Kraft Heinz beat first-quarter revenue and profit estimates on Thursday as a year-long surge in demand for consumables including Lunchables crackers and Kraft Macaroni & Cheese held up even as the US economy gradually reopened.
Shares rose 3 percent in noon trading after the company projected current-quarter organic net sales to rise by mid-single-digits.
Pandemic-induced curbs that led people to eat at home and rely on packaged meals proved to be a boon for the Chicago-based company, which has struggled with tepid sales and was forced to write down the value of several brands by billions of dollars over the past two years.
The surge in demand and stockpiling due to a resurgence in COVID-19 cases, however, have fueled a jump in prices of commodities such as sugar, wheat and soy, with Kraft anticipating a mid-single-digit level of inflation in 2021.
Meanwhile, the company is investing to close gaps in the supply of Heinz ketchup sachets, Mac & Cheese cups and Claussen pickle jars as demand accelerates in the United States.
“By July, we will have 25 percent more capacity in sachets and are not foreseeing more problems,” Chief Executive Officer Miguel Patricio told Reuters in an interview.
Kraft built capacity for Heinz bottles to cater to pantry loading trends in the early months of the pandemic, but saw demand shift towards sachets as the health crisis wore on, he said.
Capacities for Mac & Cheese cups are also being ramped up, in part due to its decision to offer them in more eco-friendly, compostable cups, Patricio said.
Claussen pickles and cucumbers have also been in short supply, he said, because of a problem in supply of glass jars.
“We are catching up on that.”