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Kraft Heinz Sales Dip as Lower-Income Consumers Feel Squeezed

Cautious lower-income consumers and slower restaurant sales are squeezing Kraft Heinz.

The packaged food product company on Wednesday (May 1) released earnings showing a 1.2% drop in sales, driven by lower-income consumers spending less at both the supermarket and on meals away from home. The company said it raised its prices 2.7% year over -year to offset the cost of goods such as coffee.

“The gap between high and low earners continues to remain wide, and it shows a clear and continued bifurcation,” CEO Carlos Abrams-Rivera said during an earnings call. 

“So the lower-income consumers are challenged with interest rates remaining high, gas prices elevated and savings dwindling. So there’s a clear pullback of restaurant spend by these lower-earning households, especially in restaurants and convenience stores. These consumers instead are looking for value as they prepare more meals at home.”

During the question-and-answer session, management was asked if perhaps the company wasn’t being too optimistic about the latter part of the year, given that a number of restaurant companies are forecasting weaker sales. 

“I continue to feel very good about overall strategy globally, about away from home,” Abrams-Rivera replied. “Again, it’s a business that we are seeing continue to improve outside the U.S. And even as we are seeing some of the slowing of the restaurant business here in the U. S., as I think about the second half, there’s a few things that I think will feel better as we go into this rest of the year.”

For example, he added, the company will make efforts to expand “the number of clients into identifying our portfolio,” and focusing on “higher margin channels.”

One area where Kraft Heinz is not struggling, the CEO said in response to a separate question, is in competition with private label brands.

“We are fortunate that we have such iconic and beloved brands in our portfolio,” Abrams-Rivera said. “And I think what you’re seeing is that really we haven’t seen much of a change in terms of our overall gaps versus private label.”

His comments echo ones from Procter & Gamble management, which said last month that consumers did not appear to be trading down.

PYMNTS noted Wednesday that the current earnings season shows a lot of evidence that consumers are dining out less, with high-profile brands like McDonald’s and Starbucks both reporting declining quarterly sales.

Starbucks CEO Laxman Narasimhan noted the chain was seeing “fewer visits from our more occasional customers,” with revenues down 1% year over year, and same store sales sliding 4%.