KRAFT HEINZ MEAT, CHEESE SALES TUMBLE

Second-quarter sales of Kraft Heinz’s Oscar Mayer deli meats and cheese slices grew more slowly than those of higher-end rival products such as ham from pigs fed vegetarian diets on family farms, retail data shows. The nearly $7 billion US lunch meat market grew by 18% in the 8 weeks to June 13, but Oscar Mayer sales rose only 9%, according to Nielsen data analyzed by Wells Fargo. Meanwhile, sales of rival brands like Hormel Foods’ Applegate and Tyson Foods’ (TSN.N) Hillshire surged 37% and 27%, respectively.

Cheese and chilled processed meat are Kraft Heinz’s top two U.S. businesses by retail sales, but Euromonitor data shows Kraft Heinz’s market share in both categories has steadily shrunk since 2015. The company is due to report quarterly earnings on Thursday, Richa Naidu wrote for Reuters late on July 30, 2020.

To fuel growth, Kraft Heinz needs to innovate, a process that could take several years, analysts said. “The higher priced brands are seeing the strongest growth. People aren’t trading down to private-label, they’re buying the quality stuff,” Wells Fargo analyst John Baumgartner said. “Oscar Mayer doesn’t have that quality perception with consumers - they’re going to have to launch a product that’s really clean-label so they can charge more.”

To appeal to environmentally conscious consumers, the labels of Applegate’s roughly $16-a-pound hams say prominently that its pigs are “humanely raised” and given vegetarian feed on family farms. The packaging of Oscar Mayer products, which cost about $4.85 per pound in stores, say they don’t contain hormones, nitrates or artificial ingredients - a years-old declaration in the industry.