Kraft Heinz's $100m Marketing Bet Is Paying Off

When sales wobble, the marketing budget is usually first to the chopping block. Kraft Heinz has done the reverse.

The maker of Heinz ketchup, Philadelphia and Jell-O has just squeezed another US$100m into marketing while sales are still sliding, which in most boardrooms would count as heresy. Kraft Heinz calls it confidence.

A year ago, breaking itself into two sharper, more focused companies looked like the smart way forward. Now Kraft Heinz has a better idea, backing its brands as one and letting marketing do the heavy lifting.

The new US$100m tops up a US$600m war chest the company has been spending since last year on everything from recipes to pricing to advertising.

Marketing alone will now soak up at least 6% of net sales, a budget up by roughly a third, and all of it is going in while the top line is still in the red.

"Let me be clear, we are increasing investments from a position of strength," CEO Steve Cahillane tells analysts, "not because what we are doing is not working, but precisely because it is."

The proof is on the shelf

The evidence, he argues, is already visible. Kraft Heinz has spent some US$200m of the pot, and condiments, its heartland, have swung back to growth, with Heinz posting what Steve calls "strong consumption growth."

Executives point to "green shoots" in the US, the market that has caused the most trouble.

Consumption across the business still fell 2% in the quarter, but the company expects that to narrow to around 1% next quarter and improve again by year-end.

Market share is climbing where it matters most, and Kraft Heinz lifted its full-year forecast, now bracing for a sales decline of 0.5% to 2% rather than as much as 3.5%. "This is proof," Steve says, "that our brands respond well when we invest behind them."

It is the line marketers have waited years to hear from the corner office, and this time the finance chief is saying it too.

"We are seeing good returns on our marketing spend, which give us the confidence to step up our investments here," says Chief Financial Officer Andre Maciel.

For a marketing department, a CFO volunteering to spend more is roughly the corporate equivalent of a standing ovation.

What separates this from the old cut-and-hope reflex is measurement. Every dollar is now tracked to sales rather than to impressions, which is how Andre can hand marketing more money and still call it discipline.

"We're measuring direct sales impact," Steve adds, "and we are seeing clear improvements."

Fewer bets, bigger swings

The money also goes further because it goes to fewer places. "We are spending more efficiently," Steve says, having moved dollars to higher-return brand media and consolidated to "fewer, more effective media partners."

In practice that has meant swapping a scatter of small buys for a few heavyweight partners: a five-year deal with the NFL, a spot in America's 250th-birthday celebrations and a sprawling Disney tie-up across parks, cruises and channels.

Under Chief Growth Officer Diana Frost, who has rebuilt how Heinz shows up and pulled much of its creative in-house, campaigns like "It Has to Be Heinz" and Philadelphia's "Really Philly Good" do the closer work, turning a tub of cream cheese into a kitchen fixture.

Nobody is reaching for the ketchup-red confetti just yet. Sales still slipped 1.4% in the quarter, North America fell 2.7%, and the shares dropped about 4% on the day, Wall Street wanting the turn to come faster.

The plan to split the group in two stays paused, perhaps for good, with marketing left to carry the load. "Nobody's doing a victory lap that we're declining less than we anticipated," Steve conceeds, "but it is moving in the right direction."

For a discipline forever made to prove it belongs on the growth side of the ledger and not the cost side, that is about as sweet a result as it gets.