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

Great. If we could just find our seats, we'll kick off our next presentation. It is now my pleasure to introduce Kraft Heinz. Please join me in thanking the company for sponsoring today's lunch following their presentation. With a portfolio of iconic brands and a strong commitment to agriculture, Kraft Heinz is dedicated to providing consumers with the food they love. Led by its flagship Heinz brand, a $5 billion powerhouse, company sees meaningful opportunity to leverage its Brand Growth System to drive brand and product superiority. Kraft Heinz will also be hosting today's lunch, as I mentioned, where we'll get to try some of the delicious recent innovations and to meet more members of the executive team. With that, please join me in welcoming CEO, Carlos Abrams-Rivera; followed by CFO, Andre Maciel. Carlos, over to you.

Well, thank you, Andrew, and good morning and welcome, everyone. Andre and I are excited to be here with you today. Before we begin, please keep in mind that today's presentations will include some forward-looking statements. Frankly, a lot has changed in the world and in our industry since we last -- we gathered in CAGNY. Actually, for me, in particular, my first year as CEO has been pretty eventful. Yet despite the macro environment presented a number of challenges and uncertainties, it also continued to present some meaningful opportunities. Our team at Kraft Heinz have remained steadfast in our commitment to building a stronger, resilient company for the future. And we're working tirelessly to ensure we deliver long-term value. Across Heinz, we are uniquely positioned to be the leader in elevating and creating food that makes you feel good. Our iconic brands are the bedrock of our business, playing in attractive spaces where we have a strong advantage to win. In 2024, we returned over $2.7 billion in capital through our industry-leading dividend yield and share buybacks. We increased free cash flow by approximately $200 million or 7% compared to 2023, all while maintaining our target leverage ratio. As we continue to maturing our strategy, as we relentlessly unlock efficiencies, we are positioning ourselves for a virtuous cycle of profitable growth, providing a clear path to consistent double-digit total shareholder returns. In 2024, we generated gross savings equal to 4.4% of COGS, which is best in class. We expanded gross profit margin by 1 percentage point as we protected profitability and generated a 4 percentage point increase in free cash flow conversion, and we reinvested in marketing and innovation. At Kraft Heinz, our ambition is to be the leader in elevating and creating food that makes you feel good and doing so in the most attractive consumer spaces, elevating food by unlocking endless flavor possibilities that inspire creativity in every kitchen and everywhere, nourishing life's moment by creating delicious and convenient solutions that bring people together and by serving food that makes you feel good. It starts with warming the heart and homes of our consumers with food that is good for your soul. Think of that cozy feeling you get when every bite of Kraft Mac & Cheese that fans have loved for over 85 years, now with the same great taste and comfort but without the dairy. We are all about bringing diverse range of great-tasting food that are good for your health. This is true whether we are talking about zero-sugar Jell-O, Kraft Gluten-Free Mac & Cheese or Heinz Tomato Ketchup Zero in the same classic flavor with zero added sugar or salts. And it's good for the planet. I am so proud of the advancements we are driving in sustainable farming, packaging and manufacturing around the world. Good quality is serving the best of our consumers for their families, quality that they just trust, taste and to share with confidence. It all started from the best American dairy farms. We bring the same local quality to every Philadelphia product with no artificial preservatives, flavors or dies. And finally, delivering good value to our consumer is at the heart of what we do. We are proud to offer numerous affordable solutions, making great good accessible to everyone every day. Take, for instance, Crystal Light. We now have offerings that deliver on whatever consumers may need throughout the day, whether it's a morning energy boost, an afternoon refresh or an evening on wine, all less than $0.12 a glass. That is value you can count on. Now to provide consumers with the food they love, Kraft Heinz is an agricultural company and farming is at the heart of what we do. Our founders, Henry J. Heinz and James L. Kraft, knew that our product is only as good as the ingredients that go into it. And for more than 150 years, our agricultural leadership has laid the foundation for creating the perfect Heinz Tomato Ketchup. At Kraft Heinz, we produce over 5.5 billion seeds annually and harvest 40% of the world's tomatoes. Our tomato masters oversee every stage of growth, ensuring the best quality from soil to table. It is worth noting that we don't even add any color into our pure ketchup. The red is pure tomato. And the secret to our irresistible ketchup starts with healthy soil. In fact, 95% of the food we consume is directly or indirectly linked to the quality of our soil. But let's take a look. [Presentation]

