Bernstein Downgrades Kraft Heinz, Citing Limited Growth Catalysts
Bernstein has downgraded its rating on Kraft Heinz (NASDAQ: KHC) from Outperform to Market-Perform, reflecting a cautious outlook on the food giant’s near-term growth prospects. The investment firm also lowered its price target from $40 to $35, citing a lack of meaningful commercial momentum following a weak Q1 performance.
Kraft Heinz, a key player in the packaged food sector, reported organic sales declines in five of its ten categories last quarter, signaling softness across its core portfolio. Despite a 1.2% uptick in total net sales during Q1, organic sales fell 0.5%, highlighting underlying volume and mix challenges. Notably, North American retail—its largest segment—saw organic sales contract by 2.2%.
Bernstein analysts acknowledge that Kraft Heinz continues to perform well relative to some competitors in areas like innovation and revenue growth management. However, the firm argues that the company’s current commercial initiatives lack sufficient scale to generate momentum across its full portfolio. “There are some bright spots… but the scale of these changes is insufficient to instill confidence in a broad-based reacceleration,” the firm noted.
The downgrade also reflects a broader concern about category-wide growth in the consumer packaged goods (CPG) sector. With moderating inflation and price sensitivity among consumers, volume recovery will be critical. Kraft Heinz’s reliance on pricing over volume for revenue growth raises questions about sustainability as promotional activity returns across the sector.
While Kraft Heinz has rolled out new marketing campaigns and product innovation across brands like Kraft Singles, Lunchables, and Heinz, Bernstein remains cautious. The investment firm indicated that visibility into a stronger second-half performance remains limited, suggesting that a robust recovery is unlikely in the immediate future.
The downgrade will be closely watched by stakeholders across the FMCG landscape, particularly as peer companies navigate similar macro and category headwinds. For now, Kraft Heinz’s ability to drive renewed growth is under scrutiny, with execution and portfolio agility key to regaining investor confidence.