we have the right products in market. And those new reformulations with better tasting started shipping 2 weeks ago in the U.S. And in fact now, we're only getting the new formulation. We're going to new channels. So for the first time ever, we're taking Capri Sun out of the pouch into a club size that is starting to ship now also into the club channel in the U.S. We also are supporting it with marketing dollars. So this summer, you'll see us spend 3x the amount that we spent last year in Capri Sun. So we have a huge amount of support in terms of making sure we get the trial with the new product. We have the right formula now, and we are going into the new channels with different formats. So while it's a headwind right now, I feel good about the plans that we have going forward. The second one was Lunchables. And it's unfortunate that there was a number of misleading statement that was done by this group called Consumer Reports about 5 weeks ago at the end of April, in which they talk about how there was something in our products that weren't good for kids, which is completely misleading. And frankly, not only do I eat Lunchables but my 2 daughters have been eating Lunchables since they were kids, and now they're 21 and 20 and they're doing great. So there is a -- and by the way, the USDA also supported the fact that there was something completely -- everything is completely high quality with Lunchables, and we are better quality standard than anything the government ask from us. But it did catch fire with social media. It created a huge amount of pressure in the short term. So about 4 weeks ago, business were down about 14%. The last week, about 8%. So we are seeing now that the social media piece has not continued to drive the negative, but we're still cycling through that. Having said that, so those are things that -- that one in particular was outside of our control. What is in our control is that as we go into the back-to-school period, which is a critical time for us for Lunchables, that we have the right program in place, the right partnerships, the right support from a retail environment, and we are also spending twice the amount of marketing that we did last year. So we have taken that as a way to kind of reinvest in the category and for us to make sure that we are changing the dynamics that we saw in late April, beginning of May. But in the short term, it's created that issue. Again, you take that out, you actually start seeing the recovery of our volumes. I don't know, Andre, if anything you would add?

No, I agree. I think if you look at the trends year-to-date and month-to-date is minus 3.5% when you look at a unit standpoint. But as Carlos said, these 2 products, in particular, have [ presented ] more than 100%. So the rest of the portfolio has improved quite a lot. Stocking sell out here, which is encouraging as we have them years ago.

Okay. Great. I mean one of the, I guess, the corollary concerns is that if we do see volume, this goes back to some of the concerns on the U.S. consumer, that it will be tied to sort of overinvestment in price. And how do you assess -- how do you respond to that concern? How do you see that risk? Or is that a false concern?

Well, I wouldn't speak for every company. I will say for us, we have a disciplined approach to how we think about us driving volume. And that has to do with, again, making sure we have the right value and our products are worth it for consumers to spend behind. So the idea of us going to try to chase volume through any means possible is just not the company we want to run. Today already, you're seeing that our promoted volumes are less than they were in 2019. We're maintaining a discipline in how we're going through. And you asked me, Stephen, earlier about Agile@Scale. One of the products that we have and the AI that we built in-house was around revenue management, which allowed us to make sure that as we look at our promotion calendar, that we are focused on those things that drive high return of investment for us. So it prevents us from making sure we do dumb mistakes like in the past by just having the discipline on how we approach the pricing in a way that it is doing the right attractive thing for consumers but not putting in jeopardy kind of the gross margins that we want to maintain and drive for the company.

And I'd say on top of that, obviously, promotions can play a role in certain circumstances. For example, I'll give like pasta sauce and mayo. That category were very exposed to soybean oil that has a huge inflation the last couple of years. We've seen soybean oil prices really declining massively, and we saw a lot of the competition adjusting their prices accordingly following the commodity. We took too long to do that. We now have put that in place. We're going to start to see that in June. But that's a place where the promotions play a role because we just got out of the market, so now I have to go back to the right price points. But beyond promotions, where we're going to focus how our growth comes from is through innovation, renovation and distribution. So a lot of our growth in Foodservice and Emerging Markets relies on distribution expansion. We have talked several times about multiple opportunities still in this territory. And in the U.S., there is a lot of reliance on both innovation and renovation. We have increased market investments in a very relevant way in the past few years. Last year, we exited the year at 4.5%, ramping up from 3.9% in the prior year. So that's very substantial. We are now [ letting ] that money to work, which should pay back to us over time in terms of continuous leading brand equity. And we do have a lot of innovation and renovation hitting the market right now, as we speak. Maybe, Carlos, why don't you mention a few of these?

