Financial analyst: New Kraft Heinz CEO faces ‘monumental challenge’
A financial securities analyst says the Kraft Heinz Company may be running out of cash, and its new CEO has a “monumental challenge” on his hands.
Guggenheim Securities analyst Laurent Grandet told Yahoo! News that Miguel Patricio, who will take the company’s CEO reins on July 1, will need to invest between $700 million and $800 million over the next two years to jump-start sales growth and “aggressively” sell nearly $7 billion in assets and slash dividends by 50 percent to conserve cash.
Without those moves, Grandet thinks Kraft Heinz could run out of cash by 2020.
The company’s stock was trading at a high of $48.18 on Feb. 21 before a precipitous drop the next day to $34.95.
The drop came as Kraft Heinz officials announced a $15.4 billion write-down to the Kraft and Oscar Meyer trademarks as well as the arrival of a U.S. Securities & Exchange Commission subpoena regarding an investigation of its accounting practices.
Patricio will take over for Bernardo Hees, who has led the company since 2015.
Financial services company Standard & Poor’s is taking a dim view of Kraft Heinz’s stock as of June 20:
S&P downgrades scandal-hit Kraft Heinz to one notch away from junk (BBB-): "Our view of the company's business is diminished" regarding its "cost-cutting strategy," "governance deficiencies," "the ongoing SEC investigation" and other concerns, S&P says. $khc pic.twitter.com/o4RyfY0UIv
— Mitch Nolen Retail (@mitchnolen) June 20, 2019
That makes sense, given its recent drop in 2019 alone:
Kraft Heinz is having an absolutely miserable 2019. The ketchup and cheese company's stock has plunged nearly 35% this year. https://t.co/2CjYwyh4I2
— CNN Business (@CNNBusiness) June 4, 2019
Some financial analysts think part of the company’s problem is struggling to adapt to younger customers’ tastes and preferences:
.@JimCramer says millennials hate the pantry…. which makes Kraft Heinz $KHC 'a metaphor for a company that forgot that the customer's tastes change." Read Jim's full take on today's market here: https://t.co/7mBnS0pPxD pic.twitter.com/fBGUiTAkSK
— TheStreet (@TheStreet) May 30, 2019
And if social media is any indicator, the company’s recent idea to blend ketchup and mayonnaise with other condiments may not have been the best move:
nothing in this life could have mentally prepared me for seeing kranch in the grocery store today pic.twitter.com/g8ozhaLusf
— gosig råtta (@r1ngworm) June 24, 2019
so mayochup is as disgusting as it sounds 🤮
— -FRICK- (@JFrick96) June 20, 2019
The Mayochup has its fans, though:
Heinz Mayochup really takes me back to my childhood! I used to mix my own mayo and ketchup to dip my fish sticks in as a kid! This is like that, but with a bit of a twist. I think it's a great addition to your summer BBQ condiment choices! pic.twitter.com/pkiaYR4UdC
— Tracie Alo (@TracieAlo) June 20, 2019
But even teaming up with pop singer Ed Sheeran on National Ketchup Day doesn’t seem to be helping the company’s prospects:
Our ketchuppy dreams came true! Ed Sheeran created his own Heinz Tomato Ketchup ad! Click to watch the full video! #EDxHEINZ
— Heinz Ketchup (@HeinzKetchup_US) June 17, 2019
Patricio wants to hit the ground running, telling Forbes shortly after his hiring announcement that the company has to “understand the consumer better than anyone else” and that he would like to focus initially on the company’s Philadelphia, Heinz and Planter’s brands.
— Forbes (@Forbes) April 22, 2019
Patrick Varine is a Tribune-Review staff writer. You can contact Patrick at 724-850-2862, [email protected] or via Twitter .