(Reuters) -Kraft Heinz forecast annual profit below Wall Street estimates on Wednesday, expecting cost inflation to eat into margins even as higher prices boost sales.
Shares of Kraft, known for brands such as Philadelphia Cream Cheese and Jell-O, fell about 1% in premarket trading despite the company topping quarterly sales and earnings estimates.
While packaged food makers have jacked up product prices over the past two years to shield their margins, they are still battling elevated costs of commodities including dairy and eggs, as well as higher supply chain and labor expenses.
That comes as demand for Kraft’s packaged meals and condiments showed some signs of cooling, with sales volumes falling 4.8 percentage points in the fourth quarter.
Retailers have been pushing back against food manufacturers’ price hikes, with Walmart Inc pitching its own private-label products to customers. Meanwhile, analysts have also cautioned that food companies may have to ramp up promotions this year to keep demand afloat.
Kraft’s downbeat outlook comes in contrast with rivals such as Oreo-maker Mondelez International Inc and Hershey Co that have successfully passed on price increases to consumers with little pushback in demand.
Kraft said average selling prices rose 15.2 percentage points in the fourth quarter, driving sales 10% higher to $7.38 billion, above analysts’ average estimate of $7.27 billion in Refinitiv IBES data.
Excluding one-off items, Kraft earned 85 cents per share, topping analysts’ estimate of 78 cents per share.
The company forecast annual adjusted earnings of between $2.67 and $2.75 per share, below the market estimate of $2.77 per share.
The Pittsburgh-based maker of Kool-Aid and Velveeta Cheese also said it expected organic net sales growth of 4% to 6% in 2023, slightly above estimate of 4.8%.
(Reporting by Deborah Sophia and Mehr Bedi in Bengaluru; Editing by Milla Nissi)
