Good morning, everyone, and welcome to the Kraft Heinz 2026 Investor Day. I want to thank you all for joining us, whether you are here in person at the New York Stock Exchange or tuning in online. Before we begin, a few important disclosures. During today's presentation, we may make forward-looking statements that reflect our current expectations. Please refer to our most recent SEC filings and today's materials for a full discussion of those risks.
We may also reference non-GAAP financial measures throughout the day. Reconciliations to the comparable GAAP measures are available in today's materials and can be also found on our investor relations website. Today, we will show you how the pieces of our strategy fit together, from the choices we are making as a company to how they come to life in our markets, to what they mean for our financial performance. We will start with the foundation.
Steve will lay out our vision and three-year plan for driving sustainable, volume-led profitable growth. Diana Frost, our Chief Growth Officer, will then show you how we are putting that strategy behind our brands through marketing, product superiority, and innovation. From there, we will take that strategy into the regions. Our regional presidents will show you how they are building on those priorities and turning them into plans to drive growth in their markets.
Nico will start us off with North America. We will then bring our innovation strategy to life. Todd, along with some of our North America business unit leaders, will host a tasting break for you. You will have the opportunity to see, taste, and experience some of what is coming through our pipeline. When we come back together, Marcel and Willem will show you how our strategy is taking shape across emerging markets and Europe and Pacific developed markets.
Janelle will then round out the session by sharing our productivity and opportunities. Over lunch and in our afternoon breaks, you will be able to engage directly with our executive team, as well as our emerging markets and away-from-home leaders. Andre will then bring it all together with our multi-year financial framework, showing how this strategy translates into expected results. Lastly, we will host a Q&A session. Our goal is to make today a productive one for you, and we have built that agenda with that in mind.
Before I hand it over to Steve, I want to thank the many dedicated Kraft Heinz colleagues who have made today possible. We are proud of what we are about to share, we are excited to put it in front of you, and we are looking forward to the conversations and engagement throughout the day. With that, please join me in welcoming Steve.
Good morning, and thank you all for being here. Today is about more than just providing an update. It is about giving you the same clarity and conviction I feel every day about where this company is headed. I have been with Kraft Heinz for just under a year now. In that time, I have done a lot of listening with our teams, customers, consumers, suppliers, and many of you. Two things became clear. First, the assets inside this company are extraordinary. The brands, the reach, the scale, not many competitors can replicate what we have.
Second, we have not been running those assets the way that they deserve. We underinvested in our brands, our innovation fell behind the consumer, and we lost distribution. What we need to do is build, earn, and deliver value from these remarkable assets, and today, we are going to show you exactly how we are going to do that.
We have spoken before about our North Star, to win market share with brands that consumers love and choose while driving sustainable, volume-led, and profitable growth and generating attractive free cash flow. We need to deliver both, a top line that is growing and a bottom line that is growing with it. Today, I want to add the context we have not yet shared. We will show you more specifically how we get there, the milestones you can hold us to, and ultimately, how that translates into value for our shareholders. Let me start with the environment we are competing in today. GLP-1 medications are taking calories out of the basket. Challenger brands are innovating and using digital and social to grow faster than the big players. A new wave of inflation is squeezing consumers again.
All these factors are contributing to sustained volume pressure across our industry, which has now been negative for years. In this environment, the companies that win will use their scale as a competitive advantage, innovate faster and better, provide more actionable insights, and partner more strategically with retailers. They will have strong brands with a superior proposition, allocate resources better, and have the financial flexibility to keep funding profitable growth, and that is exactly what we intend to do. It all starts with our brands, Heinz, Kraft, Philadelphia, Lunchables, Capri Sun, Jell-O, just to name a few. These are not just food brands. They have been a part of people's lives for generations. They are in nearly every U.S. household, sitting in the pantries, fridges, and lunchboxes of families everywhere.
Our Heinz brand alone is an over $5 billion brand and rated an iconic brand in 88% of the markets we measure, a status only 13% of brands globally achieve. It is one of the most recognized consumer brands in the world, found on restaurant tables across Europe, in homes across Latin America, and in fast-growing markets across Asia and the Middle East. But I have learned that iconic does not mean invincible. Brands that stop being invested in stop being relevant, and for too long, that is what happened here at Kraft Heinz. But we changed that with over $700 million of incremental investment this year. We are investing in marketing our products, in our products' quality, in research and development, in price where it mattered, and in the commercial talent to build better customer and consumer plans that turn brand love into brand choice every single day.
The incremental investments we are making in 2026 are now part of our base, and we believe it is the right level that will drive further recovery and ultimately profitable growth. We have confidence in maintaining this level of investment to generate growth for three reasons. First, these investments pay back on different timelines, creating layers of returns. We are already seeing part of the benefit of our 2026 investments this year, with the remainder expected in 2027 and into 2028. Investments in price and promotion tend to deliver volume benefits more quickly. Investments in marketing, product, R&D, and people take longer, often two to three years to reach their full return. The result is a pipeline of benefits still to come. Second, these investments are fungible.
As we learn what works best, we can move dollars to the highest returning uses, so the same spend delivers better returns over time. Third, the benefits compound. These investments don't operate in isolation. Each investment builds on the others, so the combined impact grows over time. From my experience, recoveries are not always linear, and not every action will work exactly as we intended, but we are now properly funded and will continue to redeploy and optimize our investment to drive further and continuing improvement. These investments are working. Our global market share has improved 30 basis points from 2025 to 2026 Year-to-date, and our organic net sales improved by 250 basis points over the same period of time, outpacing our peers as well. The sales improvement is coming from every region and across channels. Our international developed region has improved 120 basis points.
Our emerging markets business is now pacing at a double-digit growth rate. We have returned to growth in away from home, and North America has improved as well. This progress is driven in part by volumes which have improved across each region, with global trends better than the peer average. While our U.S. retail business has also started to recover, it has felt the impact of 10 years of underinvestment, more than any other region, and the recovery there will take more time. We're making progress, and we remain constructively dissatisfied, but we have to be realistic about the pace. Retailers reset their shelves only a couple times a year, and as I mentioned earlier, change takes time to show up in the numbers, but it will show up, and it is showing up. Within U.S. retail, one of our biggest opportunities is innovation.
