Kraft Heinz appoints new CEO

Kraft Heinz (KHC), which suffered a huge loss last quarter, announced a new CEO on Monday. The struggling company's current CEO, Bernardo Hees, will remain in his post through June 30, 2019. Miguel Patricio will step into the role on July 1.

Kraft Heinz, which suffered a huge loss last year, announced a new CEO on Monday.

The struggling company’s current CEO, Bernardo Hees, will remain in his post through June 30, 2019. Miguel Patricio will step into the role on July 1. Hees has been CEO of Kraft Heinz since Kraft and Heinz merged in 2015. He was CEO of Heinz from 2013 until the merger.

Patricio joins the company at a difficult time.

In February, Kraft Heinz wrote down the value of Kraft and Oscar Mayer by $15 billion, reported a $12.6 billion loss for the fourth quarter of 2018, cut its dividend by 36% and announced that its accounting practices are under investigation by the Securities and Exchange Commission.

Hees said in a statement that he is confident that “Miguel and the team will take Kraft Heinz to new heights.”

Patricio, who spent more than 20 years at Anheuser-Busch, called Kraft “an incredible company,” and said he plans to “focus on the consumer” in order to spark growth. Previously, the company said that it would sell brands that aren’t poised to succeed.

Shares of the company, which are down about 23% this year, popped about 1% on the news Monday.

Wells Fargo analyst John Baumgartner wrote in a note responding to the news that the appointment is not “particularly surprising.” Kraft Heinz “is adding an industry veteran with a much needed marketing background,” he said, adding that he’s looking for Patricio to bring Kraft Heinz’s international portfolio to the United States and make a “more aggressive foray into premium cheeses.”

But “it won’t be easy” for Patricio to turn things around, Baumgartner warned.

The incoming CEO was selected by Kraft Heinz’s board. Patricio served as Anheuser-Busch’s global chief marketing officer from 2012 to 2018. Before that, he was president of the company’s Asia Pacific unit from 2008 to 2012, and president of its North America team from 2006 to 2008.

Turning the company around will be a challenge.

Hees said in February that operations problems were at the heart of the company’s profit miss. Sales were up about 1% in the fourth quarter of last year, but higher-than-expected manufacturing and logistics costs plagued Kraft Heinz. The company anticipated savings from its 2015 merger would continue to help lower costs, but those efficiencies dried up.

Kraft Heinz has a broad portfolio of brands, including Heinz Ketchup, Grey Poupon mustard, Capri Sun, Cool Whip, Kraft Mac and Cheese, Lunchables, Maxwell House and more. Patricio called Kraft Heinz’s brands “iconic” and “loved.”

But recognizable brands are no longer enough to hold customers’ attention. As smaller, on-trend snack brands pop up and gain popularity online, it’s harder for big corporations to keep up with evolving consumer demand. Hees noted in February that fragmentation and increased competition will continue to be a challenge for the whole industry.

On top of those troubles, Kraft Heinz said at the time that regulators were looking into matters “including, but not limited to, agreements, side agreements, and changes or modifications to its agreements with its vendors.” The SEC sent a subpoena related to the matter in October 2018. The company said it “continues to cooperate fully with the probe,” and said it launched an independent review of its procurement practices after it received the subpoena.

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