Are 'Better-For-You' Product Tweaks Enough To Anchor a Kraft Heinz Turnaround?

Kraft Heinz has been making above-the-fold news for some time now, not only due to its size and recent confusion about a potential split -- one now narrowly avoided -- but also for its ongoing turnaround effort.

That turnaround effort, under the leadership of new CEO Steve Cahillane, has seen early positive results. According to the most recent quarterly report card, Kraft Heinz outpaced Wall Street analysts' expectations on sales, delivering $6.05 billion versus $5.89 billion expected.

And according to a recent report from Modern Retail's Gabriela Barkho, a lot of the most recent successes can be tied to the brand's pivot to include "better-for-you" options alongside its traditional mainstays of Kraft Mac & Cheese, Philadelphia cream cheese, and Capri Sun. The former -- although not the national icon that Kraft Dinner is in Canada -- enjoyed a market share of 45% in 2022, but had slipped to 39% byy 2026, indicating change was necessary to remain the market leader as Goodles and Banza shouldered in.

In addition to the Philadelphia Lactose-Free option, two other staples product lines were mentioned:

• Kraft Mac & Cheese gets two different tune-ups: In one corner, we have the new PowerMac lineup which launched last month. Each box promises 18 grams of protein per serving, in addition to six grams of fiber. Although only two flavors are currently available -- original and white cheddar -- others could be introduced in the near future. In the other corner, a new assortment of restaurant-inspired glow-ups for the traditional recipe, including Monterey Jack caramelized onion, Parmesan pesto, and Romano cacio e pepe. Regarding PowerMac, Cahillane indicated that sell-in was "outstanding," with 35,000 accounts active as of a very recent earnings call.
• Capri Sun Hydrate: A one-two-three punch of increased electrolytes, vitamin E, and a 50% reduction in sugar content as compared to the standard pouch, Capri Sun Hydrate represented an opportunity "to continue the momentum that was built last year," according to Cahillane.

Cahillane also signaled that fan-favorite Lunchables was also about to join the fray with a new product lineup.

“We’ve got a Lunchables renovation, which is coming next month. We’ll be investing against that. We’ve seen a good turnaround in Lunchables, which started at the end of last year," he added.

US Consumers Dialed In on Wellness, and CPG Needs To Move To Address Demand (Especially as Private Label Competitors Up Their Game)

There's a lot of chatter going on as to the wellness boom (and resultant success of "better-for-you" CPGs), as well as GLP-1 uptake among the U.S. consumer base. That seems to be reflected both in the growing demand for products aligned with the values of today's shopper, according to experts cited by Barkho.

“GLP-1 medications are accelerating trends that are already building. For one, people on these medications are becoming far more intentional about what their meals actually contain," said Renata Medeiros, head of food, beverage and agribusiness Americas at ING. Medeiros noted that upstart competitors -- like the aforementioned Goodles and Banza -- had gone beyond simply taking advantage of a niche, but rather put the task to legacy players by focusing on "taste and convenience over function."

"These types of reformulations have become a go-to strategy for many legacy brands, in order to continue competing. It’s a dilemma that many legacy consumer packaged goods conglomerates are facing, as they deal with economic challenges, inflation and changing diet preferences," Barkho wrote.

And with private label competitors eroding the pricing (and oftentimes quality) argument for legacy name brands as newcomers aimed at taste-forward wellness-oriented target another differentiator, brands like Kraft Heinz are working apace to keep their market share intact.

“The response from established CPG companies has been predictable but necessary. Reformulate, repackage and reposition," Medeiros concluded.