It's a top priority for me personally, and today you'll see, taste, and learn a great deal about what we're building. I'm confident we can double innovation as a percentage of sales over the next couple of years. Our leaders will walk you through our plans and pipeline. By the end of the day, I think you'll share my confidence. How does all this come together? The investments, the initial traction, and the biggest opportunities. That's where our strategy comes into play. We'll get there through three clear growth priorities: our Win Big portfolio, emerging markets, and away from home, supported by key enablers and advantages. Let me be the first to say that the strategy you'll hear today is not radically new, and neither is the opportunity in front of us. The biggest change is the way in which we approach and execute our strategy.
Four things are different today. First, we have the right level of investment for the first time in a long time. Second, we have a business unit-led operating model with clear ownership driving speed and smarter decision-making. Third, we have new leadership in place with a proven track record. Lastly, an optimized incentive structure that aligns the whole organization around delivering profitable top-line growth. Let me expand on incentives. This year, we've made meaningful changes to align our incentive structure with the right outcomes for both the business and shareholders. We increased the weighting of country and business unit performance metrics, driving more accountability across the organization. We refined our short-term incentive programs to focus more on market share performance, particularly for our sales and marketing teams.
For 2027, we are introducing a redesigned long-term incentive structure for our senior leaders, tied to growing the top line, generating cash, and our shareholder returns relative to peers. Now, let me bring each of our growth priorities to life, starting with our Win Big portfolio across developed markets in retail. This represents approximately 40% of our net sales. Our goal here is to drive category growth across global taste elevation and North America meals and hydration. These are attractive categories with strong pricing power, growing ahead of the food-at-home industry by 1.4 x. Within Win Big, we have three billion-dollar-plus brands, Heinz, Philadelphia, and Kraft, and 73% of the portfolio with a number one or number two share position. Our opportunity is to continue to modernize our portfolio by leading with superior products and consistently investing in innovation that meets consumers where they are.
With our scale, we can show up in the moments that matter most. Our second growth priority is emerging markets, which I believe is one of the most underappreciated parts of our story. These markets have expanding middle-income consumers and rising disposable incomes, creating a $49 billion total addressable market for taste elevation, with historical industry growth running at mid-single digits. The runway is significant, and we are uniquely positioned to capture it. Heinz has 96% worldwide awareness, in line with leading global brands, but with half of the household penetration. Our Heinz brand opens doors in every market we operate in. The opportunity is to convert that awareness into household penetration through the brand equity of Heinz, through mayonnaise, where we're doubling down behind product superiority, and through distribution expansion across retail and away-from-home channels. This is a brand that is literally loved everywhere and rejected nowhere.
Lastly, away from home across our developed markets represents about 12% of our business. Put simply, wherever people eat, we want Heinz to be there. Away from home is an attractive channel that historically grows ahead of retail by 1.8x , driving trial and building brand awareness. We are the undisputable leader in front of house, with three times the relative market share of our nearest competitor. But here is what excites me most. We are still in the early innings. The opportunity behind ketchup is significant, and Heinz gives us the equity to go after it. We will leverage that position to accelerate category expansion, drive trial, and deepen penetration and loyalty through differentiated equipment, and build partnerships that make Heinz the defining brand in leisure and entertainment. Each of these priorities represents a significant opportunity, and each one we are well-positioned to win.
Throughout the day, we'll host three live breakout sessions where you can experience each of these growth drivers firsthand. From the leaders, you'll hear about five enablers that will accelerate our growth. Diana will talk through how we're building superior products and driving brands while driving innovation that is both relevant and accretive. You'll hear from Nico and Willem how we are prioritizing our efforts where we have the highest right to win. Andre will discuss our approach to reshaping our portfolio, which we intend to actively pursue. Marcel will cover how we are sharpening go-to-market capabilities that can scale emerging markets and accelerate Heinz. Janelle will outline our opportunity to continue to unlock efficiencies that expand margins to fuel growth. Supporting these enablers, we have two key advantages, our people and technology.
We are one of very few companies in our industry adding both talent and capabilities at scale right now. The talent inside this company is exceptional, and now everyone is focused on growth. We have the right team in place to execute, and we are supplementing it with the addition of over 400 new roles in North America, with nearly half of the new roles tied directly to innovation. We are adding horsepower, focus, and expertise across our growth priorities, strengthening how we innovate and how we win with customers at scale. Across technology, AI is changing how we work, and we are focused on measuring outcomes, not activity. That means using AI to understand consumers at a depth we never could before and to move faster, from innovation to shelf and from insight to marketing.
AI is touching everything from the supply chain to speed to market to how we spend, and we are only getting started. Our strategy works and will work because of how our business is built, including four attributes that set us apart from the center store group. Our mix creates a unique growth profile. With emerging markets representing over 10% of sales today, it is the largest of the group, and it is growing. Away From Home, half of our sales come from front of house, where consumers discover and try our brands in a channel that outpaces retail. Heinz stands out as the only truly globally recognizable brand in our peer set, with incredible brand equity across the world. Our advantaged balance sheet and free cash flow gives us flexibility that others candidly lack.
We expect 2026 net leverage at or below 3.3 x, compared with roughly four times for the center store group. Our adjusted operating income margins are about 200 basis points higher on average, even after our stepped-up investments. That gives us room to invest, manage our portfolio, and return capital without difficult trade-offs. Lastly, we bring exceptional experience. This leadership team has navigated multiple cycles and led large-scale transformation. That doesn't show up on a balance sheet, but it matters. Now, a strategy is only as good as what it delivers. So let me talk through our expected trajectory and milestones, which Andre will go deeper on later today. We will not be giving you a long-term algorithm today. Instead, we would rather show you the path and earn the right to talk about an algorithm when we are running it. We laid out 2026 as the reinvestment year.
This is our turnaround, with a focus on driving market share recovery. We right-sized our marketing, invested in our products and innovation pipeline, and hired talent to bolster our commercial teams. We are seeing results. Our market share losses have narrowed, and our volume trends have improved. Emerging markets are growing double digits. Away From Home is delivering low single-digit growth. Heinz globally is back to growth. We are generating productivity above 4% of cost of goods, and our free cash flow remains a strength. As we exit 2026, we will be a stronger, better-invested business with momentum heading into the new year. In 2027, we expect a return to top and bottom line growth in the second half of the year. Our innovation pipeline is expected to contribute more. Emerging markets and Away From Home are poised to continue their growth momentum.