You can smell the quality. Our dedication to excellence has earned us a trusted place in the hearts and home of consumers worldwide. And that is why to achieve our ambition, it all starts with a portfolio of iconic brands. Within the U.S., we have household penetration of 96% with 8 brands representing approximately 60% of our business globally. From the dairy farms in New York to the tomato fields in California, we can proudly say Kraft Heinz, is produced, that are made by us. It is also imperative that we are playing in the right consumer spaces. We are prioritizing the ACCELERATE platforms, the most attractive spaces where we have the strongest ability to win. Each portfolio has a role to play in executing our strategy. Our -- across our ACCELERATE platforms, we look to accelerate growth and are prioritizing our investments since they're the most attractive for both top line and margin perspective. In PROTECT platforms, our strategy to win here is to protect profit margins and invest at a healthy level. And finally, across our BALANCE platform, our strategy is to balance performance and profitability, rebuild the foundation and to invest to maintain a strong brand equity. This is so important. So let me walk you through some of recent highlights across each of the portfolio role, starting with ACCELERATE. In 2024, we launched 7 Taco Bell innovations to provide our consumers with restaurant-like experience at their home, leading to an increase in dollar sales of 24%. And our global Heinz brand achieved a 6% CAGR from 2022 to 2024 driven by our cultural relevant marketing and global creative platforms. Internationally, our business is primarily in ACCELERATE platforms. In 2024, we generated double-digit growth across our East region, Germany and Hispanic countries, which together represent about $1.5 billion in revenue. And finally, we have seen promising results following the initial pilots of our Brand Growth System. In Philadelphia, we increased dollar sales by approximately 2% in 2024 largely driven by our expansion across occasions and channels, including 13% growth in club. In the U.K. we have seen a notable turnaround for Heinz, specifically for our Brand Growth System help drive share gains in Heinz ketchup for the first time in 5 years. I'll go deeper into our Brand Growth System later in the presentation. Moving to PROTECT. For the first time in over a decade, we renovated the Jell-O brand to ensure our products continue to grow with our consumers, highlighting its zero-sugar benefits. In 2024, Jell-O gained 0.8 share points of share, while approximately 40% of those share gains came from the zero-sugar line. In meal, we modernized the brand with refreshed graphics and added emphasis on wellness benefit to attract younger consumers. For example, take our Hydrate Subline, where the results have been quite impressive, has steady sequential improvement in 2024, ending with over 30% growth in the fourth quarter. We have proven we can renovate and we can apply this successful model to many more brands in our portfolio with our newly launched single-serve and multi-serve bottles, we are delighting kids with Capri Sun, both on the go and on the table. Although it's only been 3 months since the launch in retail, Capri Sun multi-serve is quickly on its way to a top-quartile item. And do not worry, I can assure you, we still have pouches here. And through recipe activation, we inspire consumers to get creative in the kitchen, whipping up tasty dessert like this easy-to-make mini cocoa pie, featuring a perfect blend of Jell-O, Cool Whip and Jet-Puffed marshmallows. This helped contribute to an excellent year for desserts, where we gained 0.3 percentage points in share. And finally, across powdered beverages, we grew dollar sales by over 5% with our Kool-Aid brand leading the way, making it our fastest-growing brand in the category. And on Crystal Light, with zero sugar, and only 10 calories per packet, it is the ultimate solution for refreshing and flavorful hydration on the move, at a price per glass that consumers can appreciate. And lastly, BALANCE. In line with that strategic growth, Oscar Mayer achieved a 10% increase in gross profit dollars in 2024 driven by our team's commitment to deliver end-to-end productivity improvements. For example, our investment in digital technologies and modernize equipment across our plant in Kirksville, Missouri drove significant value for the company. We improved CFR by an