The extent of the challenges facing marketers at the newly formed Kraft Heinz have been exposed after the FMCG business reported a 4.9 per cent fall in sales at Kraft and a 4.1 per cent drop at Heinz in its first quarterly results as a merged company.
Kraft, which saw revenue fall to $4.52bn from $4.75bn, blamed sliding sales on the timing of Easter and decreased promotional activity around its beverages. Meanwhile, Heinz’s revenue fell to $2.62bn from $2.73bn with losses blamed on reduced promotions in Russia.
The results come just weeks after Heinz Kraft axed members of its senior marketing team, including Tom Bick, senior director-integrated marketing communications and advertising and Kara Henry, senior marketing director, communications and agency relations, according to Ad Age.
The company has so far refused to comment on the impact the merger will have on its marketing output. Those changes that have been made or reported so far indicate marketing at the join-venture could come under tougher cost-control measures moving forward as part of its wider efforts to boost margins.
Kraft Heinz, which has already stated the company will not have a chief marketing officer, has made no secret of its goal of squeezing $1.5bn in annual cost savings by the end of 2017, something that is likely to come from zero-based-budgeting (ZBB), a cost-cutting exercise both companies have pioneered in other ventures.
Heinz already uses the cost-cutting practice and its marketers are constantly on the hunt for savings from non-working media that can be reapplied elsewhere.
Following the merger in March this year, Kraft Heinz announced the appointment of Andre Maciel as US commercial finance lead, a role whose duties include US budget and business planning and zero based budgeting and revenue – another indicator that marketing spend across it brands, which include Oscar Meyer, Velveeta, and Jell-O, could be further reduced.
Kraft consolidated advertising for its brands into four agencies last year: CP+B, McGarryBowen, Leo Burnett and Taxi. Agencies including Droga5, Wieden + Kennedy, and Ogilvy & Mather were dropped.
In 2014, Kraft spent $540.5m on advertising, down from $686.3m in 2013, according to Kantar Media. Heinz only spent $42.4m in the US in 2014.