Heinz, across global markets, keeps gaining traction. We view 2028 as the year of growth. We expect to deliver consistent top-line growth and margin expansion. 2029 is when that growth continues to build, delivering consistent results time after time. Before I hand it over, three things I want you to take away from what you have just heard. Kraft Heinz has always had the assets to win. What we did not do was choose to invest in them to become a top-line-driven company. Our strategy is clear and focused. Our investments are being deployed. We have the right team in place, and we are seeing the early results. The numbers are moving in the right direction, and today is about showing you exactly how we sustain and accelerate that. With that, I will hand it over to Diana Frost, our Chief Growth Officer. Diana, over to you.
Thank you, Steve, and thank you all for joining us. Today, I will share how we are building superior brands and products and delivering innovation that is both relevant and accretive. What does it take? Our approach combines two things: science and soul. Science is the analytics and consumer insight that tells us where to focus, how to win, and whether it is working. Soul is the creativity and invention that makes people feel something and choose us. We know where we were falling short and where we need to focus: breakthrough marketing, product superiority, and innovation. Let us start with breakthrough marketing. We are investing in four areas: stronger foundations, better creative, strong media returns, and winning at the decision moment. First, we diagnose. Our brand growth system looks at every brand the same way: brand resonance, product impact superiority, the value equation, and omni-channel execution.
Now we have taken more than 75% of our global net sales through it, with one consistent approach across brands and across countries. The plans are built, and we have moved to execution. Second, creative. Creative quality is the number two driver of return, only behind level of investment. So we have refocused our creative on the food and on real consumption occasions, so we land taste appeal. Across the globe, overall creative effectiveness is up 30%, with gains in branding, ad recall, and most importantly, persuasion to buy. Third, we are putting money to work where it pays back. In 2026, we are investing $325 million more in marketing. Two-thirds of that are in media, focused on brands with strong plans and proven returns, like Heinz, Kraft Mac & Cheese, and Capri Sun.
We are shifting the mix to social and digital, up 28% on platforms like Meta, TikTok, Snapchat, and Pinterest, where returns are 30% higher than all other channels. The result, our dollars are working harder. Return on ad spend is up 8% over two years, even as we spend more. Where brands are furthest along, it is showing up in our results. On Heinz, Kraft Mac & Cheese, and Capri Sun, returns are increasing along with brand performance. We know there is so much more to do. Many of our brands are starting from different points, and their recovery will come at different times. Best-in-class returns are still 25% ahead of us, and closing that gap is a $250 million net sales opportunity.
We know the levers to get us there, and we are taking action in better creative, more consistent and optimized media mix, more portfolio sale programs, and innovation. Finally, we're winning where the purchase happens. In-store, our scale is a real advantage. Our categories peak around six power windows, worth nearly $25 billion in retail sales. Few companies can bring this many iconic brands to life into the same moment. Summer 2026 proved that it works. Our America 250 Cookout program, led by Kraft, Heinz, and Oscar Mayer, grew display sales 160% or $30 million, with two-thirds of participating categories gaining share.
In 2027, we will go after more of that opportunity across all six windows, with richer offers through our NFL and Disney partnerships, including a large-scale Star Wars program in Q2, and we'll bring holiday together as one portfolio moment for the first time. Online, we're increasing U.S. investment by more than 40% because our brands don't just need to be found, they need to be recommended. Our e-commerce business is growing about 14% globally Year-to-date, accelerating from 11% growth in 2025. That's progress, but the next step is turning that into share gains. Across away from home, partnerships with the NFL, Live Nation, and Disney are putting Heinz into more meal moments. We have gone from a decline in 2025 to up 3.7% volume growth Year-to-date 2026. Now let's talk product superiority.
Great marketing gets consumers to try us, but product superiority keeps them coming back. We recognize that the consumer experience with some of our brands had been falling short, and that we didn't have a clear enough view of what drives liking within our categories. Our ambition is simple: earn every bite. That means consumers prefer our overall product and on the one to three things that matter most in each category, whether that's taste, texture, appearance, convenience, or benefit claims. We don't assume we're better, we test it. We run one global approach to get there, a repeatable methodology, clear action standards, ownership for closing gaps, and quarterly governance. Standards are tied to portfolio roles, so we invest in superiority where it matters the most. This combined with our $50 million investment behind product and pack superiority has led to meaningful progress.
Today, about half of our tested global net sales meets that standard. By the end of 2027, we expect that to be more than 70%. In 2027, in-market improvements will come to many brands across the portfolio, from Oscar Mayer, Lunchables, to Jell-O, to even local jewels outside of the U.S., including ABC, Bénédicta, and Orlando. I'll give you some examples. In the U.S., testing told us that Classico was not meeting our product ambition overall or what matters most in pasta sauce, thickness and flavor. So we're fixing both. Our new tomato and basil is thicker with better flavor and more visible herbs and tomatoes, which will allow us to win on texture, taste, and appearance, and it's coming soon. On packaging, in the U.K., the gap for chefs was convenience. Chefs needed a fast, precise, one-handed squeeze, and our bottle took too much force, so we redesigned it.
A new cap for precision, a narrower bottle for grip, thinner plastics for an easier squeeze, and a 57 emboss that shows exactly where to press, and it is in market now. While the attributes that matter change by category, the discipline does not. We start with what drives each category, find the gap, and close it. Superiority only pays off when consumers actually know about it, and that is the job of claims. Some are about measurable nutrition, like zero added sugar and salt in Heinz Ketchup Zero, or the protein and fiber in PowerMac. Some speak to in-market strength, like Kraft being America's number one mac and cheese. When testing proves we win, it unlocks our strongest claims, and that turns a better product into a clear reason to choose us. The third pillar is innovation. As Steve mentioned, it is our top priority.
We need to step change both the quality and quantity of innovation so every category has the innovation it needs to win. Historically, innovation has been the single largest driver of our share loss versus competitors. We are changing our innovation trajectory in four ways. Consumer insights. We have built an AI-powered rapid ideation and concept creation tool to find more powerful consumer-led insights that will lead to bigger platforms. We now have twice as many innovations of greater than $10 million or more, and there is more to come. For years, we underinvested in R&D at just 0.6% of sales in 2024. We are approaching the benchmark of 0.9%. That is about $75 million more in R&D investment, and that is over and above the 245 people we have added in innovation and R&D roles, focused on benefit platforms that scale across brands. And execution.
