Kraft Heinz forecasts weak profit as high prices put off thrifty shoppers

Adds shares, executive comment in paragraph 5

By Anuja Bharat Mistry

Feb 12 (Reuters) - Kraft Heinz KHC.O forecast annual profit below estimates on Wednesday as years of price hikes eat into demand for the packaged food maker's Lunchables and packaged meat.

The Jell-O maker also missed sales expectations for a fourth straight quarter, sending its shares down about 4% in early trading.

Steep living expenses have forced Americans with tighter budgets to avoid higher-margin products, even in categories like condiments and spices, hurting packaged food makers that have raised prices repeatedly to protect margins from high input costs.

Kraft Heinz now plans to make investments to adjust price gaps across four key brands and in the U.S. food-away-from-home segment, finance chief Andre Maciel said in prepared remarks.

Its overall volumes fell 4.1 percentage points in the quarter ended December 28, while prices rose by 1 percentage point from the same period a year ago.

Organic net sales in top market North America decreased 3.6%, after falling 3.2% in the prior quarter.

"The recovery in sales is taking longer than expected. In 2025, the company will likely need to invest in price to improve the performance of underperforming brands including Capri Sun," said CFRA Research analyst Arun Sundaram.

The company has boosted its marketing efforts and invested in technology to reclaim shelf space for its brands such as Mac & Cheese and Philadelphia from cheaper private-label alternatives.

That, along with higher manufacturing and labor costs, dragged down its quarterly adjusted gross profit margin by 40 basis points to 34.4%.

The company expects fiscal 2025 adjusted profit of between $2.63 and $2.74, compared with analysts' average estimate of $3.04, per data compiled by LSEG.

It expects annual organic sales to be flat to down 2.5%, compared with a 2.1% decline seen in fiscal 2024.

The forecasts do not account for tariffs and any significant worsening of the macro environment, the company said.

Kraft Heinz's fourth-quarter revenue of $6.58 billion missed estimates of $6.66 billion.