Kraft Heinz (KHC) exceeded Wall Street's first-quarter revenue expectations, providing an early validation for CEO Steve Cahillane's strategic overhaul. The packaged-food giant reported net sales of $6.05 billion for the quarter ended March 28, surpassing the $5.89 billion consensus estimate, according to LSEG data. Shares climbed 3.6% to $23.35 in early Nasdaq trading.
The company's performance comes as Cahillane, who took the helm in January, shifts resources from a halted breakup plan toward brand investment. By pausing the split, Kraft Heinz expects to free up approximately $300 million this year, redirecting funds into marketing and research & development. The move is part of a broader $600 million turnaround strategy aimed at reigniting consumer demand.
Despite the top-line beat, organic net sales declined 0.4%, as a 0.8 percentage point increase in prices was more than offset by a 1.2 percentage point drop in volume and mix. Weakness in coffee, cold cuts, and the Indonesian market weighed on results. The company's gross profit margin improved 230 basis points to 36.7%, though adjusted gross profit margin edged down 30 basis points to 34.1%. Operating income fell 4.3%, and adjusted operating income dropped 11.8%, pressured by higher advertising spending, manufacturing and logistics cost inflation, and restructuring expenses.
Cash flow showed notable improvement, with operating cash flow jumping 39.7% to $1.0 billion and free cash flow rising 58.9% to $0.8 billion. The company paid $474 million in cash dividends during the quarter and did not repurchase any shares.
Kraft Heinz maintained its 2026 outlook, projecting organic sales to decline by 1.5% to 3.5% and adjusted earnings between $1.98 and $2.10 per share. The guidance incorporates an approximately 100-basis-point drag from reduced SNAP (Supplemental Nutrition Assistance Program) benefits, which impact low-income consumers.
During the analyst call, Cahillane pointed to improving market-share trends, noting that the total business held or gained share in 35% of categories through the first quarter, rising to 58% in March. The company's Taste Elevation category—encompassing sauces and condiments—reached 87% share by March. Specific product initiatives include Power Mac & Cheese in 35,000 accounts, expanded distribution for Capri Sun Hydrate, a Lunchables revamp next month, and Philadelphia Lactose Free targeting the second half of the year.
The broader packaged-food sector faces headwinds, as consumers seek bargains and move away from legacy pantry staples. General Mills trimmed its full-year targets in February, and Conagra lowered its profit forecast in April. Kraft Heinz's first-quarter beat provides a lift, but CFO Andre Maciel warned that second-quarter revenue could drop 3% to 5% due to Easter timing and SNAP cuts. Continued volatility may also push energy and resin costs higher from the third quarter.
"The consumer can only absorb so much price," Cahillane said, underscoring the delicate balance between pricing power and volume growth. The key question for investors is whether the $600 million in extra spending can translate into sustainable volume gains before consumer caution deepens.
