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The Kraft Heinz Co KHC

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5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Kraft Heinz Finally Puts Its SEC Investigation to Rest; Investors Should Feast on Shares

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

No-moat Kraft Heinz disclosed in a SEC filing on Sept. 3 that the nearly three-year investigation into its procurement practices (specifically the timing of previously recognized vendor agreements, incentive payments, and pricing arrangements) had concluded, resulting in a $62 million civil penalty. We never anticipated that the financial implications of the alleged infractions would prove significant, given Kraft Heinz’s own internal review in 2019 amounted to just around $200 million in adjustments in aggregate (resulting in a less than 1% change to annual earnings per share each of the prior three years), relative to its cost base of $12 billion spent annually excluding key commodities.

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Company Profile

Business Description

In July 2015, Kraft merged with Heinz to create the third- largest food and beverage manufacturer in North America behind PepsiCo and Nestle and the fifth- largest player in the world. Beyond its namesake brands, the combined firm's portfolio includes Oscar Mayer, Ore-Ida, and Philadelphia. Outside North America, the firm's global reach includes a distribution network in Europe and emerging markets that drive around one fifth of its consolidated sales base, as its products are sold in more than 190 countries and territories.

Contact
One PPG Place
Pittsburgh, PA, 15222
T +1 412 456-5700
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 28, 2020
Stock Type Slow Growth
Employees 38,000

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