Kraft Heinz Names New CEO
23 April 2019 - 1:48AM
Dow Jones News
By Heather Haddon
Kraft Heinz Co. named a new chief executive, replacing Bernardo
Hees with another veteran manager of companies controlled by 3G
Capital LLC amid weak sales and a federal investigation into the
food giant's procurement practices.
Miguel Patricio, the former chief marketing officer of brewer
Anheuser-Busch InBev SA, will succeed Mr. Hees as chief executive
on July 1, Kraft said Monday.
Kraft hadn't previously announced a planned executive change or
a succession plan. Kraft has yet to enter into compensation
agreements with Messrs. Hees or Patricio, the company said in a
filing Monday.
Shares in Kraft rose 1% in morning trading on Monday. The
company's shares were down around 43% over the past year through
Friday as sales have stalled and the company has acknowledged its
yearslong cost-cutting drive undermined the value of some of its
best-known brands.
Mr. Patricio said the leadership change, after Mr. Hees led the
company for six years, was a natural step in Kraft's evolution
under 3G, a Brazilian investment firm. 3G helped create the firm
through the 2015 merger of H.J. Heinz and Kraft Foods, joining
forces with Warren Buffett's Berkshire Hathaway Inc. to form the
fifth largest food-and-beverage company in the world.
"He was the first one to admit that he was finishing this cycle
with the company and that the company would benefit from having a
person with a different background to lead it in the future," Mr.
Patricio, who is 52, said in an interview.
Mr. Hees, 49, said in a statement that it had been an honor to
oversee Kraft Heinz. "I have confidence that Miguel and the team
will take Kraft Heinz to new heights," he said.
A Kraft spokesman said that Mr. Hees decided to move back to 3G
Capital to focus on other projects. The company will disclose
compensation at the appropriate time, he said.
3G is a top-tier investor in both Kraft and Anheuser-Busch,
where Mr. Patricio worked for two decades. The firm's aggressive
cost-cutting strategy, known as zero-base budgeting, was emulated
by many consumer goods companies seeking to boost profits before
falling out of favor recently amid troubles at Kraft and other
proponents of the strategy.
Kraft's spending cuts left its brands in a weaker position to
compete on store shelves just as many consumers turned away from
packaged goods such as its Velveeta, Cheez Whiz and Oscar Mayer
brands. Sales fell, and Kraft cut prices and added salespeople to
compete.
The Chicago-based company in February disclosed the
investigation by federal security regulators into its business and
wrote down the value of its Kraft and Oscar Mayer brands by some
$15 billion.
Kraft is facing lawsuits in the wake of the write-downs,
including class-action suits from employees and shareholders
regarding losses related to the stock's drop.
The company missed a February deadline to file its annual report
with securities regulators as it concludes an internal
investigation into irregularities in its procurement department.
Kraft entered into an agreement with its lenders to file its
financial statements by May 14, it said in a filing last month.
Mr. Patricio said he plans to move Kraft in a new direction. Mr.
Patricio has worked in the consumer-packaged goods industry for
more than 30 years, including stints at Coca-Cola Co. and Johnson
& Johnson.
Mr. Patricio declined to comment on the Securities and Exchange
Commission investigation into accounting practices in Kraft's
procurement division.
He also declined to discuss Kraft's plans to potentially divest
weaker brands. He said he wanted to focus on improving the quality
of the company's products first.
"Some are a little bit dusty and we have to rejuvenate them, Mr.
Patricio said.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
April 22, 2019 11:33 ET (15:33 GMT)
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