Business model of Kraft Heinz Company

Customer Segments

Kraft Heinz manufactures an extensive portfolio of products that are marketed to segments of the general consumer market. While the Company operates some online channels that serve consumers directly, its products primarily reach consumers through various intermediaries. The Company’s direct customers comprise

• Wholesalers and Distributors, comprising independent brokers, consumer goods wholesaler, chain distributors, and cooperatives;
• Retail Outlets, comprising various large grocery chains, convenience stores, drug stores, value stores, bakeries, pharmacies, mass merchants, and club stores; and
• Foodservice and Catering Companies, comprising specialist foodservice distributors and institutions, including hotels, restaurants, hospitals, health care facilities, and certain government agencies.

For the year ended 3^rd January 2016 Wal-Mart Stores was Kraft Heinz’s largest customer, representing approximately 20% of the Company’s net sales for the year. Kraft Heinz’s five largest customers in the US accounted for approximately 45% of United States segment sales, the five largest customers in the Canada segment accounted for approximately 75% of Canada segment sales, and the five largest customers in the Europe segment accounted for approximately 35% of our Europe segment sales.

Kraft Heinz serves an international customer base, spanning North America, Latin America, Europe, Asia Pacific, the Middle East, and Arica. The Company’s US business, however, continues to account for the majority of its net sales each year.

Value Propositions

Kraft Heinz provides value to its customers in the following ways:

• Its reputation and industry standing, with the Company established as one of the largest consumer goods manufacturers and distributors in the world, with a long-standing reputation for reliably producing high-quality products;
• Its broad product and brand portfolio, with the Company manufacturing and distributing a broad range of grocery products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, and coffee, under various high-profile brands, such as Velveeta, Oscar Meyer, and Philadelphia;
• Its international sales and marketing reach, with the Company serving a large domestic customer base in the US, as well as an extensive network of customers across Latin America, Europe, Asia Pacific, the Middle East, and Africa;
• Its extensive manufacturing and distribution infrastructure, with the Company owning and operating its own network of production and distribution facilities, that enables the Company to serve customers quickly and efficiently; and
• Its research and development activities, with the Company committed to innovation, dedicated a significant portion of its funds each year to research and development activities.

Channels

Kraft Heinz operates a website at www.kraftheinzcompany.com, through which the Company provides information on its various products, brands, and corporate activities. The Company also operates a number of regional and brand-specific websites, through which it provides more detailed information on certain brands and products, including www.heinz.com.au and www.heinz.co.uk. Additionally, many of these website operate online stores, which allow consumers to purchase Kraft Heinz products and arrange deliveries.

Kraft Heinz operates its own in-house direct sales force, which sells the Company’s products in bulk to retailers, distributors, and wholesalers, which comprise the Company’s principal customer base. The Company’s direct sales force is organised geographically, with sales personnel operating out of the Company’s international network of offices spanning more than 40 countries across the Americas, Asia Pacific, Europe, the Middle, and Africa.

Kraft Heinz additionally operates its own network of production, processing, and distribution facilities across the world, comprising 89 manufacturing and processing facilities spread across the Company’s numerous operating jurisdictions. Its products ultimately reach consumers through a network of retail and foodservice customers.

Customer Relationships

Kraft Heinz offers certain products to its customers on a self-service jurisdiction through various regional and brand-specific online stores. These channels allow consumers to browse products, make purchases, and arrange deliveries without interacting directly with members of the Kraft Heinz sales and marketing teams.

The majority of Kraft Heinz’s sales, however, are made to retailers and distributors through its in-house direct sales force, which consults directly with customers across the world to establish the details of each individual sales and distribution contract. These contracts can often span several years, with the Company providing personalised service to its large customers through dedicated account and relationships management personnel in order to secure long-term relationships.

Kraft Heinz provides ongoing support to its customers, who are able to contact the Company’s various departments directly over the phone, via email, or through an online contact form, enabling customers to access personalised support. The Company also provides a range of online resources, largely directed at consumers, including recipes, and media releases and coverage.

