The recovery at Kraft Heinz starts with the fundamentals

Since April 1, 2017, Kraft Heinz Company (KHC) stock has plummeted from $90/share to $30/share. When a stock loses almost 70% of its value, the problems run deep and changes are desperately needed. But change without a vision and strategy becomes busy energy without focusing and harnessing the company’s resources to begin the turnaround. Fortunately, KHC has some new leadership in place and they are saying the right things. In the interview link with new KHC U.S. President Carlos Abrams-Rivera, three important areas were touched upon.

  1. Consumer-First Mentality. Do you REALLY understand your end user? Where do they shop & why? What motivates them emotionally and functionally? Why do they buy…and why don’t they? It sounds so simple but when a company or brand loses its way, it often starts with a breakdown in the fundamentals. When cost reduction and consolidation become the focus, short term thinking drives decisions that often lead to cuts in strategic investments like consumer research, ethnography, innovation, brand health studies, quality brand support and quantitative assessments. The results, time after time, are disastrous.
  2. Fewer, Bigger, Bolder. KHC has an enormous brand portfolio through many years of sizable acquisitions. When KHC moved into cost cutting mode, they not only stopped understanding their end users, but they made two critical innovation errors. (1) They stopped innovating. They pulled back on finding ways to strengthen their brands through meaningful innovation and uniqueness, and allowed smaller, more nimble brands to carve significant market positions at their expense. (2) When KHC did innovate, they did so without creating motivating points-of-differentiation and then spread their reduced advertising dollars across multiple, undifferentiated products. One of THE most important roles of a leader is to define a clear portfolio strategy and drive the areas that will be in focus…saying “no” to non-core segments.
  3. Playing to Your Strengths. The roles of a purpose, mission and vision are to ground and rally the organization as to what you stand for and what your roadmap is for success. When you combine this clarity with a deep understanding of your competition (I like Porter’s 5 Forces for this exercise), you crystalize what makes you different vs. your competition and how to ensure you are playing to your strengths. The more you try and emulate a competitor, the more you play to your competition’s strengths and dilute your unique abilities.