Yes. Because I think back to the idea of making sure that consumers are essentially voting with their dollars, things that they're worth for. For us, it's making sure that we bring products that we are continuing to understand, what is the benefit that they're looking for? What are the pain points they have? And we've done this program around design to value. And let me give you an example of Kraft Singles. Many years ago, the company decided they wanted to put vitamin D in Kraft Singles. We learned from consumers that they don't care about vitamin D in Kraft Singles. That's not why they buy the product. What they do care about is that when they open the package, half of the cheese may get stuck in the plastic. So for us, we said, let's take the money away from those things and let's put the money in making sure we have better packaging for Kraft Singles. That's a way for us to make sure we bring differentiation and renovation for our products. When we talk about our liquid enhancers, our MiO product, we know that consumers are -- whether you are in GLP-1 or you just want to eat whatever you want, everybody is drinking more water. So for us is, how do we make sure we bring renovation to the category by bringing more benefits, whether it's caffeine, hydration, and us continue to bring that differentiation to consumers. So you'll see that in some of our core products, not only in the ACCELERATE but also in the PROTECT platform. So a business like Jell-O, for example, which over the last -- so year-to-date, we're growing about 5%. Last year, we actually were able to renovate the brand. We're bringing zero sugar benefits to Jell-O. This year, we're partnering with the Girl Scouts. We're bringing new Hispanic flavors to Jell-O. So that idea of us continue to make sure our products grow with our consumers and maintain a level of insights. And then on the innovation side, which is a big driver of our volume as well, too, is being less about just launching things for the sake of launching but rather have disruptive innovation to have an IP behind, an intellectual property behind it. So where there is something like our 360CRISP platform that is we launched first with a product that is a grilled cheese sandwich that you put in the microwave. And it tastes like just like you grilled in the stovetop. We're taking the same technology and now apply it to Taco Bell. And some of the products that we have with the crunchy quesadillas so that you put in a microwave and it tastes just like it was baked. And that sense of us bringing innovation that is truly disruptive to the marketplace is what you're going to see more of. And I talked about those, but you can also [indiscernible] say about plant-based and how we have taken the partnership that we have with our NotCo business in order to create a joint venture in which we bring the know-how of AI-driven solutions on developing plant-based solutions to Oscar Mayer, to Kraft Singles, to mayonnaise, to Mac & Cheese. That is the kind of thinking behind our innovation now is platform-driven innovation that allows us to lever our scale with a unique point of view.

Great. We've talked a lot about -- most of what we talked about so far has been centered on the U.S., but you've got a strategic priority to expand and to lead growth through Emerging Markets. I think on the year, you're expecting double-digit growth again from Emerging Markets. When you think about the long-term opportunity, what's required to capture the opportunities that you see in Emerging Markets? And I guess any kind of incremental color you have on '24 would be helpful as well.

Yes. Let me start and then Andre, if you want to comment. First of all, I think easy to get seduced by emerging market. And I have spent probably half of my career thinking about emerging markets and lived in emerging markets. And what I would say is for us, it's about creating focus, first of all. So we have 4 specific markets that we are disproportionately driving our growth in Emerging Markets, so it's Brazil, Mexico, Indonesia, and China. And those are places where we bring essentially a Taste Elevation platform. So it's focused from a country perspective and it's focused on the platform perspective as well, too. And we have a significant amount still of penetration to go. And let me give you a sense from Heinz. The penetration in Heinz brand global is about 19%. Many of the iconic brands in which we can put Heinz in, it's more in the 30% range of penetration. So there's still a significant amount of distribution. And what I feel good about is that we are now creating a person -- part of my leadership team has a mandate of how we drive the way we [indiscernible] in Emerging Markets uniformly across all the businesses. So there is a level of capability and consistency about how we're going to grow those businesses. We already had a go-to-market model that allows us to say that we're going to be first, build distribution, bring our people in, then bring manufacturing in order for us to accelerate the growth. We are following essentially a same path as we think about those markets: continue to build distribution, continue to make sure that we are partnering with the right distributors, bringing our people in, then work in the manufacturing to make sure we grow in places like, again, Brazil, Mexico, Indonesia and China. So for us, we see that organization today is about 10% composed of emerging market. I think one of the things that I want to do over my tenure is how do we actually triple the size over the years. And it is really depending on us, things that we can control. It's the distribution goals, it's also continue to build the Heinz brand, it's also continue to build the Taste Elevation platforms in those particular markets. Anything I missed, Andre?

