Introduction

Overview of the company’s present situation

The Kraft Heinz Company operates as one of the largest food and beverage companies in the
US, as well as having labels in over twenty countries globally. Kraft Heinz produces a wide variety of
products which includes condiments, cheeses, snacks, and meals. Heinz Ketchup, Kraft Mac & Cheese,
Oscar Mayer meats, and Philadelphia spreads are among the company’s most well-known products. The
company also produces and sells a number of additional food products under various brand names.
The Kraft Heinz Company as it is known today was formed from the merger of Kraft Foods and
H.J. Heinz in 2015. Since then the company has faced a huge fraud scandal in 2019 that has led the
company to reshuffle major executives and relook at their approach to

Overview of company’s strategy

Cost Leadership

Economies of scale

Applying agile approach

Differentiation

Focus

Discussion of any problems and/or issues that confront management

Of the problems that confront management in recent years,

1. In 2019, the company posted a loss of $12.6 billion and wrote down the value of its Kraft
and Oscar Mayer brands by $15.4 billion (Kraft Heinz, 2019).

2. Subsequently, Kraft Heinz saw a massive decline in their profits in 2020 due to the
pandemic. Their net profit was reported at $361 million as compared to $1.9 billion in
2019 (Kraft Heinz, 2020).

3. In 2021, the SEC charged Kraft Heinz with fraudulent accounting practices which inflated
their EBITDA. The company had to pay $62 million (U.S. Securities and Exchange
Commission, 2021).

4. Due to the drought in California, farmers struggled to harvest tomatoes (Romans, 2022).
This led to a shortage in ketchup all over the US, since 95% of the tomato products
consumed in America come from California.
 5. Kraft Heinz generates the majority of its revenue (71% in 2021) from the US. This
geographic concentration increases the company’s risk as the geopolitical and economic
situation in the US may affect its supply and demand as well as growth opportunities.

6. There is intense competition in the food and beverage industry. Kraft Heinz faces
competition from other major brands as well as cheaper store and generic brands.

7. Consumer food trends and diets change frequently, especially as new health studies
come out, and new fads spread on social media.

8. As a global company Kraft Heinz is subject to the many risks this may bring such as
exchange risk, as well as having to keep up with the stringent food and safety health
regulations that vary in different countries.

9. Kraft Heinz’s total assets turnover is 0.29, which is significantly lower than the industry
average of 0.83 and the industry median of 0.70. Kraft Heinz has the lowest total assets
turnover among their competitors.

10. Kraft Heinz’s return on assets and return on equity are 2.57% and 4.82%, which are
significantly lower than the industry averages of 7.38% and 28.94% as well as the
industry medians of 7.06% and 19.18%. The company has some of the lowest returns in
the industry.

*thoroughness and accuracy of discussion

*current vs historical events

Analysis and Evaluation

Vision and Mission

Kraft Heinz's vision statement is "to sustainably grow by delighting more customers globally" (Kraft Heinz,
n.d.).

Kraft Heinz (n.d.) further discusses their vision statement on their website, explaining that they want to
grow its top-line and bottom-line revenues in a socially and environmentally sustainable manner. The
company aims to achieve this by surpassing customer expectations with regard to "flavor and taste",
which will attract new customers and expand the reach of their brand internationally (Kraft Heinz, n.d.).

The vision of Kraft Heinz clearly communicates the company's purpose and aspirations for the future, with
long-term sustainable expansion on a global scale. However, the type of business the company is
engaged in is not well articulated through the vision statement. For example, it would be difficult to tell
from the vision statement alone that the vision belongs to Kraft Heinz since it does not identify the
industry in which the company operates.

A potentially clearer vision statement could be: To grow sustainable by delighting more customers
globally as we make life delicious.

The company’s Purpose:

Let’s Make Life Delicious

Our Purpose is an inspiring call to action – our reason to exist. It reminds us, day in and out, why we're
here. After all, we are a food and beverage company – one whose products and brands spark joy, bring
people together, and create memorable moments for people across the globe. With dedication and
passion, we provide consumers and their families with products they know, love and trust. Quite simply,
we help feed the world – and we do it deliciously. (Kraft Heinz, n.d.)