impressive 21 percentage points, delivering $40 million in gross savings and by bringing new items to the high growth value channel we drove 37% growth for Oscar Mayer at Dollar General, outpacing total Dollar General perishable growth by roughly 5x. We also launched accretive consumer-driven innovation, bringing excitement by making one of America's favorite traditions even better with our Stuffed Dogs. We achieved the highest distribution for any new hot dog item in the category over the last 5 years. And we brought Velveeta into a new convenient format that is ready to dip. We are making occasions like watching the game easy with minimal prep. I am also excited to announce that our new peel/reseal Oscar Mayer deli fresh packaging is rolling out now with a full national launch in April. This new packaging improves sealability and reduces plastic by 30% with 50% less plastic relative to our competition. We have achieved a major win for both our consumers and the environment by innovating our packaging without passing any additional cost to our customers. I am incredibly proud of the team's outstanding work in driving this positive change and what they have been able to accomplish across the Oscar Mayer brand. When it comes to investments, we are distributing resources to higher-growth and higher-margin platforms to become a sauces and meals powerhouse. We have made significant progress to improve the composition of our portfolio over the last 5 years, reaching $17 billion of sales in ACCELERATE platforms. Looking to the future, we expect this platform to become an even larger part of our net sales, reaching more than 75% over time, with most of the expansion coming from Taste Elevation. So let's take a closer look at each consumer platform within ACCELERATE. Taste Elevation is one of our most compelling spaces. It includes products such as condiments, sauces and spreads. With over $11 billion in revenue in Taste Elevation, we play in more than 70 countries and are the #1 player in sauces worldwide. That makes us the clear leader in this space. Our second platform ease-ready meals at approximately $5 billion features convenient meals you cook in 30 minutes or less. With iconic brands and global scale, we are primed to lead this fragmented space. And our third platform, Substantial Snacking, are snacks you can enjoy between or instead of a meal. With disruptive technology like 360CRISP and our supply chain expertise, we have the edge to win in this space. These ACCELERATE platforms are at the core of our growth and span across all 3 of our strategic pillars: North America Retail, Global Away-From-Home and Emerging Markets. And our global Heinz brand is leading the way. Our "It Has to Be Heinz" campaign, the first global effort from the Global Growth Office, leverages real-life stories to build brand equity and connect with consumers. Heinz have achieved iconic status in 85% of global markets with loyalty increasing 3.5 percentage points year-over-year in 2024. This has contributed to significant growth with a 6% CAGR since the launch of our global creative platform. As a $5 billion-plus brand, Heinz has seen more than $600 million in sales growth over 2 years, particularly in ketchup, where we have stabilized or grow penetration with 6 of 7 priority markets. While Heinz has universally high awareness, our global household penetration of 19% lags behind the 30% best-in-class benchmark set by similar iconic packaged brands. Closing this gap, that alone represents a $4 billion opportunity for sales growth. We are a company of iconic brands and can further leverage Heinz success as a blueprint to unlock the full potential of these brands. Now to deliver on our growth potential, we have a clear path ahead of us, a Kraft Heinz playbook, if you will, to drive profitable growth across our 3 strategic pillars, to continue investing in enablers to fuel top line growth and to fund this investment by unlocking efficiencies across our sources of funding. Now what reinforces my confidence is our ability to execute in our distinctive competitive advantage. Today, Andre and I will highlight key elements of this plan, starting with our 3 strategic pillars. As you may recall, our long-term algorithm called for each pillar to drive about 1/3 of our total top line growth with about 1 percentage point of organic net sales growth coming from each of these pillars. We are targeting top line growth of 2% to 3%. Now let's take a closer look at how we will capture the growth across each ACCELERATED platform in North America Retail. Starting with Taste Elevation. We are growing our consumer base by expanding usage occasions and flavors. Whether you are a fan of our classic ketchup or our flavorful combinations, we have the perfect condiment to take your chicken to the next level. For example, Heinz pickle ketchup has been a huge success for us with 50% incrementality to the