The Kraft Heinz Company (KHC) has seen revenues slow in recent quarters as consumers shift preferences, and the Whole Foods Market, Inc. (WFM)/ Amazon.com, Inc. (AMZN) merger increases competition in the space. Much of what brought KHC to its recent highs was expansion of valuation multiples, as opposed to actual top-line growth. With growing concerns surrounding this company, valuation multiples could begin to contract, alongside weakening fundamentals, pushing its share price lower in coming months. In a recent conference call with management, even before the AMZN/WFM merger was announced, Kraft Chief Operating Officer George Zoghbi responded to a question about competition in the space by stating it wasn’t a new phenomenon. He went on to say, “We have to be mindful of the impact on us, particularly the one that we watch for the most, the impact on the equity of our brands, because we have certain expectations where we position our brands.”
The recent shift in consumer tastes is weighing on company revenue, regardless of new entrants or competition. Amazon didn’t need to acquire Whole Foods to make consumers desire less processed, better quality ingredients in their food. This is reflected in revenue declines in the U.S. and slowing year-over-year sales comparisons in Europe for KHC.