Using the 9 components of a mission statement from Chapter 2 (David et al., 2019), we propose that Kraft
Heinz’s mission statement should be:

At Kraft Heinz, we aspire to provide delicious foods and beverages (2) to help individuals and families (1)
around the world (3) eat and live better. With the aid of cloud-based AI software to continually drive
improvement (4) (Kraft Heinz, 2022), we aim for consistent growth (5) in a socially and environmentally
sustainable manner (8). Embodying our company's Purpose, "Let's Make Life Delicious" (6) (Kraft Heinz,
n.d.), our employees work together as a tight-knit team (9) to ensure that our consumers receive
appetizing, affordable products without sacrificing quality (7).

Internal Analysis
External Analysis

Kraft Heinz is a multinational company, so they must be strongly aware of the ongoing political
situations around the globe. This includes being thorough with different countries and their
stances on tariffs, trade policies, import and export laws, and other guidelines that can affect
their daily operations. Kraft Heinz is a food and beverage company that is heavily regulated by
the many laws and regulations surrounding food safety, labour, sanitation, and labelling. Given
that they are an American company, the US laws and regulations can sometimes be prioritized
over other countries.

Being a company that operates in numerous countries can be risky due to exchange rate
fluctuations, but this can be managed with increased market development. Moreover, the dollar
currency is most valuable to Kraft Heinz as more than 50% of their overall sales are generated
in America. Inflation can heavily impact the food and beverage industry since it increases the
price of raw materials and the overall price of the final product, which then influences
consumers to switch to generic and cheaper brands. However, research shows that revenues in
North America have been rising for the past two years (Kohan).

As consumer tastes and preferences continue to change, it is important for the company to stay
updated with the current trends. With the increase of health conscious consumers, Kraft Heinz
must have a variety of products that appeal to them. Currently they offer low sugar or salt
options as well as vegan and organic products for consumers to choose from. Kraft Heinz does
not target a specific demographic, it is suitable and enjoyed by people of different ages,
genders, income, race, and regions. They are also working towards becoming a sustainable
company by implementing regenerative agriculture and assisting in reducing climate change,
corporate carbon emissions, and packaging waste.

Technology can be used to conduct market research, aid in efficient production and packaging,
and reduce environmental impact. With technology advancing, businesses can also use AI and
machine learning to gather better customer insights. Moreover, a joint venture was formed
between Kraft Heinz and Not Company to improve and introduce new plant-based options
(Food in Canada staff).

Porter’s Five Forces

Rivalry Among Competing Firms

There is a high number of competing firms in the packaged food and beverages industry. They
operate globally and offer various products. Companies in this industry have strong brand
loyalty and their products have short life cycles. Overall, there is a high intensity of rivalry
among competing firms.

Kraft Heinz faces intense rivalry from numerous competitors within the packaged food and
beverages industry all around the world. This industry is highly competitive with little product
differentiation. The competitors include Mondelez International, Nestle, Danone, Kerry Foods,
Unilever, ADM, PepsiCo, Tyson Foods, JBS, and Kellogg’s. Products include cereal, granola
bars, bottled water, chocolate, beverages, canned items, sauces, ready meals, and many more.
During the pandemic, there was a surge in the consumption of processed foods, and research
shows that these trends continued post-pandemic (NYU Web).
Bargaining Power of Suppliers

Kraft Heinz has over 350 suppliers worldwide (Nunes). Suppliers in this industry have low
bargaining power as most of their services like packaging, handling, and transportation can be
easily replicated. Switching costs for suppliers are low, especially since many suppliers would
provide their service to multinational brands. Conversely, raw and agricultural materials play an
important role in packaged foods and beverages as they are necessary for production. In the
US, the tomatoes used in Kraft Heinz's processed tomato products are harvested from
California (Romans). Hence, they must have a successful harvest season and ensure the
tomatoes remain undamaged. Research shows that Kraft Heinz has a 97% penetration rate in
Canada and the United States (Poinski). This highlights the impact they have on households
and their suppliers, who depend on large-volume orders. Likewise, Nestle also knows the value
of the Nescafe coffee beans and will take extreme measures to ensure they preserve their
quality (Nestle). Exit barriers are low in this industry, allowing companies that are unable to
compete or make a profit to decide to leave the market. All in all, suppliers have low bargaining
power.