category. As a result, we are now scaling across 4 continents. We are growing through meaningful product differentiation across our core brands. On Heinz, we are proud of our legacy as the global standard for ketchup. By applying this expertise to bring premium quality across various host foods, we are making our most loved ingredient accessible to all. And by increasing better-for-you offerings, we are improving the nutritional profile of our products and educated the flavor palates of consumers who already love our brands with options like our Simply and Organic Heinz ketchup as well as our lactose-free Philadelphia Cream Cheese. And finally, by growing Heinz beyond ketchup, whether that is by capturing the excitement of the global trends with our new flavor to our sauces or by inspiring consumers with the exciting flavors of Heinz mayonnaise. Now moving to easy-ready meals. We are expanding usage occasion & flavors with Kraft Mac & Cheese. By bringing flavor to the Mac & Cheese aisle, we help drive a 5-year industry CAGR of over 40% of flavors. Our versatile formats make it easy to enjoy favorite bowl of comfort any way you prefer, whether that is on the go, at the table or anywhere in between. We are deepening consumer connections and relevance through partnerships and movies. For example, we partnered with Nintendo to introduce Super Mario Bros. shapes, leveraging the success of The Super Mario Bros. Movie, the second-highest growing movie -- animated film in history, or either partner with Napoleon Dynamite to launch a campaign that resonate with younger audiences. This helped deliver an impressive 8% growth in dollar sales and an increase in household penetration by 2.6 percentage points in 2024. And we are accelerating Mexican cuisine. And in case you didn't know, Mexican food is an $8.4 billion category and it's growing at an accelerated 4.5%. And Taco Bell is the fast-growing brand in that category. We had an explosive 2024 performance driven by bold innovation and partnership with social influencers. And finally, we are redefining convenience and value by delivering solutions in the right sizes and formats, making it easier for consumers to feed their families. For example, our value-sized Kraft Mac & Cheese provide a lower price per ounce and 50% more cheesy goodness than the standard-sized blue box. And finally, Substantial Snacking. We are expanding usage occasion & flavors by bringing the excitement and heat to snack time with Lunchables spicy nachos. We are deepening consumer connections relevance through campaigns like $1 million Lunchables gaming sweepstakes and social engagement like pairing Claussen and Dua Lipa. Dua Lipa takes a picture in her favorite drink, one that included pickle juice, inspired our Claussen team to create a fictional Just The Brine can, which became a viral hit on Instagram with hundreds of fans begging it to be real. We are improving core product performance by renovating an Oscar Mayer Bites, with elevated graphics highlighting 15 grams of protein and adding a new premium cracker. We have provided a perfect on the go snack cater to adults. We're also taking our popular Lunchables to the next level by revamping our protein pack option for kids complete with an upgrade cookie and cracker they are sure to love. We are redefining convenience and value. And when I think of convenience, I think of 360CRISP. Made with a 100% Kraft Heinz technology, our deli mix quesadillas come out of the microwave, crispy, ready in minutes and packed with 18 grams of protein per quesadilla. Now turning to away-from-home. We have significant opportunity to expand our presence. In North America, we see expansion opportunities across host foods and beyond ketchup. For example, chicken as a host food presents a huge opportunity for us as the fourth largest host food with a highly fragmented market. And across international, our penetration, especially in the emerging markets, is significantly below our share in North America. That means there is much room for us to grow. In away-from-home, we will capture the growth by going from ketchup kings to Queens of condiment royalty. And it starts with growing beyond ketchup, whether that be through our full suite of amazing Heinz condiments or through Philadelphia Cream Cheese and by entering the faster-growing, higher-margin noncommercial channels, which are projected to grow at a 6% CAGR over the next 10 years. Let me start and take travel and leisure as an example. This is a huge untapped market for us in a channel where Heinz is significantly under-indexed. And I am thrilled to share that we have landed our first global customer contract with Hilton, a game-changing opportunity to leverage Hilton vast global footprint. To put this into perspective, Hilton spends approximately $40 million annually on condiments alone across over 130 countries worldwide. We are putting our customers at