We are putting an incremental $70 million in marketing behind our big bets, and we have increased sales headcount by 12%. The early proof is in some of our big bets, like PowerMac, that are turning at top-tier velocities. Last, but certainly not least, our operating model. We have simplified and sped up decision-making, with local teams executing the one-to-three-year pipeline while central teams build platforms that scale, like Zero, that is now in 26 markets. We are innovating against consumer behavior that is changing faster than ever. Wellness needs and GLP-1s are shaping consumer choices. More than 70% of consumers want more protein, 64% want more fiber, and simple and natural ingredients are now the number one need in sauces and condiments. As GLP-1 use grows, so does the demand for low and no-sugar options. New channels and formats are redefining convenience.
In the U.S., 65% of breakfasts, 56% of lunches, and 1/3 of dinners take less than five minutes to make. Consumption is increasingly defined by occasions. Half of at-home meals are eaten solo, and chicken, fish, and pasta are the fastest-growing host food. Here is how some of our pipeline answers those shifts. Nearly half of all new products will be focused on meeting consumers' health and wellness needs, with options offering less sugar, more protein, all-natural ingredients, certified organic ingredients, or lactose-free choices. We will do this across platforms and not simple products. Heinz Simply expands to barbecue, and simple ingredients comes to Jell-O. We are going big on protein with Philadelphia, Jell-O, and PowerMac. On hydration and functional benefits, we are scaling across Capri Sun, Kool-Aid, and Crystal Light. In convenience, Kraft Mac & Cheese adds cheesy ramen. Oscar Mayer is launching sandwich bacon.
Lunchables Uploaded gets more food and more protein, and Heinz delivers an advantaged affordable pack. In new occasions, Heinz pasta sauces, the category growth driver in the U.K., are scaling to the Netherlands and Brazil. Ore-Ida Shapes head into year two with even more shapes and flavors, and our condiments range continues to match growing host foods. These big bets have strong margins, which will allow us to keep investing behind them. That is how we will turn our biggest gap into a leading driver of growth. on a three-year rolling basis, we expect U.S. retail innovation to step up from about 3% of net sales today to 5% in 2027 and 6%-8% in 2028, more than doubling. Every 100 basis points of incremental innovation from the U.S. retail translates into 30 basis points of growth for Kraft Heinz.
Let me bring it all together with one of the most iconic brands in the world, Heinz. As Steve mentioned, Heinz is a $5 billion brand with 96% global awareness and iconic status in 88% of our markets. But in 2025, that growth stalled. Our brand growth system showed us why, and it came down to four things. We were underinvested at about 75% of media sufficiency. Our occasions were too narrow, stuck on fries and burgers. Our innovation was one-off flavors as opposed to global platforms. In some markets, our premium was too high. We went after it in three ways. Number one, to reinvigorate the core. Number two, to future-proof ketchup. And three, accelerate our expansion into growth spaces. First, the core. We increased investment by 30%.
We backed it with breakthrough creative against a consistent global platform of "It has to be Heinz," and also brought it to life through brand partnerships like the NFL and Live Nation. We kept optimizing our media mix. Return on ad spend is up 8% this year. We strengthened category fundamentals and our value equation market by market. Second, we are future-proofing ketchup with Heinz Simply and Heinz Zero for consumers who want simpler ingredients and no added sugar or salt without sacrificing taste. Both are growing double digits. Simply is up 22% Year-to-date, Zero is up 42%, and Zero is bringing new consumers into Heinz. In Europe, where it is now 15% of sales in several markets, more than half of Zero sales are new to the brand. In Brazil, after just five months, it is 80% incremental.
Third, we are taking Heinz well beyond ketchup into consumer growth spaces with tailwinds and where Heinz has proven it can win. Year-to-date globally, mayo is up 19%. Our flavorful condiments are up 4%, and pasta sauces made with real and simple ingredients is growing at 22%. We have not stopped there. We are setting a new standard in soup, a category that has been the same for far too long, with elevated flavors in a convenient pouch that just launched in the Canadian market. Here is what it adds up to in our biggest market as measured in retail sales. In the U.K., we have returned to growth, up 2%, with our latest campaign ranked number one for advertising effectiveness by Kantar, and our penetration has recovered. In the U.S., Heinz is up 4% Year-to-date, and total ketchup is up over 2%.
In China, we are up 7% with ketchup penetration up 1.4 points. Since 2024, we have closed a 30-point share gap to the number one in mayo, Kewpie. In Brazil, we are up 16%, with Tomato Ketchup Zero being the biggest launch campaign in history, and mayo volume up 40% Year-to-date, with household penetration up 2 points. It has to be Heinz. Consumers are choosing us, and altogether, Heinz retail sales are up 4.6% Year-to-date, and 80% of our markets are growing share. Here is what excites me the most. Heinz still has only about half the household penetration of global brands with similar awareness. That is our upside. That is what we are proud of. We are proud of what we have done, but we are just getting started. Three takeaways as we go from Heinz to Kraft Heinz. First, breakthrough marketing.
Our dollars are working harder, and we have green shoots across businesses like Heinz, Kraft Mac & Cheese, and Capri Sun, with the others to come. Second, product superiority. We are earning every bite, with more than 70% of tested sales expected to meet our product ambition by 2027. Third, innovation. Our biggest gap becoming a big growth driver, more than doubling by 2028. We are proud of the progress, and we know what it takes and what is required to win. When analytics reveal what consumers need and creativity makes them feel understood, we create food that wins every bite, every single day. Thank you so much. With that, it is my privilege to introduce Nico to you.
Thank you, Diana, and I am really excited to be here, and now, after nine months in the company, even more excited and confident about the business we have and its future. Over the next few minutes, I will show you where we stand, where we are playing, and the progress that shows us it is starting to work. Let us start with the foundation. North America is the heart of Kraft Heinz, and it starts from a position few companies have. First, iconic brands. Heinz, Kraft, Philadelphia, and many more consumers have trusted for generations and recognize them instantly.
That equity cannot be bought, and it cannot be copied. Second, scale. Not only the size of the business, but its breadth. We compete across categories that complement each other, from the pantry to the fridge to the table. That breadth gives us reach with consumers and weight with customers that few can match.
