Greetings. Welcome to the Kraft Heinz Company third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Anne-Marie Megela. Vice President of Investor Relations. Thank you, you may begin.

Thank you for joining us today. Welcome to the Q&A session for our third quarter 2026 business update. During today's call, we may make forward-looking statements regarding our expectations for the future. These statements are based on how we see things today and actual results may differ materially due to risk and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SEC filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures. Please refer to today's earnings release and the non-GAAP information available on our website for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. I'll now pass it over to our Chief Executive Officer, Steve Cahillane for a few opening comments.

Good morning, everyone. Before we open the call for questions, I want to take a moment to highlight this morning's announcement regarding the definitive agreement to divest our North American coffee business to One Rock. This is an important step in simplifying and strengthening our portfolio. With this transaction, we can concentrate our capital and management attention where we see the greatest potential for growth and where we can create the most value for our consumers, our customers, and our shareholders. I also want to acknowledge the people behind this business. These brands have a long and proud history with consumers and that is a credit to the teams who have cared for them for over many, many years. Thank you for your dedication. We are confident these brands have a bright future under One Rock's focused ownership and we are demonstrating that confidence by owning a 30% non-controlling equity stake in the business, which allows us to share in their future success. With that, I'm joined by Andre Maciel, and we're happy to take your questions. Operator, please open the line for the first question.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Great. Thanks so much. Good morning, everybody. Steve, I know you recently spoke a little bit, a couple weeks back, about maybe some weakening category trends in sort of U.S. retail, but delivered the North America business organic as planned, even excluding the trade benefit. So I'm wondering how you sort of square those two. and what you're expecting in 4Q regarding sequential improvement in U.S. retail, given I think that the percent of revenue gaining or holding share seemed to take a little step back sequentially this quarter.

Yeah, Andrew, thanks for the question. You know, we did deliver a better result than our original plan, and you can see that on our narrowed top line guidance. And I think what you're seeing in terms of our share trajectory and our consumption trajectory is what you would expect based on the investments that we've made. We've leveled out in terms of where we are in terms of holding share. We'll acknowledge that for certain. But if you think about the investments we're making, we're making those and we're making those against the innovations that were in the pipeline from last year. So there's a lot of benefit that you'll see in the velocity, but there's not the same benefit that you'll see in total distribution points and the like. You'll see that really start to get kind of its next Boost, if you like, in the first quarter, spring of next year with the resets. We've got very constructive dialogues going on with our retail partners. They love the fact that we're making these investments. They like what they're seeing in brands like Kraft Mac and Cheese and Power Mac and Capri Sun that are benefiting from that. They like what they're seeing in condiments. But as we get into next year, you'll see we'll have a You know, a plan to actually grow TDPs, and you'll see that next level of, you know, improvement starting next year. And that's exactly as we expected it. Great.

And I'm going to sneak in a really... Oh, yeah. Keep going, Andre.

Got it. Just to give a little more color as well. First, give credit inside North America to U.S. away from home in Canada. They both grew low single-digit in the quarter again, which is great and encouraging to see that consistency. On U.S. retail, to your point, it did come a little better, despite having probably more pressure from retailer inventory than we expected. So we mentioned 80 pips in last earnings. There was a little more impact than that, but the consumption came a little better. The category has indeed softened the way we were expecting. So it was about, in our portfolio, Mick suggested about 50 pips softer. But just to maybe adjust a little bit to what you said, in the quarter, our percentage of revenue gaining share has improved a little bit. It went from roughly 25% in the first half to 28%. It's not a great improvement, but still another step in the right direction, which I think helps you offset the headwind you saw in the inventory.

And I know it's too early to talk about 27, and maybe we'll get more of that sort of next week, but just with expected higher inflation, a higher year-over-year tax rate next year, Maybe some of the incremental investment this year likely to still be a year over year headwind next year. I guess, are there any other key puts and takes we should consider and maybe what sort of opportunities do you have to help mitigate some of these items again as we go into 27? Thanks so much.

Yeah, I think, you know, as we think about 27, we'll give more guidance than we normally would at an investor meeting next week or we'll talk more color about 27 next week. But we are seeing more inflation. I think everybody's seeing that. Our first line of defense is always productivity, and we're stepping up that productivity. As we think about price, we want to take as little price as possible because of the consumer dynamic. But price is likely to have to be taken in 27 for sure. And as I mentioned earlier, we're very bullish about the investments that we've made and the fact that we will get better returns on those investments after the spring resets. And we'll, again, talk more about that next week at our investor meeting, which I hope many of you will be able to attend. Thanks so much.

Our next question comes from the line of Nick Mody with RBC. Please proceed with your question.