the forefront of what we do, whether it's through culinary elevation or equipment innovation. Our food labs are spaces where Kraft Heinz chefs and other culinary professional can collaborate to develop new products and ideas. Our Kraft Deluxe menu came out of that particular space. This Deluxe menu is made with incredible ingredients and chef-inspired production melts evenly and delivers top-graded quality at a great value. And with our HEINZ REMIX, we can collect real-time data from the dispenser machine to gather insights on what flavors and combinations consumers like best. And the Heinz sauce [ won ] streamlines back-of-the-house operations by delivering multiple sauces with speed and consistency. Let's take a look about our third key pillar, Emerging Markets. Today, Emerging Markets make up only 10% of our business, we see significant long-term opportunity here. We expect the Taste Elevation industry alone to grow at a 6% the CAGR over the next 10 years. And with only half the penetration in Emerging Markets as we have in developed markets, there is a lot of white space for us to capture. We have 3 proven levers back in our growth in Emerging Markets. First, through HEINZ. Our crown jewel in our portfolio of iconic brands, HEINZ represents $1.2 billion of revenue in Emerging Markets and delivering impressive sales growth of 8% in 2024. Second, our go-to-market model as we continue to drive distribution in the existing market and explore white spaces opportunity. Through this proven model, we expanded distribution point by 17% in 2024. And looking ahead, we've identified a meaningful opportunity to unlock an additional $75 million in untapped white space over the next 3 years by leveraging a global scale and the iconic HEINZ brand. With this opportunity spans across over 100 countries, we have identified 15 countries to focus to be positioning ourselves to drive double-digit growth. Third, through Heinz-led innovation, we will continue to accelerate the growth of our Heinz brand through flavor exploration, expanding usage occasions and driving value to the right portfolio and pack size. Now let's move into our enablers of growth, where we will continue investing to fuel our future, starting with disruptive marketing. As part of our transformation, we have changed the trajectory of marketing at Kraft Heinz. Our marketing success stems from building an ecosystem that fuels brand relevance and creative excellence by bringing together the right internal talent and external partners, we are able to move at the right speed. Our award-winning in-house agency, The Kitchen, has been a key driver of success. launched 4 years ago, it enabled us to market at the speed of culture, while unleashing marketing matters from ketchup and similarly ranch to our most recent collaboration with Dijon Mustard. Our Brand Growth System, which I mentioned earlier, is another critical component. It provides a systematic and repeatable framework to drive brand superiority. It ensures that creative excellence is a likely outcome, not a lucky one. So let's take a look. [Presentation]

So as you get a taste from that video, we piloted our Brand Growth System in the Philadelphia brand. And as a result, we were able to identify gaps and prioritize opportunity to drive growth to reach younger consumers in places where they engage the most. We leverage social media to showcase Philadelphia as an ingredient. This resulted in meaningful household penetration gains across Gen Z and millennial. To capture white space in growing channels, we utilized joint business plan to increase distribution, leading to a 13% sales growth across club channels. And finally, we broadened usage occasion to drive versatility to relevant innovation and messaging. This has led to exciting new products, such as our 2 new Whip flavors that leading to snacking and our ready-to-eat crossing the [ list ] in to the baking. The varied use case for a new launch Philly Frosting are a testament to its versatility. It's no surprise that many enjoy straight from the tub, it's actually amazingly delicious. If we look ahead to 2025, I am excited to scale the Brand Growth System across more brands, aiming to reach 30% of sales by year-end. Now let's move on to our second enabler, innovation. Over the last few years, we have stepped up our investment using R&D, leveraged tech-enabled Agile@Scale to increase speed to market. And above all, we have put our consumers at the heart of everything we do. Our approach is creating a foundation for growth as we have significantly increased innovation as a percentage of our sales from 1.6% in 2022 to almost 3% in 2024. The key to successful innovation is providing consumers with sustainable value. And how we do that? By satisfying consumer desire with flavors and cuisine exploration by expanding accessibility and relevance through value channels and occasion and by meeting consumers' evolving needs by providing them with unique benefits worth paying for. Now let's watch a video to see what -- how that works in action. [Presentation]

