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What's going on?
Kraft Heinz the maker of Heinz baked beans and Philadelphia cream cheese reported improving results on Friday and its stock played a bit of ketch-up from recent losses, rising 9%.
What does this mean?
Kraft actually reported sales that declined in the second quarter, but it did manage to raise prices around the world (apart from in Europe), a trick that competitors like Unilever havent been able to pull off.
Krafts CEO said that whilst sales for the whole quarter declined, things got better as the quarter went on and the firms expecting results to get better through the year. Krafts also planning on launching some new products, which should help its sales, too.
Why should I care?
For markets: The company might be coming out of the woods yet.
Krafts been going through a bit of a rough patch. Its sales have declined over the past 18 months and it failed in a bid to acquire Unilever in April 2017 all of which has likely helped push its shares down (24% since the start of the year). With the stock down so much, the prospect of improving sales trends might be enough to shake off the gloomy clouds.
The bigger picture: Kraft goes back to what it knows best.
The consumer staples market (e.g. packaged food and beverage products) is typically low growth one way big conglomerates with lots of brands can take market share is by spending big on buying new brands or investing in new, innovative products. Krafts quest for growth has seen it go on a spending spree in ecommerce, food startups and product development in March, this culminated in the launch of a special business that helps develop startups. But the company should begin generating cash again soon and it looks like itll be going back to its tried and true recipe of buying companies Krafts rumored to be looking at big targets like Campbells Soup Company.
Originally posted as part of the Finimize daily email.
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