Third, headroom. As a company, we are in almost every home in North America. Category by category, we are not. Even Philadelphia, one of our strongest brands, is in fewer than half of American homes. Our biggest opportunity is finding new households and selling more of our portfolio to the households we already reach. Today, the consumer is under pressure, and behavior is shifting fast. Three shifts define the landscape. Value, budgets are stretched, more meals are eaten at home, and every item has to earn its place in the cart. Health and nutrition, regulation, and new habits, including GLP-1, are redefining what better for you means. Taste still wins, and taste is where our brands are strongest. The path to purchase. Trips are fragmenting across channels and screens. The fastest-growing channels are where we are underinvested today. Every one of these shifts presents an opportunity.
However, we haven't addressed them with their required action and attention, which explains some of our underperformance. From 2022 to 2025, we lost 230 basis points of share. Most of the cost was within our control. Start at the shelf. Why should a shopper choose us? Over time, we gave them fewer reasons. Fewer reasons meant lower velocity. Lower velocity cost us distribution. At the same time, we under-innovated. We didn't give consumers new reasons to come back. We didn't give customers innovative solutions to put on shelf. Problems we created are problems we can fix. We will reinvigorate the core to win back the shelf, and we will accelerate into new growth spaces, segments, occasions, and underdeveloped retail environments. Everything you'll see today ties back to these opportunities. Now, where are we going? Our ambition is to be a top-tier food and beverage company in North America.
Top tier means growing with the best in our industry. We're not there today. We will be. That means being at arm's reach in grocery stores, clubs, online, stadiums, and in restaurants. Wherever the shopper is, our brands are there. It means winning in moments that matter. The holidays, the big game, back to school. Those are the weeks where we win disproportionately, and at our scale, they represent important growth opportunities. It means delivering through iconic brands, powered by exceptional people and capabilities. An ambition is only as good as the plan behind it. We will focus behind four priorities to deliver it. Reinvigorating the core and accelerating into growth spaces, going directly at our declines and share losses. Delivering operations and advancing capabilities make the fix repeatable every week in every channel. Let me take them in order, starting with the core.
The core is where we win or lose. Our biggest brands have to earn their place on the shelf again, every day, in every aisle. That starts with the product. Better food, cleaner labels, contemporary packaging. It requires brand support and sufficiency, with creative that moves consumers. It requires a value equation that goes beyond price, the right pack at the right price for the right shopper. It requires winning with our customers. If we don't win with them, we don't win. They want Kraft Heinz to win, and we're giving them reasons to believe we will. This is already in market. 2026 started the renewal. Kraft Mac & Cheese, Philadelphia, Lunchables, and Heinz Ketchup are already in market with better products. 2027 takes it across the portfolio, with new products, packaging, and creatives on far more of our brands.
Next year, consumers will see a different Kraft Heinz on the shelf. The core wins back the shelf. The second priority closes the innovation gap. Growth spaces follow one principle: go where demand is growing. We have three hunting grounds. New segments, better for you, functional, and convenience. New occasions, big moments, and the everyday ones where our brands belong. Winning channels, value retailers, clubhouses, and e-commerce, where shoppers are going and where we have been underrepresented. These aren't side projects. They have dedicated teams, dedicated resources, and their own innovation. Winning there requires a different innovation model. Here is what it's producing. We changed how we innovate. More and bigger bets, build on real consumer needs, and design to bring in new buyers. It's working.
Innovation's contribution to sales has doubled, and this year's launches, including Capri Sun Hydrate and PowerMac, are among the top performers in their categories. Our 2027 pipeline is the strongest we've had. You'll taste it today in our innovation breakout. Growth only counts if we can deliver it. That's the third priority. We have some gaps in operations. We're closing them. Service and quality are non-negotiable. If the product isn't on the shelf, every marketing dollar goes into a leaky bucket. We're investing in safety, quality, and reliability across the network. At the same time, we're driving productivity through smarter sourcing, automation, and AI. That productivity funds our growth. The fourth priority makes all of this repeatable. The strategy is won or lost in execution, and Canada sets our standard. Walk into any store there, and our brands are present, visible, and in stock at the right moment.
We're taking that standard across North America. We're building the capabilities to decide faster and act sharper, from consumer insights to digital and AI. We've simplified the organization. Our model is BU-led and function-enabled, with the right talent in the right roles. We're building a winning mindset. We have the portfolio, we have the scale, and we have the plans. We have every right to play at the top tier, and we will do so. Four priorities. The obvious question, is it funded? And it is. The majority of the roughly $700 million we're investing goes to North America. Behind brands like this and a simpler operating model gets the money to work faster. It isn't a commitment for later, it's already deployed. The investment is in the business today, and every dollar has a job and a timeframe. Price makes us competitive on shelf now.
Marketing rebuilds brand equity in the medium term. People and product build long-term category leadership. We're being disciplined. Where something isn't delivering, we redeploy fast. What are we getting for it? The trend is turning. U.S. consumption is improving 250 basis points versus last year. Share has improved 40 basis points, and Canada has now grown for 11 consecutive quarters. We're not where we want to be, but the direction is clear and the improvement is broad. We're also deliberate about where we put our resources. Every brand has a defined role, and the roles drive our choices. Win Big is more than half of our sales. Heinz, Kraft Mac & Cheese, Philadelphia, Capri Sun, strong share, strong margins, the right categories, that's where we concentrate investment. In win, we invest selectively. In hold, we stabilize. To be clear, hold doesn't mean neglect.
Those brands get the fundamentals and innovation. All three roles are improving this year. Win Big is where the acceleration starts. Win Big has stopped declining, and the moment is broad. Heinz, which you heard about it in the prior presentation, is back to growth. So are Capri Sun and Away From Home. Philadelphia is gaining share, Mac & Cheese is growing again, and Canada keeps delivering. Every platform has a defined 2027 pipeline behind it. This is where our accelerations comes from. Let me show you three businesses where the playbook is already working: Kraft Mac & Cheese, Capri Sun, and Away From Home. Let's start with Mac & Cheese. Kraft Mac & Cheese, an American icon, number one in its category for nearly 90 years, with awareness and affection most brands never reach. And yet, for three years, the business declined.
