The speaker, Anne-Marie Megela, welcomes everyone to the Q&A Session for the second quarter 2023 business update and states that forward-looking statements may be made during the call. She then mentions that cautionary statements and risks can be found in the earnings release and recent filings. Additionally, non-GAAP financial measures may be referred to and reconciliations can be found in the earnings release and on the company website. Finally, the CEO, Miguel Patricio, makes some opening comments before the call is opened for questions.

In this paragraph, Andrew Lazar is asking the KHC team about the promotional environment and how competitors are promoting more than KHC. He is also asking about whether the industry promotional levels will remain below 19 or if there is a concern that the levels could return to previous levels or beyond. The team responds that they have seen their action plans take hold and that they expect to see improving volume trends in the second half of the year. They reiterate their full year guidance.

Miguel Patricio and Carlos Abrams-Rivera discuss the promotional levels of the industry, which are still lower than 2019. They explain that their branded competitors are closer to those levels, and they are working to protect their margins while driving revenue management. They are using agile AI Driven Revenue Management Tools to ensure that the promotions have a good ROI return, and they are also focusing on the quality of their merchandising and displays.

Miguel Patricio and Andre Maciel of Kraft Heinz discussed the company's organic sales growth rate and capital allocation priorities. They expect organic sales growth rate to gradually reach the long-term goal of 2-3%, and their capital allocation priorities remain unchanged with an emphasis on funding the business organically and maintaining their dividend yield. M&A is also actively being looked at, and they are being disciplined in how they are doing it.

Carlos Abrams-Rivera answered a question about the effectiveness of promotional investments in North America, noting that there will be an increase in promotional levels in selected categories in the second half of the year with a disciplined approach of positive returns. He also mentioned that they are able to improve the effectiveness of their promotional investments by making sure they have the right product selection to the right audiences.

Kraft Heinz is looking to maximize their presence in retail stores by leveraging their scale and introducing products in larger packs and smaller packages to appeal to different consumer behaviors. They are using AI tools to measure ROI and ensure that their investments are effective.

Miguel Patricio and Andre Maciel answer a question from John Baumgartner about price promotions versus non-price promotions. They explain that they have seen attractive lifts without having to go as deep on pricing, and that the importance of mix-related actions will continue to increase. They also clarify that the fourth quarter margins will be higher than the third quarter due to a seasonal factor, driven by the gross margin.

Andre Maciel explains that their share gains over the last couple of months have been due to their competitors narrowing the price gaps, as well as other actions such as improving service and introducing new innovations. They expect to fully recover their cold cut market by the end of Q3 or Q4.

Carlos Abrams-Rivera discusses how private label shares have been flat since the second half of 2022, despite increasing price gaps. He then goes on to explain why there is a moderation of improvement in the second half of the year, which includes investing more in marketing and launching more innovation. Examples of this innovation include the NotCo line of plant-based offerings, the new Crisp from the Microwave, the IHOP® Coffee line, a new frozen Mac and Cheese, and the expansion of Delimex and Taco Bell into more spaces with Mexican meals, as well as the launch of Oscar Mayer scramblers.

Miguel Patricio discusses the gap between organic sales growth and consumption in certain parts of their portfolio, such as the GROW platform, Taste Elevation, and Easy Meals. He states that retail inventory is in good shape, and that it has improved throughout the quarter. He then asks for clarification on the first part of the question.

Miguel Patricio explains that the sales being below consumption across some of their platforms is due to an inventory de-load in the beginning part of the quarter. He states that their strategy remains focused on consumption, which has continued to improve as the quarter progresses. Andre Maciel adds that the price gap is not getting worse, but slightly better, which should improve volumes going forward. He believes that innovation will also be a driver for increased volumes.

Kraft Heinz is continuing to work on their pricing strategies, as well as other steps to increase their market share. Carlos Abrams-Rivera adds that innovation is key, allowing them to expand their presence in Lunchables, Philadelphia cream cheese, and IHOP coffee. They are also leveraging their brand power and creating shelf displays for the upcoming holiday season.

Andre Maciel and Pamela Kaufman are discussing how innovation, shelf resets, and service level recovery will help to increase volume in the second half of the year. Andre Maciel also explains that commodities are generally declining, with the exception of tomato, potato, and sweetness, which have had bad crops. This is allowing the company to expand their gross margin and invest more in marketing, R&D, and technology.

Andre Maciel and Miguel Patricio both agree that taking price ahead of inflation was the right move, and Carlos Abrams-Rivera adds that the only way to sustainably increase investments behind the brand and grow volumes and shares is by improving gross margins and investing back in marketing, R&D, and technology. The company is ahead of their $500 million efficiency plan, and this allowed them to increase their marketing, R&D, and technology investments this quarter.

Andre Maciel and Anne-Marie Megela discussed how they have been using resources to invest in marketing and technology rather than adding more promotions, which would not be as profitable. Miguel Patricio concluded the call by thanking everyone for their time and attention.

This summary was generated with AI and may contain some inaccuracies.