Bargaining Power of Consumers

Buyers have a reasonable amount of bargaining power in this industry considering the number
of substitutes available, competitors’ pricing, and accessibility to distribution channels. Although
consumers may be sensitive to prices, they are also willing to spend more for better value. Kraft
Heinz has unique characteristics that set them apart from its competitors. For example, the rich
taste that comes from their ketchup is derived from their hybrid tomato seeds (Heinz).
Consumers also enjoy the distinctive taste and texture of Philadelphia cream cheese. Moreover,
Nestle’s bottled water ranks as the 3rd largest around the globe (Juline). Companies in this
industry have numerous buyers and the various products distributed by them are high in
demand. As a result, there is a low bargaining power for consumers. Switching costs are also
low as customers have developed strong brand loyalty. Research reveals Canadians buy
around 24% of Kraft’s Mac and Cheese that is sold globally (McDowell). When comparing it to
the competition on the shelves, Great Value’s Mac and Cheese costs 77c per box, whereas
Kraft’s costs $1.57. Although there is less than a dollar difference, consumers can purchase two
boxes of Great Value’s Mac and Cheese for the price of one Kraft. Yet, consumers continue to
buy Kraft’s Mac and Cheese, emphasizing the preference for taste and quality.

Potential Development of Substitute Products

There are numerous substitutes available in the processed food and beverages industry. For
example, instead of ketchup, consumers may prefer sriracha, spicy mayonnaise, salsa or other
variety of sauces and spreads depending on their taste and the food they are eating. Although
the threat of substitutes is high, buyer switching costs have proven to be minor. For the trailing
12 months, the total revenue for Kellogg’s was $15 billion, General Mills $19 billion, Kraft Heinz
$26 billion, and Nestle $91 billion in USD (Yahoo). Another way these brands differentiate
themselves is by appealing to consumers with different diets. For instance, Kellogg’s Special K
cereal, General Mills keto ice cream and vegan mayonnaise, and Kraft Heinz organic ketchup.
Moreover, to recover from the pandemic, production costs, and the rising prices of raw
materials, Kraft Heinz raised their prices on numerous occasions. For example, from April to
June, there was a price increase of 12.4% and Kraft Heinz experienced a 2.3% decrease in total
products sold (Butler). However, this also led to a 10% increase in revenues. Over time, it is
evident that this move did not heavily impact their customer base as they had an increase in
sales (Butler).
Potential Entry of New Competitors

The companies in the processed food and beverages industry have high barriers to entry,
making it difficult for new competitors to break into the market. Current companies operate on a
global scale, sell various products, understand consumer behaviour, and have developed loyalty
from their consumers over time. Furthermore, new entrants would lack access to distribution
channels and long-term relationships with their suppliers. Also, current competing firms have the
benefits of economies of scale like mass production. Additionally, 70% of the ketchup sold in the
US is produced by Kraft Heinz (Charles). A new substitute product would have a hard time
rivalling this type of competition. Moreover, entering the market requires high capital, increased
spending on research and development, and access to raw materials, all of which are difficult to
accomplish for new firms entering the market. There are also many policies and tight regulations
in place to protect the health of consumers and eliminate consumer fraud (Ontario

EFE Matrix
Weight: a weight was assigned ranging from 0.0 (low importance) to 1.0 (high importance). The
number indicates how important the factor is if a company wants to succeed in an industry.

Ratings: 4 means a major strength, 3 – minor strength, 2 – a minor weakness and 1 – a major
weakness.

Score: The score is the result of weight multiplied by the rating. Each key factor must receive a score.
The total weighted score is simply the sum of all individual weighted scores. The firm can receive the
same total score from 1 to 4 in both matrices

Key External Factors Weight Rating Score

Opportunities
Sauce market forecasted to increase by 20% by 2025 brings
chance for consistent growth 0.09 4 0.36
Acquiring new brands to increase brand exposure globally to
increase customer base 0.04 2 0.08
Introducing new products that target a different customer base
of individuals and families 0.02 2 0.04
Appeal to health-conscious consumers and help them live and
eat better 0.06 3 0.18
Eco friendly packaging more appealing to consumers and helps
environmental sustainability 0.03 3 0.09
Large global market for sauces to share our products with
customers around the world 0.09 4 0.36
Use of AI software to continuously drive improvement 0.06 3 0.18
Demand for dairy expected to increase rapidly over the next ten
years brings chance for consistent growth 0.09 3 0.27
Key External Factors Weight Rating Score
Threats
Many competitors in the food industry 0.08 1 0.08
 Trend towards healthy options can take away sales from
processed foods 0.07 3 0.21
Increased prices throughout the supply chain due to pandemic 0.05 2 0.10
Natural disasters such as drought can impact raw materials
needed for production 0.09 1 0.09
Food safety regulations 0.02 2 0.04
Changing consumer preferences 0.07 3 0.21
Rising costs make customers more likely to go for generic brands 0.08 3 0.16
An unstable global market increases the foreign exchange risk 0.06 1 0.06
Total 1.00   2.51
The total score of Kraft Heinz is 2.51 which indicates their position is between minor weakness and
minor strength.