No. I think when you think about the Emerging Markets for us is primarily a sauces play, and it's primarily a Heinz play driving proportional growth. And there is a huge opportunity to build distribution. And there is an advantage on the Heinz brand internationally that the perception of the brand is on Western's next brand, which allow us to play in several different spaces in the broader sauces definition. And we have been having a lot of degrees of success by expanding well beyond ketchup.

And frankly, the beauty of our brand and our focus on Taste Elevation is that I don't have to go into emerging market and explain to people how to eat. I can basically say, "Whatever you're eating, whatever whole food you have, whether it's a sandwich, whether it's a pizza, whether it's pasta, I can make that bet." So in Brazil, if you eat your ketchup with your pizza, I'm not trying -- I'm not going to go to say the people in the Middle East, let me show you how you're going to ketchup with pizza. No. What I'm going to do is you eat a certain type of lunch. Let me tell you the sauce that we can sell you to enhance a particular product. So those are the things that, I think, for us, give us the flexibility and conviction that we can continue to grow in Emerging Markets as well, too.

Great. So enabling investments in Emerging Markets, enabling the technology investments you made. You've made sizable investments in R&D and marketing has been recovering gross margin. And it's been a pretty impressive 170 basis points this past quarter. Andre, as you look forward, a, how confident are you that, that gross margin improvement can sustain itself? And then b, how do you have confidence you can continue to make the necessary investments if the rate of gross margin starts to plateau?

Yes. So I think there are a few questions there. On the gross margin, first, I think we are proud that we're able to bring our gross margins now ahead of the 2019 level. And in our long-term algorithm, we continue to contemplate gross margin expansion. The assumptions that we have implied in the long-term algo, they are quite conservative. Essentially, we assume that we price half of the inflation like has been the case pre pandemic for the industry and that we continue to deliver 3% of COGS efficiency. We have been delivering more than that for the last 4 years but we are counting on 3%. That suffices for us to continue to expand the gross margin and continue to invest more in the business. Now in terms of investing more in the business, we mostly reset our investment levels. So we are now at around 4.5% in marketing. We believe sufficient level is somewhere between 4.5% and 5%, so we are pretty much there. R&D, we are at 0.6%. We want to be around 1%, so there is a little more that we can go higher there. And on the CapEx side, we are at the 4%, which I think is the appropriate level to be at least for the next 2 or 3 years. So I think it's mostly there. We believe we can fund the incremental needs that we have in R&D, in particular, through continue to expand our shared services. So not necessarily counting on gross margin, even though we do expect those margins to expand. We have a huge opportunity behind shared services. We have only the very basic type of services today inside there, and we still have quite a lot of people in the U.S. We opened a captive center in India last year. We are rapidly expanding that. We are about to create a new captive center in America that I don't want to talk about because a bit sensitive, but it's going to be open in the next 60 days. So we're going to have 2 hubs. We're going to start to labor arbitrage, and there is a lot of automation happening as well. So with that part of SG&A, we're going to be able to fund the R&D. So we feel good about the investments. Again, we mostly we said that so we don't have a need for a huge step-up looking forward.

So self-funding efficiencies and SG&A redeployed into more productive SG&A. Great. Carlos, you've -- I think the company over the past several years has deployed a pretty disciplined but successful approach to portfolio curation, essentially improving the growth profile by optimizing the portfolio that you go to market with. How would you summarize the portfolio strategy today? And how have you set criteria for incremental M&A, whether acquisitions or divestitures?

