More Funerals Being Planned At Kraft Heinz

• by Richard Whitman , Columnist, February 17, 2020

In the lead-up to the Super Bowl, Planters killed off its longtime mascot Mr. Peanut only to stage his “rebirth” during a spot in the Big Game.

Now parent company Kraft Heinz says it is whacking about half of the agencies on its 36-shop roster. Their rebirth is unlikely, as company CEO Miguel Patricio characterized the cuts as an effort to save “wasted” marketing dollars.

The cut-down-to-size roster shouldn’t come as a big surprise.

Company officials have been warning for some time that they believe the CPG giant has been spending too much on marketing as sales have dropped precipitously in recent quarters, including another 5% dip to $6.5 billion in Q4 2019.

Not all of the savings is being plowed into the bottom line. In fact, while some agencies (as yet undisclosed) are getting the ax, the firm is earmarking a 30% increase in media spending, Patricio told analysts on an earnings call last Friday. (The transcript courtesy of Seeking Alpha.)

The company spent an estimated $534 million on advertising-media expenditures in 2019, according to its latest 10K filing. Total advertising costs totaled $1.1 billion, per the filing.

“2019 was a very difficult year for Kraft Heinz, for our employees, our Board and our stakeholders,” Patricio told analysts.

The CEO said the firm was “finding efficiencies in nonworking marketing, such as fewer research dollars necessary for the more concentrated innovation pipeline … as well as cutting the number of agencies we employ in half. As a result, we plan to increase working media, what consumers actually see, by 30% in 2020 with even greater increases behind the brands that are the biggest drivers of our profitability.”

He said 2020 marks the beginning of a multi-phase turnaround plan for the company. More details will be provided at an investor meeting in May.