Additionally, Kraft Heinz and its various brands operate a number of social media accounts – including with LinkedIn, Facebook, and Twitter – through which it can interact directly with customers and issue updates on corporate activities.

Key Activities

Kraft Heinz is a food and beverage manufacturer and marketer. The Company is engaged in the production, marketing, and sale of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products.

Kraft Heinz aligns its operations into four reportable business segments that are divided geographically, concerning the Company’s operations in the US, Canada, Europe, and Rest of World. The Rest of World segment is organised into a further three sub-segments: Asia Pacific; Latin America; and Russia, India, the Middle East and Africa.

Kraft Heinz controls an extensive brand portfolio, including popular brands such as Heinz, Kraft, Oscar Mayer, Planters, Philadelphia, Velveeta, Lunchables, Maxwell House, Capri Sun and Ore-Ida. The Company's products are sold through its own sales organisations and through independent brokers, agents, distributors, wholesalers, retailers, and foodservice companies.

Key Partners

Kraft Heinz works closely with a network of partners that support the Company’s manufacturing and distribution activities. These partners can be categorised broadly as follows:

• Supplier and Vendor Partners, comprising suppliers of materials, commodities, equipment, and ingredients that are used in the Company’s manufacturing processes, as well as suppliers of services and technologies that are utilised across the Company more broadly;
• Channel and Distribution Partners, comprising the Company’s network of intermediaries, including brokers, agents, and distributors, that assist the Company in extending its sales and marketing reach, particularly in overseas jurisdictions;
• Community and Social Partners, comprising various non-profits and charitable organisations, with which the Company collaborates on social and community projects around the world; and
• Strategic and Alliance Partners, comprising various market leading companies across multiple sectors with which the Company shares certain resources and works on joint marketing and branding projects.

Kraft Heinz has a number of partnerships in place, including a recent tie-up with Fetch Rewards to sponsor the development of a mobile grocery shopping platform, and a partnership with fashion retailer Shop412 to design packaging for the Company’s products.

Key Resources

Kraft Heinz’s key resources are its brands and intellectual properties, its manufacturing and processing infrastructure, its suppliers and supply chain, its IT and communications infrastructure, its sales and distribution channels – including its network of intermediaries, and its personnel.

Kraft Heinz owns a number of intellectual properties, including trademarks and patents, around the world. The Company own numerous patents and patent licenses worldwide that the Company considers to be key to its operations as well as a number of trademarks and brands the protection of which remains important. These brands include Kraft, Heinz, Oscar Meyer, Philadelphia, Maxwell House, Tassimo, Capri-Sun, Kool-Aid, and Cracker Barrel.

Kraft Heinz owns and or leases a number physical properties across the US, which are key to the Company’s activities. This notably includes the Company’s network of 86 manufacturing and processing facilities across the Americas, Europe, Asia Pacific, Africa, and the Middle East.

Cost Structure

Kraft Heinz incurs costs in relation to the procurement of commodities and supplies, the operation of research and development projects, the operation of its manufacturing and processing facilities, the maintenance of its IT and communications infrastructure, the operation of its sales and distribution infrastructure, the implementation of marketing and advertising campaigns, the management of its partnerships, and the retention of its personnel.

For the year ending 3^rd January 2016, Kraft Heinz recorded cost of goods sold in the amount of $18.30 billion, and selling, general, and administrative costs in the amount of $4.61 billion. The Company’s research and development costs for the year totalled $105 million.

Revenue Streams

Kraft Heinz generates revenue through the manufacture and sale of various grocery products across more than 190 countries and territories across the world. These products are organised into five categories:

• Condiments and Sauces;
• Cheese and Dairy;
• Ambient Meals;
• Frozen and Chilled Meals; and
• Infant and Nutrition.

For the year ended 3^rd January 2016 Kraft Heinz generated annual net sales of $18.34 billion, up considerably on the $10.92 billion recorded the previous year. This is attributed primarily to the 2015 merger of Kraft Foods and Heinz Holding. The majority of the Company’s net sales, around $11.12 billion, was attributed to the US segment, with sales of condiments and sauces accounting for 32% of sales.