Yeah, thank you. Good morning, everyone. Steve, I was hoping you can talk about away from home. You know, we've been hearing from some other companies there's been some pressure from away from home, but obviously you had a very good So just wanted to get some more context. You know, is this something you think you can muscle through this, some of this weakness simply because you have these new partnerships and you're really leaning in? You know, any context on that would be helpful. And then just kind of wanted to follow up on one of Andrew's questions regarding market share. You know, you talked about, you know, better shelf resets next year, but, you know, something that we're picking up across a lot of different categories is how retailers are really Thank you. Yeah, thanks, Nick.

So in a way from home, most of our, if not all of our success this last couple of quarters has been through share gains. And a lot of that is based on the partnerships that you referenced, you know, the NFL and Disney are just really starting and proving to be quite valuable. We're taking share. We're gaining new distribution across not only ketchup, but also the other condiments. So we're feeling very good about our away-from-home performance. And as we look to the consumer recovering in 27, if we continue to gain share and the category itself gets a little bit of tailwind, it's a great place for us to be. So global away-from-home grew nicely, and North America away-from-home grew nicely. So we're feeling very good about that. In terms of the North American retail and the way they're thinking about the aisles, we're involved in a lot of very constructive conversations around just that. How do you revitalize and how do you, you know, make the aisle more interesting? I wouldn't say there's anything dramatic in the offing for 27, but we're square at the table with those conversations. And I think part of that is, you know, we punched that ticket when we made the investment of $600 million, now $700 million. and was very bullish about, you know, we're going to grow. We want to be a tailwind for our retailers, not a headwind. And part of that comes through innovative thinking about how we make the aisle more dynamic, more interesting, how we bring more innovation, how we drive more traffic. So that is clearly a conversation that we're engaging, you know, up and down with our retailers.

Our next question comes from the line of Thomas Palmer with J.P. Morgan. Please proceed with your question.

Good morning. Thanks for the question. I wanted to ask on the timing item you noted as it relates to operating profit in the quarter, the 450 basis points of help relative to your expectation from trade and marketing.

What caused the timing shift?

Was there anything more tactical on your end to kind of think about? And then just to clarify, you would look for this to be fully made up for in 4Q, or is there a bit of a change in trade for the year as well? Thank you.

Thanks for the question. Nothing in particular. It's just the way the programming ended up working. So we have, by end of Q3, spent roughly 70% of the of the trade and the market investments plan for the year. Three years today to have already accrued in the P&L 6.1% of marketing. So we're going to, we are facing that. So there is no intention to change our plan whatsoever. So we do have historically our market share peaks in Thanksgiving and Christmas. So we decided to concentrate more of the efforts to the Q4. So nothing beyond that.

Understood. Thank you.

Our next question comes from the line of Max Gumport with B&P Paribas. Please proceed with your question.

Hi. Thanks for the question. I wanted to focus on your market share performance in U.S. retail. So previously when you announced these investment plans, you discussed how you You're expected to see meaningful results in the second half. You're expected to see a bend in the trend even in market share. You can acknowledge you're a bit behind that schedule, but you're also saying things are playing out exactly as you expected and you now expect a meaningful step up next spring. Maybe put a bit more color on why it does seem like market share has perhaps not really shown the Thanks very much.

Thanks, Mac. I remind you that we've never and we won't give market share forecasts, but our top line in North America and globally is moving better than we anticipated at the start of the year. and there's categories where we're doing better than we expected and there's categories where we're acknowledging we're doing not as well as we expected. One of the not as well as expected is clearly in Philly cream cheese and it's an interesting one because we're gaining share but we're losing consumption because the category is under pressure and some of the pricing moves that we made proved to be deflationary to the category so they didn't work and so we're adjusting. and so I'd say broadly speaking the fact that we bend the trend and we're holding that improving it very modestly is a better place to be than the opposite and we've also said all along that progress would not be linear and so we reserve the right to continue to get smarter to make the reinvestments and move things around as we see what's working and what's not working and so as we study our market share and we study our North American retail performance what we've seen is were gaining velocity and improving velocity against smaller shelf sets because we lost distribution last year and we had an innovation pipeline that was based on the underinvestments of the years past. But we looked at that pipeline and said, you know, what could work for us? We think Kraft Mac and Cheese Power Mac could work. So we leaned into that. We thought Capri Sun Hydrate could work. We leaned into that. We thought Arita and Shapes and some of those things, you know, were good. So we leaned into that. and what we're looking forward to is the investments that we've made this year and the pipeline that we've built this year for next year will prove to be more beneficial to us and so non-linear but good progress and we're feeling good about you know where we are from a top line perspective we're feeling good about the constructive discussions we're having with retailers about next year and so that's kind of where we stand we're feeling you know good about the innovation pipeline for next year If you look at one example of what's happening in Canada, we introduced KD Ramen, and literally we sold three months of inventory in a week. Great innovation. We're going to bring that to North America next year. We'll continue to hold ourselves accountable for market share and for consumption growth. We're feeling okay about where we are right now, and we're feeling better about what we're building for next year. Thanks very much. I appreciate all the details.