Kraft Heinz’s mission is to provide delicious foods and beverages to help individuals and families around
the world eat and live better. Some major opportunities that will allow the company to continue to do
so are bringing in new healthier options and acquiring global brands. The expected growth in the sauce
and dairy markets will allow Kraft Heinz to continue to grow sustainably. Partnering with firms to
develop cloud-based AI software will help to continually drive improvement and keep the company
ahead technologically. Goals to make eco-friendly packaging will help the company environmentally
sustainable. All this will enable Kraft Heinz to continue embodying the company's Purpose, "Let's Make
Life Delicious." Threats to Kraft Heinz’s consistent growth are rising prices that make consumers more
likely to go towards generic brands. Also, natural disasters pose a large threat because of the damage
they can cause to crops. By evaluating these opportunities and threats, Kraft Heinz can continue to
ensure that its consumers receive appetizing, affordable products without sacrificing quality. 

Some major opportunities for Kraft Heinz include a large global market for sauces as it is forecasted to
increase by 20% in the next 2 years. Additionally, the rise in demand for dairy products as well as
packaged food and beverages will have a large impact on the company’s future success. Brands in this
industry need to be cautious of raising prices as it can cause customers to alternate between brands.
Also, natural disasters pose a large threat because of the damage they can cause to crops. By evaluating
these opportunities and threats, Kraft Heinz can further grow their business while mitigating any risks.

Financial Analysis

(gonna add citations and do some work on the recommendations later)

The change in Kraft Heinz's financial ratios over the past five years is shown in the graphs
below. Recently, their liquidity and leverage ratios have been decreasing, while their activity,
profitability, and growth ratios are composed of some ratios that are increasing and others that
are decreasing.
To gain additional insight into Kraft Heinz's competitive position, it is necessary to compare
these financial ratios to their competitors and the industry as a whole. Because an aggregated
source for industry financial ratios is not readily available, industry averages and medians were
calculated from the financial ratios of Kraft Heinz's biggest competitors – namely, Coca-Cola,
Conagra, Danone, General Mills, Hormel, Kellogg, Mondelez, Nestle, PepsiCo, Tyson, and
Unilever. This sampling of top companies is similar to the approach that J.P. Morgan uses to
determine industry statistics.

Liquidity Ratios

Kraft Heinz's current ratio and quick ratio are at 0.87 and 0.47 respectively, which are below the
industry averages of 1.01 and 0.56. This would normally be a cause for concern since low
liquidity ratios can indicate difficulties with paying off short-term debts. But because these ratios
are very close to the industry medians of 0.84 and 0.50, it suggests that Kraft Heinz’s liquidity is
quite similar to other competitors in the industry.
Kraft Heinz's current ratio of 0.87 and quick ratio of 0.47 puts them ahead of top competitors in
the industry like Nestle, with ratios of 0.71 and 0.21; and Mondelez, with ratios of 0.60 and 0.40.
However, Kraft Heinz is still behind Coca-Cola, with ratios of 1.15 and 0.93; Hormel, with ratios
of 2.33 and 1.07; and Tyson, with ratios of 1.75 and 0.66.

Leverage Ratios

Kraft Heinz has a debt-to-total-assets ratio of 0.23, a debt-to-equity ratio of 0.43, and a long-
term debt-to-equity ratio of 0.41, which are below the industry averages of 0.33, 1.13, and 0.92,
respectively. Their leverage ratios are also below the industry medians of 0.35, 1.11, and 0.80.
Having low leverage ratios suggests that Kraft Heinz has a healthier level of debt compared to
their competitors.

Interestingly, Kraft Heinz has some of the lowest leverage ratios in the industry. The only
competitors that have comparable leverage ratios are Hormel, with ratios of 0.25, 0.43, and
0.43; as well as Tyson, with ratios of 0.23, 0.42, and 0.40. As a result, Kraft Heinz has an
advantage over several top competitors in the industry, like Coca-Cola, Nestle, PepsiCo, and
Unilever – all of whom have higher levels of debt than Kraft Heinz.