Dollars down, volume down, fewer households buying. The lesson is simple: iconic doesn't mean invincible. There was no single cause. Four things were wrong at once, and every one of them was under our control. The product fell behind as consumers expected more. The value equation stopped working, and we were missing the pack sizes consumers wanted. Brand support fell well below sufficiency, and we innovated with new flavors where consumers moved to other formats like ramen, soup, and frozen pizza. That's how a great brand loses relevance and share. We didn't pull one lever, we pulled four. We made the product better, more cheese, a tastier recipe, and a redesigned box. We fixed price and pack. We put real media back behind the Best Thing Ever campaign, and we innovated where consumers had gone.
The first result is the one that matters most: households are coming back, and the growth is accelerating. Kraft Mac & Cheese is growing in dollars, volume, and households, and the trend is accelerating. Young families are coming back, and our innovation is bringing in new buyers, not cannibalizing existing ones, at top quartile velocity. That's the playbook. Fix the product, value, brand, and innovation together, and the brand responds. Mac & Cheese shows what happens when we fix the core. Capri Sun shows what happens when we go where the category is growing. Capri Sun was one of our biggest headwinds. The issue wasn't the brand. Kids love it. It's a lunchbox staple. The issue was where we played. Kids' beverage was growing in functional drinks, in convenience, and in new formats. We weren't in any of them. First, we fixed the core.
We stepped up brand support, leaning harder online, and moved the recipe in line with the consumer needs. The result, Capri Sun is gaining households for the first time since 2022. Then we took the brand somewhere new. We entered functional with Hydrate built for kids. It's now our number one innovation. We took Capri Sun out of the pouch and into bottles to win in the cooler. And the results? Six straight quarters of growth now, at double digits, and share has turned positive. Mac & Cheese and Capri Sun are about what we sell. Away From Home is about how we sell and why capabilities matter. Away From Home is an advantaged business. Heinz is the condiment people expect when they eat out, but we lost share for four years, and the problem was our own model.
Our go-to-market limited our ability to excel in execution and better understand our customer needs, and our service let them down. We changed our model. We increased our direct sales coverage, strengthening our customer relationships. We put Heinz equipment in restaurants. We identified distribution gaps across our portfolio, and rewarded our customers' loyalty through our Heinz Verified program. And we used our partnerships to get on more menus. The business is back to growth, and these capabilities don't stay in Away From Home. We're taking them across North America. Three businesses, three priorities, one playbook. Let me bring it all together. Here's the roadmap. 2026, you set the business. 2027 builds momentum, and 2028 and 2029 will accelerate and sustain growth. Four reasons give me confidence. We're fully funded, and the new model is in place. Canada and Away From Home are already growing at our target.
Win Big will lead the acceleration, powered by a step-changing innovation, and the rest of the portfolio keeps improving on the fundamentals. We started with a foundation few companies have. You've seen the plan to turn it into growth and the evidence that it's working. We're not where we want to be yet. 2027 is the year the momentum starts becoming visible, and we'll show you the progress quarter by quarter. Thank you all, and now I'll hand it over to Todd to kick off our innovation breakout. Todd?
All right. Hey, everybody. I'm excited to kick off the immersive part of our day together, and you just heard from Nico about our significant turnaround efforts that are underway in North America, and you heard from Diana earlier about how we're transforming our marketing and step-changing our innovation. As the Chief Marketing Officer here in North America, I'm right in the middle of it all, and I can tell you what we are building together is exciting. But if there's anything we know at Kraft Heinz, the proof is in the pudding, right? Steve likes to say this turnaround is a show-me story, which is why for this next segment, we're going to give you a peek behind the curtain and how we're actually transforming our portfolio here in North America.
As such, I'm happy to kick off the first of our three immersive sessions today, and it's about one of the most critical levers to drive future growth, and that's innovation. Innovation's a critical lever to our future here at Kraft Heinz, and we aspire to be famous for it. In fact, our ambition is to become a true innovation powerhouse, building a repeatable model that quickly identifies consumer needs, creates scalable opportunities, and executes them flawlessly. As you can see here, we're well on our way. We've doubled our innovation contribution in net sales this year with some great new products out in the marketplace, and we've even more robust and scalable new platforms ready to deploy in our pipeline. But to get there, we need to build and implement a tightly run innovation engine where every single step of our process is best in class and end-to-end.
From dedicated teams that build real-time trends and consumer foresight into our ideas, to AI-enabled tools that can accelerate timelines and quickly validate ideas with consumers, to investing in robust R&D resources, capabilities, and tools, launched with flawless execution in partnership with our valued retail partners, and backed by strong innovation marketing plans. Of course, we're building all of it to work in a simplified operating model that is both easily repeatable and scalable. That is the innovation engine we are building and what best in class looks like. Our investments in our marketing, new technology, and our people will only accelerate our path to get there sooner. As we get ready to head into our immersive room down the hall, you'll see and get to taste exactly what we're talking about.
While you will only experience just a portion of our innovation pipeline, you will get to see firsthand how the right innovation can bring in more households, drive more product occasions, and grow our categories, all to better serve the ever-changing needs of our consumers. The products you will see will be organized around the three growth platforms that Diana introduced earlier: nutrition, convenience, and new occasions. We are also going to highlight how our packaging can serve as a true differentiator, ensuring that we have the right product in the right pack to meet the needs of the right consumer occasion. Our North America business unit presidents will be in the room to walk you through each of the areas and share a peek at what we are building for tomorrow.
Once we all get in there, I am excited for you all to taste for yourself, as I hope you are as hungry as I am, because we have quite a few samples for you to try. Let us go see, feel, and taste the future of Kraft Heinz in North America. Thanks so much, and please follow me to the room.
Thank you for being here. It is a privilege to speak with you today about emerging markets and the key role it plays in driving growth for Kraft Heinz. At the end of this presentation, I hope you have a clear sense of the significant potential in our region, how we plan to capture it, and the momentum we have in the short term. Emerging markets is a $2.5 billion net sales business. We have an in-market presence in 19 countries, represented by the dark blue areas on the map, with 18 plants serving most of them. These markets account for 70% of total taste elevation sales, while the remaining 30% represents our white space opportunity. It is important to say that we see opportunities everywhere across our region.
