Kraft Heinz Replaces Finance Chief -- 2nd Update
27 August 2019 - 2:39AM
Dow Jones News
By Heather Haddon and Micah Maidenberg
Kraft Heinz Co. replaced its chief financial officer and made
other executive changes, the latest attempts to address accounting
errors and weak sales that have slashed the value of the food
giant's brands and shares.
The Chicago-based company said on Monday that finance chief
David Knopf, 31 years old, will return to 3G Capital, the
private-equity firm that worked with Warren Buffett's Berkshire
Hathaway Inc. to create Kraft Heinz through a merger in 2015.
Berkshire Hathaway and 3G remain top shareholders in Kraft
Heinz.
Mr. Knopf will be replaced on Sept. 1 by Paulo Basilio, 44 years
old, who became finance chief of H.J. Heinz Holding Corp. in 2013
and retained that title for Kraft Heinz after the merger. In 2017,
he became president of Kraft Heinz's U.S. commercial business and
last month became chief business planning and development
officer.
Kraft Heinz's shares, down 41% this year, were roughly flat on
Monday.
The company has struggled to generate sales growth in its stable
of well-known brands, such as Oscar Mayer hot dogs and Kraft
macaroni and cheese, that in many cases are out of step with trends
toward more natural or healthful products. A big cost-cutting drive
after the merger has also diminished its bandwidth to promote new
or improved products, some former employees say.
Chief Executive Miguel Patricio, a former executive at
Anheuser-Busch InBev SA who took the top job at Kraft Heinz in
June, has said that he wants to revive sales growth in well-known
brands without straying from 3G's focus on keeping down costs. Some
3G executives are also invested in Anheuser-Busch InBev.
"We have many opportunities ahead of us at Kraft Heinz as we
chart a new course and rebuild our business momentum with a focus
on driving long-term profitable growth," Mr. Patricio said in an
email Monday morning to employees about the management changes.
Some investors have urged Kraft Heinz to look beyond its own
staff and other 3G companies for new leaders. Mr. Basilio has been
a partner at 3G since 2012, and Mr. Knopf has been a partner there
since 2015.
"3G is again rotating talent," John Baumgartner, a food industry
analyst at Wells Fargo, wrote in a research note.
Kraft Heinz has marked down the value of its brands by nearly
$17 billion this year after reporting slowing sales and a federal
investigation into the accounting errors. That investigation
remains ongoing.
The company has restated financial earnings as far back as 2016
after disclosing that it had understated costs of goods sold across
roughly three years by $208 million. The understatements were
related to how the company booked rebates and expenses related to
contracts with suppliers, the company has said.
Mr. Basilio was CFO during part of the period when those
misstatements were made. Kraft Heinz has said that top officials
didn't know about the errors at the time and that it fired some
employees that were responsible.
A Kraft Heinz spokesman declined to comment further on the
procurement problems.
Mr. Knopf, who worked at Goldman Sachs after a graduating from
Princeton University, joined Kraft Heinz as a vice president of
finance in 2015. When he became CFO in Oct. 2017 at the age of 29,
he was the youngest CFO of a Fortune 500 company.
Mr. Knopf faced pointed questions from investors during the
company's delayed earnings reports this year. Kraft Heinz earlier
this month reduced the value of assets, including international
divisions and its U.S. refrigerated-foods unit by $1.22 billion.
Those impairments came on top of $15.4 billion in write-downs on
the value of its Oscar Mayer and Kraft Heinz brands in
February.
"We are dissatisfied with our financial performance
year-to-date," Mr. Knopf told analysts earlier this month.
Mr. Patricio told employees that he wanted a seasoned veteran in
the finance job and that Mr. Knopf will work with his replacement
to help in the transition.
The food giant reported net sales fell 5% in the first half of
this year compared with the first two quarters of 2018 to $12.37
billion.
Sales of older brands including Maxwell House coffee and
Velveeta cheese are also weak, according to Nielsen data cited by
analysts at Guggenheim Securities LLC.
During the four weeks ending Aug. 10, retail sales of Kraft
products fell 0.5%, according to Guggenheim.
Kraft also said Monday that Nina Barton, currently the company's
top executive for Canada and digital growth initiatives, will be
promoted to chief growth officer, a new position. Carlos Piani,
head of strategic initiatives and mergers and acquisitions, is
leaving Kraft Heinz to pursue other opportunities, Mr. Patricio
said in his note.
Write to Heather Haddon at heather.haddon@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
August 26, 2019 12:24 ET (16:24 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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