Activity Ratios
The activity ratio that stands out most for Kraft Heinz is their total assets turnover of 0.29, which
is significantly lower than the industry average of 0.83 and the industry median of 0.70. In fact,
out of Kraft Heinz’s competitors in the industry, Kraft Heinz has the lowest total assets turnover
of them all. After Kraft Heinz, the competitors with the lowest total assets turnovers are Coca-
Cola and Mondelez, both being tied at 0.46, which is quite a jump from Kraft Heinz’s ratio of
0.29. Having a low total assets turnover means that Kraft Heinz is disadvantaged by not making
use of their assets as efficiently as other companies in the industry, like Nestle and Tyson.

Profitability Ratios

Kraft Heinz's profitability ratios tell more of a mixed story. With a gross profit margin of 32.24%,
an operating profit margin of 17.15%, and a net profit margin of 12.06%, Kraft Heinz has several
profit margins that are greater than the industry medians of 32.21%, 12.14%, and 7.70%. This is
a good indicator for the company’s ability to generate a profit. However, the same cannot be
said for their return on assets and their return on equity.

Kraft Heinz’s ROA and ROE are 2.57% and 4.82%, which are significantly lower than the
industry averages of 7.38% and 28.94% as well as the industry medians of 7.06% and 19.18%.
While this puts Kraft Heinz in a similar position as Danone, which has a ROA of 2.08% and a
ROE of 5.37%, the company still has some of the lowest returns in the industry. This means that
Kraft Heinz is not making the most out of their assets and their shareholders’ investments
compared to their competitors, especially compared to companies like Coca-Cola, Nestle,
PepsiCo, and Unilever.

Growth Ratios

Kraft Heinz's net income has grown by 133.50% and their earnings per share have grown by
133.12%, which is significantly higher than the industry averages of 5.03% and 5.52% as well
as the industry medians of 7.57% and 8.02%. These growth ratios are the highest within the
industry and indicate that Kraft Heinz's net income is growing very quickly compared to their
competitors. Considering how companies like Danone, Kellogg, and Mondelez have a negative
net income growth, these high growth ratios show that Kraft Heinz is in a strong position to
compete in the industry.

*details, discussion and demonstration

Recommendation
Should address problems/issues identified
- Financial analysis (incl key ratios)

(pasted above in the problems section:

Kraft Heinz’s total assets turnover is 0.29, which is significantly lower than the industry average
of 0.83 and the industry median of 0.70. Kraft Heinz has the lowest total assets turnover among
their competitors.

Kraft Heinz’s return on assets and return on equity are 2.57% and 4.82%, which are significantly
lower than the industry averages of 7.38% and 28.94% as well as the industry medians of
7.06% and 19.18%. The company has some of the lowest returns in the industry.)

Instructions are unclear but I think that the financial analysis problems + recommendations and
the 11 strategies should be moved under the Alternatives Identified vs Recommendation
section, and that he’s saying that the Alternatives/Recommendations should address the
problems we identified earlier in the doc

Gonna try to add alternatives from the Grand Strategy Matrix into the alternatives section as
well -Joseph

- 11 strategies

From the eleven alternative strategies, Kraft Heinz can consider utilizing backward integration,
horizontal integration, product development, and related diversification. To start off, backward
integration will give them higher accessibility to raw materials and greater authority in the early
stages of the production process. They can purchase tomato farms instead of buying tomatoes
from farmers. In doing so, it will give them a competitive advantage and product differentiation.
This will also aid in cost reduction as they are eliminating the middlemen involved in the
production process and give them an increased control over their supply chain operations.
Since competition is one of their biggest threats, Kraft Heinz should consider horizontal
integration by acquiring brands to gain a competitive advantage. They can also implement
product development as well as related diversification to help tackle competition, increase
growth, and diversify their products. This can be accomplished by launching frozen meals or
partnering up with a frozen foods brand and further improving one of their products before
introducing it into the market.

Alternatives identified vs Recommendation

(11 strategies here?)

Using the Grand Strategy Matrix, there are several alternative strategies that Kraft Heinz as a
whole can use, and several alternative strategies that the company's six divisions or platforms
can use. etc etc etc

Based on the QSPM Matrix, we recommend…

Reasonable or achievable

Timelines

Justification

*tools utilized and justification

Conclusion

Discussion/Summative?