What changes from one market to another is how we go after those opportunities, and I will walk you through that in the next few slides. Emerging markets benefit from strong demographic and economic tailwinds. Compared with developed markets, population grows 40% faster while purchasing power grows twice as fast. This translates into 144 million consumers moving into higher income segments, expanding the addressable consumer base for our categories. Taste Elevation is a $49 billion market, and when we look across multiple categories, we see growth in every one of them. Our two biggest ones, ketchup and mayo, are growing at 8% and 5%. So we are very well positioned in an attractive and growing market. It does not stop there. As you will see on the next page, there is still significant untapped opportunity ahead of us.
Taste Elevation consumption per capita in emerging markets is about half the level of developed markets. At the same time, our brand penetration remains well below the category level. Using Heinz ketchup as an example, penetration across our markets ranges from 13% to 38%, compared to 78% for the total category. There are still plenty of opportunities for us to capture in both per capita and household penetration. When we look at our business, you can see that it is highly focused. Around 80% of our sales come from Taste Elevation, and more than 40% come from Heinz. This is a real advantage for us. It gives us scale, increases the impact of our investments, and allows us to replicate what works across markets. Looking at our performance, you can see a clear progression in our organic net sales.
We delivered 4.1% growth in 2024, 5.6% in 2025, 7.2% in the first half of 2026, and 15.6% in this third quarter. We are now at 10% growth Year-to-date, with all five business units growing year-over-year. Very strong momentum. As we look ahead, we are very clear on where our growth will come from. Our plan is built around four key avenues: Heinz, Mayo, Away From Home, and Go-To-Market and Geo White Spaces. All combined fuel our growth, allowing us to direct our efforts and investments toward the biggest opportunities. On the next slides, I'll walk you through each one of them. Let me start with Heinz. Organic net sales are up 14% Year-to-date, while value market share has increased by 110 basis points. From a brand equity perspective, we are stepping up investment, strengthening our quality credentials, and scaling Tomato Ketchup Zero.
Overall, we are investing three times more in media behind Heinz. On affordability, we continue to strengthen our price pack architecture, targeting to increase penetration by offering the right price points for different consumer needs and occasions. We'll take this further with our new affordable pack. This will unlock additional price points while preserving the quality and premium attributes consumers expect from Heinz. On innovation, we are expanding Heinz to new occasions, from modern sauces with a host food-led approach to culinary portfolio. Heinz continues to gain momentum with significant room for further growth. Let me bring this to life with three examples. Starting with Egypt, where price pack architecture and entry formats are helping us make Heinz more accessible and drive penetration. Today, Egypt has the highest ketchup penetration across our region.
Brazil, where we launched Heinz Ketchup Zero, the biggest launch in Kraft Heinz Brazil's history. The product has been on the market for only five months and has already reached three points of market share with 80% incrementality to our existing Heinz ketchup business. Finally, China, where we are growing penetration by helping consumers understand how Western sauces can become part of local host foods. Over the last year and a half, we have gained seven percentage points of market share. Let me run a quick video to bring some color to what I've just shared.
Diverse culture and diverse people. That is emerging markets, already setting the standard in taste, earning more tables with Heinz, winning market share everywhere. We are gaining momentum with successful cases. In Egypt, smart price packs, entry formats, affordability unlocked. 38% penetration, the highest across emerging markets. In Brazil, Heinz Zero, the hero choice. No added sugar, no compromise on taste. 3% market share in just five months. In China, we are teaching the nation that the classic, tomato and eggs, sweet and sour, made easier, made better with Heinz. Chefs on our side, plus seven share points in 18 months. When it comes to growth in emerging markets, it has to be Heinz.
Our second avenue is mayo, where organic net sales are up 16% Year-to-date and value market share has increased by 140 basis points. A big part of this is strengthening brand equity. First, by ensuring product superiority across all our key markets. Second, by communicating the distinctive advantage of Heinz. To support this, we are doubling our media investment behind mayo. Then, on portfolio expansion, we are closing portfolio gaps across all formats while also bringing innovation through flavored mayo. Let me now share three examples of how this strategy is working across our markets. Starting with Chile, where we have built a very strong position through product superiority, penetration, and relentless execution. Today, we have reached an all-time high of 51% value share and continue to lead the market. Then, UAE, where flavored innovation and portfolio expansion have been key to building the brand.
Flavored mayo already represents 30% of our mayo mix, enabling us to reach market leadership. Finally, China, which all starts with consumer understanding. We have identified relevant local occasions and host foods, such as the breakfast sandwich, and built a winning proposition around them. Over the last year and a half, we have gained 10 percentage points of market share. With that, let me show you a video that brings these results to life and gives you a flavor of what is happening across our markets.
A complex competitive environment, an opportunity to step in. No such thing as too much mayo. We are gaining momentum and success in taste. In Chile, 51% share, an all-time high. The real mayo, rich, unmistakable taste. Deli mayo, spreading the love further. In the Middle East, we are building equity through flavors. 30% of our mix is mayo. China, we are owning the breakfast sandwich mayo with high-grade yolk and omega-3, plus 10 share points in 1.5 years. When it comes to growth in emerging markets, it has to be Heinz.
It has to be Heinz. Our third avenue is away from home, with organic net sales up 7% Year-to-date in 2026. On key accounts and QSRs, we are protecting and growing our customer base while also winning new key account and QSR chains. Year-to-date, the number of key accounts we serve has grown by 10%. On independents, we are expanding our coverage with active outlets growing at 14% CAGR since 2023 and scaling up our brand programs. Finally, we want to win in the kitchen through our portfolio by innovating our back-of-the-house offering and closing portfolio gaps versus competition. Our fourth avenue is go-to-market and geo white spaces. Let me start with go-to-market opportunity in our current markets, where we can expand both horizontal and vertical coverage. First, we have made strong progress on distribution.
Our number of active outlets has been growing at around 5% per year, consistently expanding the reach of our brands. On execution, we are increasing basket size by improving priority assortment compliance, which is now at 80%. We are also driving stronger in-store execution, resulting in a share of shelf five percentage points above our market share. Going deeper on geo white spaces, as you saw earlier, 30% of taste elevation opportunity sits in markets that remain largely untapped for us. We are addressing this in two streams. First, through trading hubs, expanding our regional trader network across Latin America, Asia, and Africa. Here, the opportunity goes beyond our local portfolio, leveraging the global one. Second, through high-potential markets, where we start with a deep understanding of the consumer and our ability to win, to set the right operating model in prospective markets.