I'm sure that makes you a little hungrier for lunch. Moving to our last enabler, sales excellence. With our newly created global omnichannel office, we now have the structure to quickly scale best practices and move globally with speed and agility. As a result, we have strengthened our sales capabilities across 3 levers. First, by scaling a proven, repeatable go-to-market model, we have increased distribution points by nearly 175,000 since implementation. Second, we are strengthening customer relationships through joint business plans. We aimed for top-quartile ranking on the Supplier Advantage survey, we have significantly improved our net payables score from retailers in the U.S. by 27 points since 2020. And third, we're working to perfectly execute across retail online and away-from-home channels through advancements of analytics and technology. We have been able to improve retail execution metrics by 5 percentage in 2024. We are also unlocking new avenues for growth online by ensuring that we have the right products in the right places with Kraft Heinz showing up at the top of 68% of searches across our top 5 retailers. And in away-from-home, we have successfully secured a robust pipeline of new business wins, representing a twofold increase in revenue compared to 2024. With that, let's move to our 3 competitive advantages, starting with Agile@Scale. Agile@Scale gives us the fuel to outpace our competition. It maximizes organizational impact by unlocking speed and efficiency boosted by technology and distinctive ways of working. Through agile ways of working and teams, we are powering our organization to unlock value for our customers and consumers. And the results speak for themselves, Agile@Scale is meaningfully unlocking efficiencies and accelerating innovation globally. Let me share some examples to bring Agile@Scale to life. The first example is our connected shop floor. We roll out a digital process and collaboration platform across all of our plants in North America. This tool delivered $35 million in value by improving yield and reducing labor hours with 100% adoption by more than 1,200 plant employees. Moving to our second example. As we're experimenting with AI solutions, we recognize the importance of security. That is why we build our own Kraft Heinz AI, our internally built AI engine. Our Kraft Heinz AI is more than just a tool. It is a catalyst for transforming our ways of working. From idea to launch in 180 days, it is helping to elevate the scale of our organization from optimizing factory floor processes, streamlining SAP rollouts in China to automating routine financials, our Kraft Heinz AI is becoming an integral part of our total workflow. And the third example is our Mexican Food Agile Pod. This cross-functional team launched 7 new Mexican food products in under 12 months, generating $32 million of sales in 2024. Now our second competitive advantage is our unique approach to strategic partnerships. For example, in collaborating with Turing Labs, we developed a machine learning model that enable us to reformulate nutritional profile of products faster. In Brazil, we reduced added sugars and sodium by over 30% in our Heinz tomato ketchup, all while maintaining the same great taste. We are now expanding the use of this technology with ketchup in other countries as well as exploring the possibilities of reformulation across other products in our portfolio. We partnered with Microsoft to build a world-class control tower, enabling data-driven decisions in real time, shifting an approach from reactive to proactive across our supply chain. And finally, Highbury Canco provided to be the ideal partner for our Taco Bell innovation enable us to launch in record speed achieving a 50% reduction in time to market. The openness with which we approach these partnerships allow us to accomplish our goals faster in new creative ways. Our third competitive advantage, our ownership-centric culture. It has turned Kraft Heinz into a talent destination, attracting top talent from other companies. Our employees embrace our unique culture of ownership and meritocracy. We encourage and empower our people to think and act like owners, to take results personally, to be accountable and to treat each dollar as if it is our own. The investments we have made in our people and our capabilities are paying off, with engagement at all-time high, I am especially proud that we have seen meaningful improvements across both our salary and hourly employees. The results we're seeing internally also have heard recognition externally. We have earned Great Place to Work certification in 22 countries from up from 0 in 2019. Now let me pass it over to Andre to discuss our sources of funding and capital allocation.

