By Tonya Garcia, MarketWatch
New consumers are being introduced to Kraft Heinz Inc. products during the coronavirus pandemic as they cook more of their own meals at home, according to the company.
Kraft Heinz /zigman2/quotes/203625533/composite KHC -2.39% brands include the namesake lineup of items like Kraft Mac & Cheese, Philadelphia cream cheese and Oscar Mayer cold cuts.
“One of the things we have seen happen given the situation where more people are spending time at home, they’re looking for the reassurance of brands they know and love,” Carlos Abrams-Rivera, Kraft Heinz president of the U.S. zone, told MarketWatch.
He said on the company’s earnings call that these items specifically have been in high demand during COVID-19, according to a FactSet transcript. The food giant reported third-quarter profit and sales on Thursday that beat expectations and raised its guidance.
But it isn’t just the consumers with memories of eating Kraft Heinz foods who are adding the company’s products to their baskets. Abrams-Rivera says younger and more diverse consumers who have fewer people in their homes are also discovering that the company’s products can be used in new ways, for example, to add a little zing to burger or sandwich.
Grey Poupon mustard and Claussen pickles are other brands in the company’s portfolio.
Abrams-Rivera said on the post-earnings call that Kraft Heinz plans to invest even more than it already has in 2021 to improve capacity to meet the demand.
And he thinks this buying activity will continue.
“We are seeing an increasing stickiness of our performance, increasing participation in our categories and new people coming in,” Abrams-Rivera told MarketWatch. “There are higher repeat rates, which suggests those brands have the continued momentum.”
Building repeat business has been a concern for UBS analysts.
“Share gains and repeat trends are encouraging, but to become more constructive we need to see Kraft Heinz convert new trial into loyal customers while demonstrating a competitive advantage versus private label,” analysts said.
UBS rates Kraft Heinz stock neutral with a $33 price target.
To keep the momentum going, Kraft Heinz is boosting its marketing spend by 40% in the second half of this year, one of the reasons that CFRA’s Arun Sundaram is upbeat about the company’s prospects.
“Kraft Heinz’s new organizational structure is operational and fully staffed, and the company is gaining new customers and seeing its market share improve,” Sundaram wrote. CFRA rates Kraft Heinz shares buy with a $35 price target.
Kraft Heinz stock was up 1.8% in Friday trading, but has fallen 4.8% for the year to date. The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.48% has edged up 1.2% for 2020 so far.