Our next question comes from the line of Peter Galvo with Bank of America. Please proceed with your question.

Hey, good morning. Thanks for taking the question. Andre, I know you mentioned that inflation maybe could still be higher into 27. I think last call you had provided kind of some early thoughts on, I think, 4% to 5% inflation guidance for 27. I didn't see an update on that today, so I was just hoping to get some clarification there and Obviously, on some of the raw materials, we've seen some deflation. So just curious kind of where you're falling in that band for next year. Thanks very much.

Sure. As Steve said, we're going to provide a little more color on 27 next week. But I can tell you on inflation that we previously said in the prior call, we're expecting 4% to 5% next year. The expectation is now slightly above 5%. So we continue to see On one hand, what inflation coming from packaging and from certain commodities, soybean oil remains a good item of pressure. We are having a lot of favorability this year from dairy, and we do expect some of that to reverse into next year, which will contribute to the year-over-year pressure. And that's why Steve mentioned a little while ago that Even though productivity remains the first line of defense and if you're good about the pipeline you have for next year, there will be an element of price across our regions so we can protect our gross margins. Great, thanks very much.

Our next question comes from the line of Leah Jordan with Goldman Sachs. Please proceed with your question.

Thank you for taking my question. I just wanted to follow up on the margin discussion. I know there's been a few questions different this morning, but you've previously suggested this year should be a trough in margins. Your investments continue to play out, some working, some not. You've called out a little bit higher input cost inflation. Just wanting to get an update on your confidence in that view, the high-level puts and takes we should keep in mind around the stability, or what would you call out as the biggest tailwind? Is it productivity at this point, or just kind of help clarifying that point? Thank you.

So what we have said is the level of investment that we have, Thank you very much. Thank you very much. So, again, we're going to talk more about 2027 next week, but I want you to understand these dynamics.

Great. Thank you.

Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Thank you. Good morning. You're obviously increasing the spending quite significantly this year, but you're also improving the ROI and ROAS. Can you maybe point to what's helping boost some of that effectiveness and efficiency? And is there more upside? Is it specific to certain brands or categories that could be transferred more broadly across the portfolio or from one geography to another? What's kind of driving that lift and is there more headroom to it?

Yeah, Michael, thanks for the question. I'd say, you know, Before I arrived, the company was making good progress in building capability around the efficiency of marketing spend. And the investments that we're making are not just in advertising, promotion, price, they're also in capability and people. So we continue to build on that capability. And technology continues to move forward rapidly in terms of our ability to understand in real time what we're getting returns for and what we're not. And I see continued upside in that. So the level of spending that we have, as Andre said, we feel is very sufficient. And getting a better return on that in 27 versus what we got in 26 is, in fact, very realistic and something we're demanding of ourselves. And so we feel good about the level of investment, and we feel very good about the capability that we're building and our ability to get continued improvement in returns based on those investments.

And more technically, like if you look on trade investments, like we have a very good visibility to invest in capability in RGM for many years now. And there are continuous opportunities for us to improve certain promotional tactics, sometimes moving dollars across brands. And on the marketing front, there is opportunity to redeploy dollars across brands to a certain extent and also improve the amount allocated to different media types. So we're going to speak a little bit about that next week as well. You'll hear more, but we feel confident about the ability to continue to improve a lot of the returns on those investments.

Okay, great. Thanks so much.

Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

Great. Thank you. I wanted to ask you about the investments this year. How much of that $700 million has been spent So far, do you think you're going to hit that number in calendar 2026?

Yeah, good morning. As I said a few minutes ago, we have spent around 70% of the price investments for the year and about the same for marketing investments. We have at this point hired 80% of the The people that we have planned and we expected to, by the end of the year, pretty much be hiring everyone that was previously anticipated. So we will spend the $700 million these years, as you have said before. There will be, and we're going to put more money in marketing because we are not spending the whole money behind people, right, because of the natural ramp up. Next year, there will be a little bit of carryover of people. But we are deploying resources across the different levels and they do have a number of efficiencies on the SG&A front, further leveraging our shared services, further leveraging automation. So then any ramp up of people will be fully offset. But again, we are spending $700 billion in the P&L this year.

Great. Thank you for that clarification. I want to just ask, you've talked a bit about some of the things that you're learning but if you had to sort of, you know, list the biggest things that you might do differently with the money that you were spending next year, first of all, do you envision it being similar in amount to this year, but maybe just spent better? And then why would it be better? I guess there's gonna be maybe some retailer resets, maybe the quality of the innovation, maybe some things you're learning on the promotion activity ROI, you know, any sort of, Thank you for joining us.