Thank you, Carlos, and hello, everyone. I'm pleased to be speaking with you today. As I reflect on 2024, I am proud of our ability to unlock efficiencies. But we are not done. We have a robust pipeline of opportunities ahead of us. Let's dive into some examples. Within revenue management, we created a dedicated organization and have expanded the use of digital tools. We're also testing multiple deals online in categories such as Kraft Singles, Kraft Mac & Cheese and pasta sauce. Using a third-party partner, we can create and test various promotions prior to implementing in retail stores. Together, these advancements resulted in a 15% improvement in promotional rights since 2019. And there is more opportunity to explore here. We are aiming for 60% of promotional spend with net positive ROIs. And to get there, we expect to further reduce negative ROI promotions, continue to expand capabilities internationally and increase positive contribution through mix. We are also stepping up improvements across our supply chains. We are well on our way to hit our target of $2.5 billion in gross efficiencies by 2027. Over the past few years, we have generated best-in-class productivity levels above 4% of COGS and well above our long-term algorithm up 3%. We have made significant strides across our operations, including working capital, where we have improved forecast accuracy and reduced excess inventory. And we continue to progress on other operational metrics such as OE and waste, all moving towards best-in-class benchmarks. However, we have a lot more potential when it comes to further improvement. Let me walk you through some of those opportunities. We have successfully unlocked $1.3 billion of gross efficiencies since the beginning of 2023 when we set our $2.5 billion goal. We are very confident in our ability to unlock at least an additional $1.2 billion. And this will be achieved across manufacturing, logistics, and procurement. Some examples include further extending digital tools to reduce breakdowns and improve yield loss, improving mode of transportation mix and warehouse efficiency like increasing our use of rail, and further embedding end-to-end design to value across the organization. Moving to our third source of funding, marketing effectiveness. At 4.5% of sales, we believe we are approaching sufficient levels of market investment. Our main focus this year will be on quality, in other words, on the return of that investment. Before 2024, this is an area where our visibility was very limited, and we have made progress to gain visibility on our most relevant brands. However, we still have a compelling opportunity to optimize spend. It all starts with increasing the percent of our marketing spend that is consumer-facing. This is an area where we see meaningful room for improvement as we aim to increase the percentage from 65% to 85% of the total marketing spend. And that is about optimizing returns on consumer-facing dollars, but it still have a relevant 20 percentage point gap to best-in-class returns. We are working to close the gaps by continuing to optimize allocation across branded media types and improving the quality of our messaging. Finally, we are capturing efficiencies and improving service by expanding our centralized shared service centers and capabilities. Within only 2 years, our centralized service function has delivered $35 million in cost savings driven by the creation of our captive centers in India and Mexico, where we are continuing to expand teams capabilities and scope. We still have a lot more value we can unlock. By connecting our finance backbone globally enabled by SAP S/4, enhancing automation and process optimism and continuing to expand the scope of our centralized services. As you can see, we have maintained top-tier margins while continuing to reinvest in the business and improve the shape of our P&L. In 2024, we increased our operating margin by 2 percentage points versus 2022 while investing across marketing, R&D and CapEx. When I became the global CFO, we implemented the use of EVA to better allocate capital, helping us make it more informed, data-driven decisions. This has enabled resource optimization, driving long-term value creation and supporting our goal of delivering sustainable, profitable growth. At the same time, we are generating superior cash flows with improvements expected to continue as we work and progress towards our goal of 100%. And this has been a result of several strategic initiatives, including generating working capital efficiencies, mainly through improvement in inventory and payables, adding cash flow conversion as an incentive metric for all employees. And in 2025, our improvements in working capital will more than offset tax headwinds as we expect to deliver historically strong performance at 95% cash conversion. In 2024, we returned approximately $2.7 billion in capital to stockholders. Of that, $1.9 billion was through our industry-leading dividend with a yield of more than 5%. And $800 million was through our share repurchase program. This still leaves about $1.9 billion remaining against our $3 billion authorization. But as a reminder, our share repurchase program is not programmatic, a function of excess cash and takes into consideration the macroeconomic