Kraft Heinz Raises 2026 Sales Floor as Emerging Markets Grow

The Kraft Heinz Company (NASDAQ: KHC) raised the low end of its 2026 organic net sales guidance and increased its adjusted earnings-per-share outlook after third-quarter results met management’s expectations. The company also reaffirmed its constant-currency adjusted operating income forecast, even as weaker U.S. retail sales and higher investment contributed to a double-digit quarterly profit decline.

Kraft Heinz now expects full-year organic net sales to decline 1.25% to 0.5%. It forecasts adjusted EPS of $2.07 to $2.13, with the increase attributed to a lower expected effective tax rate of approximately 23.5%. Constant-currency adjusted operating income is still projected to fall 18% to 16%, while free cash flow conversion is expected to be about 110%.

Emerging markets offset part of North America weakness

Third-quarter net sales were $6.1 billion, with organic net sales down 1.1% from a year earlier. Price was flat, while volume and mix reduced growth by 1.1 percentage points. The company said trade provided a 40-basis-point benefit relative to its expectations, while an anticipated inventory pull-forward created an 80-basis-point headwind.

North America organic net sales declined 3.2%, reflecting a 2.4-percentage-point decline from volume and mix and a 0.8-point reduction from price. Kraft Heinz attributed the result mainly to lower U.S. retail sales, including an expected inventory headwind, partly offset by growth in Canada and the Away From Home channel.

Organic net sales in Europe and Pacific Developed Markets fell 1.3%. Business exits in Australia and New Zealand represented an approximately 100-basis-point headwind, while Europe recorded volume-led growth and continued market-share gains.

Emerging Markets remained the strongest region, with organic net sales increasing 15.6%. Price contributed 7.2 percentage points and volume and mix added 8.4 points. A return to growth in Indonesia contributed three percentage points. Heinz organic net sales in emerging markets rose approximately 16%, while Emerging Markets Away From Home sales increased 8% on an organic basis.

Global Away From Home organic net sales grew 2.6%, marking a second consecutive quarter of growth after increases of 2.9% in the second quarter. Management is focusing that business on expanding beyond ketchup, increasing penetration with quick-service restaurants and building exposure to channels such as stadiums and hotels.

Investment weighs on quarterly earnings

Adjusted gross profit margin narrowed 40 basis points to 31.9% as inflation across procurement and logistics outweighed some of the benefit from productivity. Kraft Heinz generated approximately $520 million of year-to-date gross efficiencies and said it remains on track to exceed its five-year target of $2.5 billion in gross efficiencies by the end of 2027.

Constant-currency adjusted operating income declined 14.6% to $0.9 billion, and adjusted operating margin fell 2.3 percentage points to 15.4%. The company cited variable compensation and investment as major factors in the decline and said marketing and trade spending would be higher in the fourth quarter.

North America constant-currency adjusted operating income decreased 10.3%, primarily because of inflation, top-line performance and comparison with lower variable compensation expense a year earlier. Europe and Pacific Developed Markets recorded a 32.4% decline, reflecting a non-cash write-off of obsolete spare parts, increased marketing investment and higher variable compensation. Emerging Markets income rose 35.6% at constant currency as sales growth and productivity more than offset inflation and marketing spending.

Adjusted EPS fell 13.1% to $0.53 from $0.61. Year-to-date free cash flow declined 5.2% to $2.4 billion as planned investments were partly offset by working-capital improvements. Free cash flow conversion increased 11 percentage points to 120%.

U.S. turnaround spending continues

Kraft Heinz is deploying approximately $700 million across commercial initiatives in 2026, including marketing, sales, research and development, product superiority and pricing. Marketing is expected to represent at least 6% of net sales, while R&D spending is being increased to about 0.9% of sales.

The company said sales, volume and market share are recovering, with the remaining planned investment scheduled for the fourth quarter. Global volume trends improved from a 4.1% decline in 2025 to a 1.1% decline in the third quarter of 2026. Emerging Markets volume and mix rose 8.4%, while North America and Europe and Pacific Developed Markets remained negative.

Consumption in Kraft Heinz’s “Win Big” portfolio, which represents approximately 60% of net sales and includes taste elevation, hydration and ambient meals, increased 0.5% year to date. However, its “Hold” and “Win” portfolios declined 3.8% and 1.6%, respectively.

Management said early results from investments in opening price points and protecting distribution were encouraging, but consumer response to selective base-price investment was below plan. The company intends to pull back and redeploy some of that spending in the fourth quarter. Pressures in U.S. retail were concentrated in meats, cream cheese, sandwich cheese and salad dressing, with separate pricing, packaging, media, innovation and price-pack actions identified for those areas.

Outlook and portfolio action

The full-year outlook assumes a slightly positive contribution from price, inflation slightly above 4% and adjusted gross profit margin near the lower end of a decline ranging from 50 to 10 basis points. At current foreign-exchange rates, currency is expected to contribute approximately 40 basis points to reported sales. The presentation also identified an approximately 100-basis-point impact from SNAP on organic net sales and an approximately 170-basis-point impact on constant-currency adjusted operating income.

Separately, Kraft Heinz plans to divest its North America coffee business to One Rock Capital Partners in a transaction valuing the operation at $650 million. Kraft Heinz expects about $500 million in after-tax net proceeds, which it plans to use to reduce debt, while retaining a 30% non-controlling stake. The transaction is expected to close in mid-2027, subject to regulatory approval and other customary conditions. The company expects the divestiture to be accretive to its growth and margin profile.

Kraft Heinz ended the quarter with a last-12-month net leverage ratio of 3.1 times, compared with its target of approximately 3.0 times, and reported returning $1.4 billion to shareholders through dividends. Execution risks include continued U.S. retail weakness, inflation, the effectiveness of commercial investments and the timing and completion of the coffee transaction.