At least what I would say, first of all, is that to your point about we are a much stronger company today because of the portfolio of choices we have made, I think that 4 years ago, when I joined the company, when I looked around, there was a couple of businesses that I felt that they were too commoditized and too exposed to private label that it didn't make sense for us to have for the long term. At the same time, both in the case of our Planters business and Kraft Natural Cheese, we wanted to be disciplined in our approach on how we divest those businesses. And my philosophy is always you're going to run -- you're going to continue to run the businesses until the day you close, like you're going to have them forever. And I think that has helped us in terms of us being disciplined on how we think about, again, those kind of transactions. And frankly, we are in a situation today that we have a strong balance sheet, that we are not -- we don't have a need to sell anything. And secondly, we can have the patience to make sure that we're not going to be overpaying for something that may be in the market. And I think over the last few years, there's been some valuations that have been maybe higher than I would think would be fair for us to be paying. So that's definitely a bit of the view on divestitures and acquisitions. And just know that now that we have a clarity of our strategy, our acquisitions will be biased towards Taste Elevation because it's a place that we want to continue to grow as we go forward. In terms of how we think of the portfolio today, I feel very good about the fact that we went to CAGNY this year in February. We designated what may be a complex portfolio into very 3 different clear areas and that we're going to drive the growth and approach them very differently. So we have the ACCELERATE platform in which we have our Taste Elevation, ready-to-eat meals as well as our Substantial Snacking. We have our PROTECT business where we have desserts and our hydration businesses, businesses that have low private-level competition. We have great margins, and we have really -- we haven't been investing enough in renovation, which is part of the reason we're doing things with Capri Sun, part of the reason we did things with Jell-O, we continue to do that. Because again, they have the right dynamics in the business for us to continue to invest behind them. And then we have a balanced portfolio in meat, cheese and coffee, which we cannot expect those businesses to be growing a huge amount of growth because there's a huge amount of headwinds happening in those businesses. But we can expect them to drive economic value to the company. So that idea of us running those businesses with a sense of what is the role they provide in the portfolio, both in terms of scale as well as profitability gives us a better way in terms of what do we expect from them but also the capabilities you need to run those businesses. So it's easy to talk about the portfolio and PowerPoint presentation, but it also is how do you build in the right capabilities in the teams to make sure they run it that way? So over the last year, and this may be not something that people may know about, but the person who runs our coffee business was a person that for the last 6, 7 years was running a coffee business in another company. The person who's running our meat and cheese company business is a person who came from a meat company. So they bring a different level of capabilities to those businesses and understanding how you run those plays differently than when you do a Taste Elevation and it changed the expectations of the business. So I feel good where we are. We don't need to divest or acquire anything to get to a long-term algorithm. Those things will only help us accelerate our way to the long-term algorithm, too, and the kind of transformation we want to continue to create.

Great. We're almost out of time, but I want to leave you with the last word. For those investors in the room who are listening, who are looking at Kraft Heinz as an incremental investment opportunity, what should be their biggest takeaway?

Well, first of all, I don't get the last word very often, so thank you. I think there's a couple of things. One, I joined in February 2020. March 2020, it was COVID hit. We have transformed the company over the last 4 years. And I think some time from the outside, it may not be as visible. You talked about the sense of our Agile@Scale, how much we have transformed ourselves using technology and us creating partnerships that allow us to accelerate that growth, whether that is partnership with Microsoft in which we are building new-to-the-world solutions, in which they're bringing their developers and engineers in order to develop solutions around logistics, around manufacturing and how we drive efficiency, which is why it gives us confidence that the gross margin can continue to be a part of our future. Whether that is partnerships with a company like Simplot, which is the largest potato company in the world and rather than Kraft Heinz having to spend $500 million, $600 million on a new factory, we can leverage the resources or somebody like Simplot who has 5 factories in the U.S. and kind of allows us to unleash the potential [indiscernible] business. So that idea of us transforming ourselves by bringing a new playbook on both agility as well as partnership is something maybe the outside world doesn't see as much. And I get the fact that people who have been with the company since inception, went through '18 and '19, [ 2 ] difficult years. And my own encouragement is, let's make sure those bumps were bruises, not scars. We are a different company today. It's a different mentality within the company with a different leadership team who have the right capabilities and the right sense of ownership for us to not only build for today but build for the next 150 years. And I think what you -- now better prove that the things that we've been saying, we've been doing, we've been committing to a certain level of guidance, we've been delivering. Even this year, as you pointed out, there were some hiccups that we got into the Q2 because of our factory, but that didn't change the fact that we felt that we were comfortable enough and confident enough on our way we can manage that to still deliver the guidance for the year. So that's what you should expect to continue to see from us, is a company who are focused on delivering on the short term but also keeping an eye on how we are going to continue to drive the growth for the company for the next 150 years.

Great. On that note, thank you very much, Carlos. Thank you very much, Andre. Thank you all for joining us. Wish you all a great conference.

Thank you. Thank you, Stephen.