environment. We provided our 2025 full year guidance last week. As you recall, we are expecting organic net sales in the range of flat to down 2.5%. The most significant decline is expected to be in the first quarter, primarily due to Easter shift. This is expected to result in organic net sales in the first quarter down approximately mid-single digits with improvement in each subsequent quarter. At a consolidated level, pricing is expected to be flat to slightly positive. This assumes mid-single-digit pricing in Emerging Markets and pricing for commodity inflation such as cost in North America. Excluding the price for cost inflation, our price in North America is expected to be down year-over-year. Keep in mind, the gross margin expansion from unlocking efficiencies is expected to more than offset inflation and the incremental investments in price, resulting in a flat to slightly positive year-over-year adjusted gross profit margin. Due to trade timing and commodity inflation, we expect the gross margin to be more pressured in the first half of the year with a recovery in the second half. Constant currency adjusted operating income is expected to be down 1% to down 4% for the full year, and expected adjusted EPS to be in the range of $2.63 to $2.74. This reflects a $0.07headwind versus the prior year from lower variable incentive and a $0.23 headwind from an effective tax rate of approximately 26%. We anticipate 2025 serving as Europe stabilization, 2026 marking a return to growth and 2027 to be on algorithm. As we enter 2025, we have tangible wins taking hold. For example, we have secured 75% of new customer wins in away-from-home and are building on a 17% distribution increase in Emerging Markets. In North America, particularly, we are investing in price, product and marketing. 75% of our 2025 innovation sales will come from products already launched. We are also prioritizing brand spend through the Brand Growth System, investing in technology to fuel efficiencies and shifting more marketing towards consumer-facing spend. These wins and dedicated investments, along with our sharp focus on executing with excellence, give us the confidence that we will stabilize our performance in 2025. Last year, we discussed key performance indicators to make sure we are on track to deliver our long-term algorithm. We have proven we can unlock efficiencies consistently. We have been reinvesting in the business as we committed to do. Now the key focus for us is powering brand and product superiority through the Brand Growth System. We have common incentives for both short-term and long-term performance fully aligned with the goal of delivering top-tier shareholder return. These incentives reinforce the importance of a balanced contribution between top and bottom line growth as well as free flow. This was a newly added incentive last year, and we have seen progress as a result. We continue to be excellent stewards of capital. By taking a disciplined approach to financial management, we have created a healthier balance sheet and optionality for capital allocation. Our priorities remain the same: To continue to invest in organic growth, actively manage our portfolio and return incremental capital to our stockholders. When it comes to portfolio management, our priority is to do M&A that strengthens and accelerates our organic growth strategy. We have defined strategic and financial parameters for both acquisitions and divestitures, and we have actively rotated nearly 20% of our total business over the past 6 years. As a reminder, our criteria for either potential acquisitions or partnerships is aligned to our portfolio strategy, sufficient scale while remaining accretive with a bias towards bolt-ons. In the case of divestitures, our strong balance sheet position us to take a disciplined approach to fair valuation. As Carlos mentioned, being the leader means that we consistently deliver top-tier shareholder returns. We are committed to our objectives and are taking a deliberate approach combining business fundamentals and capital allocation to make progress towards our goals. With that, I will turn it back to Carlos.

Listen, as I stand here, I'm very optimistic about our future. We have a talented team, we have the right strategy and a strong company culture rooting in ownership and meritocracy. Our focus remains on acting with urgency and discipline as we execute with excellence against our strategic pillars. We are committed to making the right investment for the now, the near and the next while continuing to return capital to our stockholders. There is so much more opportunity ahead for us. We will lean into our strategy and empower our people to achieve our ambition to be the leader in elevating and creating food that makes you feel good. With that, we hope you would join Andre and me and several members of our Kraft Heinz's executive team for lunch. You will get a chance to taste some of our delicious innovation, ask us questions. And as always, thank you for your attention and time today and your interest in Kraft Heinz. See you soon.

Great. And in lieu of a breakout, as Carlos mentioned, Kraft Heinz management will be out at lunch, downstairs and outside, and we'll see everybody there. Thanks again for sponsoring lunch.

Thanks, Andrew.