Get the app today! App Store Play Store

Kraft Heinz Meat, Cheese Sales Lag As Shoppers Buy Premium Products

Published on Jul 31 2020 5:50 AM in A-Brands tagged: Trending Posts / Tyson Foods / Kraft Heinz / Oscar Mayer

Kraft Heinz Meat, Cheese Sales Lag As Shoppers Buy Premium Products

Second-quarter sales at Kraft Heinz’s Oscar Mayer deli meats and cheese slices arm grew more slowly than those of higher-end rival products, retail data has shown.

The nearly $7 billion U.S lunch meat market grew by 18% in the 8 weeks to 13 June, but Oscar Mayer sales rose only 9%, according to Nielsen data analyzed by Wells Fargo.

Meanwhile, sales of rival brands like Hormel Foods' Applegate and Tyson Foods' Hillshire surged 37% and 27%, respectively.

Cheese and chilled processed meat are Kraft Heinz's top two U.S. businesses by retail sales, but Euromonitor data shows Kraft Heinz’s market share in both categories has steadily shrunk since 2015.

Innovation Needed

To fuel growth, Kraft Heinz needs to innovate, a process that could take several years, analysts said. "The higher priced brands are seeing the strongest growth. People aren't trading down to private-label, they're buying the quality stuff," Wells Fargo analyst John Baumgartner said.

"Oscar Mayer doesn't have that quality perception with consumers - they're going to have to launch a product that's really clean-label so they can charge more."

Kraft Heinz CEO Miguel Patricio, who began revamping operations when he took over about a year ago, said in April the company had postponed a lot of innovation this year to spend more on media and reduce the number of products it makes. Kraft Heinz declined to comment for this story.

Cheese Sales

The company's U.S. cheese sales rose 24% in the 8 weeks to 13 June, the Nielsen data shows, once more lagging rivals - including premium private-label brands - that drove 32% growth in the $19 billion U.S. packaged cheese market.

Kraft Heinz has taken some steps to innovate. In September, a fund backed by the company led a $3.5 million investment in animal-free dairy cheese startup New Culture.

Kraft Heinz's Cracker Barrel cheddar cheese is considered premium and has seen some innovation, but it was launched in 1954 and analysts say it needs to further revamp its portfolio through tie-ups with specialty cheese-makers or regional dairies.

News by Reuters edited by Donna Ahern, Checkout. Click subscribe to sign up for the Checkout print edition.

Share on Facebook Share on Twitter Share on LinkedIn Share via Email