M&A is still an option for The Kraft Heinz Co. one year after the company's failed bid for Unilever Plc, executives said during a call Feb. 16.
Speaking to analysts during the call, CEO Bernardo Hees said the food industry has not consolidated to the degree other sectors have in recent years.
"If there will be more consolidation in the industry or not is to be proven," Hees told analysts during a call to discuss the company's fiscal fourth-quarter and full-year 2017 results. "But if that is the case, we want to be a force of that."
While Hees declined to name specific subsectors or types of products that the company might consider for acquisitions, he said Kraft Heinz is generally attracted to brands with a clear identity that the company can grow, including internationally. Valuations of food companies are also "more attractive than they were even two months ago," Hees said.
Hees' comments on M&A come as the maker of Jell-O and Velveeta cheese is focusing on increasing sales after posting declining revenue in recent quarters, particularly in the U.S., the company's largest market. In a special presentation it released Feb. 15, the company identified multiple strategies for growth, including expanding its largest brands' presence abroad and increasing revenue from its food service business.
The 77-slide presentation, which the company notified investors about one day before it was published, could itself have been an effort to "improve its standing with corporate boards and other stakeholders that could be key in any future M&A actions," Barclays analyst Andrew Lazar wrote in a Feb. 16 research note.
Sales for the company's fiscal fourth quarter declined 0.6% on an organic basis, which excludes the impact of fluctuations in foreign currencies, acquisitions and divestments. Since 3G Capital Inc. and Warren Buffett's Berkshire Hathaway Inc. created the company from H.J. Heinz Corp. and Kraft Foods Group, Inc. in July 2015, quarterly U.S. sales at Kraft Heinz have declined more often than they have increased, according to data from the company.
The company has attributed the decline to weak demand for its cold cuts and other processed foods. U.S. sales accounted for nearly 70% of all revenue at the company during its fourth quarter, meaning gains in developing markets have frequently been overshadowed by losses in the U.S.
Against that backdrop, Kraft Heinz made a bid, worth $143 billion at the time, for Anglo-Dutch Unilever in February 2017. Unilever rejected the deal, and analysts have been wondering which company the food giant might target next.
Since the 2015 merger, Kraft Heinz's only successful bids have included a Russian plant that produces infant formula and an Australia-based packaged food producer, which it said it planned to purchase for about $231.1 million in October 2017, according to S&P Capital IQ.
Shares of the food manufacturer fell 4.7% to $69.29 in late morning trading Feb. 16. The company reported fourth-quarter and full-year results before U.S. markets opened Feb. 16.