A lot of what we're spending on Heinz ketchup, really working. What we're spending on Heinz Zero, really working. It's kind of as simple as that. We're learning what's working and we're spending more against that. In terms of innovation, as I mentioned earlier, we had the innovation pipeline as it was. We allocated investment against where we thought there were winners. I've mentioned some of those. We have a different innovation pipeline coming in 27, which we'll talk more about next week. which we feel is significantly better than 26, still not sufficient. So we're gonna get better even beyond 27 into 28. And so it's making sure that we're spending the appropriate amount of investment against R&D. We've increased our spend 20%. R&D spending and investment doesn't happen overnight, but it's building towards the future. And we feel good about getting closer to 1% of net sales as a ratio against R&D, more than 6% in sales and marketing. And so, you know, the investment is there. We feel the investment is sufficient, but it's a learning curve that we're on and, you know, it's a good place to be relative to anything else. So we feel good about 27 and the learnings that will apply based on 26 and onwards.

Thank you.

Our next question comes from the line of Rob Dickerson with U.S. Bank Corp. Please proceed with your question.

Great, thanks so much. Steve, you know, obviously a couple of comments on the call today about, you know, potential need to take some incremental price next year just to protect gross margin. I'm just kind of curious kind of how you're viewing, let's say, the overall marketplace, right? Because I kind of, you know, the core tenet or one of the core tenets of the strategy longer term is like demand recovery, right? Volume-led growth that's profitable. Thank you for joining us.

Thank you for joining us. Not less pricing. And so, as Andre already mentioned, and we say over and over, our first line of defense is against productivity and we'll continue to ramp up our efforts against productivity. But I do feel like 27 will require price. You're seeing that from the peer set clearly. And so I think that's just the environment that we're going to be in.

and it will be you know kind of you know we'll be in it with everybody so it won't be a competitive advantage or disadvantage it'll just be the situation that we have to face right fair enough and then maybe just one quick hello go ahead go ahead oh sorry uh just a quick question um on the meats business you know that's clearly kind of been a little bit of a drag for you kind of for some time um obviously, you know, announced the divestment or I guess partial divestment of coffee this morning. So I'm just curious, like, you know, is that, is the meat business, like, you know, kind of, I guess, broader question is like, is that fixable? You know, like, is the category itself a little disadvantage or, you know, is this an area where maybe you would consider kind of looking more in justifiable reasons of keeping it, kind of like you've done with You know, part of cheese and nuts and coffee. That's all. Thank you.

So, you know, we'll continue to look for opportunities to make our portfolio more growth-oriented portfolio. And you saw that today with the announcement around coffee. We feel very good about that. In terms of the meats business, you know, Oscar Mayer, I would start with the strength of the brand. It is a phenomenal brand. So, yes, it is fixable. There's areas where we've had some own goals, which we're, you know, we're fixing. It's improving quite a lot. So it stopped getting as bad, but that's clearly not sufficient. So there's still work to be done. We haven't innovated around the Oscar Mayra portfolio in ways that you'd expect. We haven't addressed some of the concerns around the process nature of it. So there's a lot of things that we can do and we need to do around the Oscar business. But more broadly, I'd say we'll continue to look for areas where we can make Portfolio Improvements.

Super. Thanks, Steve.

Operator, we have time for one more question. Thank you. Our final question comes from the line of Scott Marks with Jefferies. Please proceed with your question.

Hey, good morning. Thanks for squeezing us in here. Wanted to just come back to the cream cheese category in Philadelphia. You know, obviously part of the win big bucket. Talked about some of the price investments not working, maybe redeploying some of that. Just wondering if you can share a little bit about how you're thinking. You know, is that investment being redeployed to other parts of the business where you're seeing more traction? Are you putting it back into other areas of the Philadelphia business? Just Any thinking or update around how you're thinking strategically about driving improvements forward for that brand and that category? Thanks.

Yeah, you know, it's all fungible, obviously. And when we look at Philly, the pricing investment didn't work, but we just launched lactose-free cream cheese. And so we're building distribution there. And I'd say what Philly needs from a category perspective is more innovation because it's It's very clear where we're losing as a category. We're losing to cottage cheese and other more protein forward. So we need to do more innovation around what the consumer is looking for vis-a-vis protein, vis-a-vis flavors, vis-a-vis overall innovation. And you'll see and we'll talk more about that in the future in terms of what that brand can do and what the category can do. The brand itself is an incredibly strong brand. So there's nothing wrong with the brand. It's just the category is under some pressure relative to switching out of cream cheese into cottage cheese and others. And that's very addressable, but it's going to take just a little bit of time.

Appreciate it. Thanks.

Thank you. We have reached the end of the question and answer session. And with that, the conclusion of today's call. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.