With that, let me close with a few takeaways. Emerging markets have strong tailwinds with growing population and spending power. We have significant opportunities to grow, both in per capita consumption and household penetration, and we do have positive momentum. Looking ahead, we have a strong ambition and a solid plan to deliver it. Our four avenues will drive emerging markets growth, and we are investing behind each of them. Later today, in our breakout session, you will hear more from our emerging markets leadership team about our business, strategy, and growth opportunities. Thank you very much for your time and attention. With that, I will pass it on to Willem.
Thank you, Marcel, and good afternoon, everybody. Great to be with you here today. Over the next few minutes, I want to leave you with three things about Europe and Pacific developed markets. One, we are a scaled, profitable, and highly cash-generative business. Two, we are accelerating growth in our core portfolio and transforming our non-core. Three, we have proven playbooks to win in these markets today and globally tomorrow. EPDM covers 47 markets across Europe, Australia, New Zealand, Japan, and South Korea. These are not the world's fastest-growing economies, but they are among the most affluent. We serve around 770 million consumers with GDP per capita three times the rest of the world. These are consumers who value quality and are willing and able to pay for it today.
In 2025, EPDM delivered $3.8 billion in net sales, about 15% of Kraft Heinz, and $0.6 billion in adjusted OI, with over 100% cash conversion. It is also a highly focused business. Around 90% of our sales are in taste elevation and meals. We have nine core brands, and Heinz alone is around 60% of our sales, and that makes EPDM around 40% of Heinz's global sales. Many consumer and regulatory trends start in our markets, so what we win here today, Kraft Heinz can win elsewhere tomorrow. There are two things happening at the same time in our business today. First, we are accelerating the core, and Europe shows it most clearly. We are stepping up investment in marketing and sales by around $45 million, and it is working.
In Europe, our net sales have moved from flat in the first half to low single-digit growth in the third quarter. In taste elevation and meals, our value share has moved from flat Year-to-date to +0.5 points over the last 13 weeks. We are now holding or gaining share in around 70% of that portfolio, up from 55% Year-to-date. Away from home in Europe is growing too, now accelerating to +3% in the third quarter. Secondly, we are transforming the non-core. The 10% of our portfolio outside of taste elevation and meals stays only if it earns its place on returns and growth, and where it doesn't, we act. That is why we sold our Italian infant business and why we are closing three factories in New Zealand right now.
These closures weigh on our organic growth in the Pacific at this moment, but they do not hurt our bottom line, and they free us to focus on where we win. Still, there is more work to do. Accelerating the core starts with the size of the prize, and in the categories where we already compete with the brands, the products, the supply chain, and the go-to-market we have today, the retail opportunity is $26 billion in three pools of similar size. Cold sauces, where we hold around 20% share. Ketchup is our icon, and we are a fast-growing challenger in mayo and in modern condiments. Pasta sauces and culinary tomato, around 3% share, with a successful pasta sauce launch we are rolling out right now. Meals around 10%, with Heinz soups and iconic Heinz beans, which you saw at CAGNY.
Across all three, our share is around 10%, leaving lots of room to grow. Also, from the perspective of household penetration, we have room to grow. In Europe, our condiments are at 8%, mayo at 13%, and even ketchup only at 27%. So, we are hungry for more, lots more. The engine behind all of this is- Founded in 1869 and one of the strongest food brands in the world. Our legacy is a delicious ketchup brand, and our future keeps expanding as a food brand across categories and channels that will always be delicious and, where it matters to our consumers, really nutritious too. Each step makes the brand bigger without diluting what makes it great, and that trajectory is at the heart of our strategy and of long-term value creation in this region. Let me show you how it is working, starting where it all began.
Ketchup is a $2 billion category in our markets, and we start from strength. Heinz is rated an iconic or star brand in six markets. We are the category leader in 12 markets, and in six of them, we hold more than half of the market with value shares of even up to 80%. Leadership must be earned every day, so we're investing in media behind best-in-class creative. Our outdoor campaign won a gold lion at Cannes, and our Lost in Love campaign was recognized by Kantar as one of the most effective campaigns in the world this year. We keep the brand culturally relevant too, with partnerships like Heinz and Heineken around the World Cup. It's paying off. We have gained half a point of value share over the last 52 weeks, accelerating to 1.2 points over the last 13 weeks.
Now, gaining share is one lever, and growing the category is the other lever, especially when you're the market leader. The biggest barrier to ketchup is sugar. 73% of consumers are reducing or avoiding unnecessary sugar, but 26% believe zero-sugar products won't deliver on taste. These consumers don't want to give up on the taste they love so much. They just want it without the sugar, and so that's what we gave them. We pioneered no added sugar and salt ketchup in 2018, rebranded it as Zero in 2022, and upgraded the recipe in 2025 to deliver the unmistakable Heinz taste. The results? Sales have grown at 25% a year since 2022. Switching data from France and Germany shows that 80% of Zero sales are incremental to the ketchup category. That's new doors coming in, not cannibalization.
We're now scaling Zero across Heinz globally, most recently in Brazil and Canada. This shows that our region can pioneer a trend that then travels across Kraft Heinz. Our ketchup turns 150 this year and yet shows zero signs of slowing down. Let me turn to mayonnaise. In our markets, it's a $3 billion category, so it's bigger than ketchup, and it's growing at 4%. Here, we're the challenger. We launched Heinz Mayo in the U.K. in 2016, and today we hold a 22% value share. In Germany, we relaunched in 2021 from a virtually non-existent position, and today we're at 14%. These are not isolated wins. Kraft Heinz is now the main challenger in our top markets. We're growing in all our key markets, and our sales in Europe are growing 13% over the last 52 weeks.
Consumers already trusted Heinz at the table, and now they're choosing us in a bigger category than the one we're known for. How are we doing it? Being the bold challenger takes a sharp toolkit, and ours has three parts. A superior product. In blind tests, consumers prefer our distinctive, fresh, and modern taste. A winning proposition. With modern packaging and bold flavors like truffle, garlic, and sriracha that bring excitement and widen the repertoire. Effective communication. Heinz's distinctive modern tone of voice behind well-funded media and culturally relevant partnerships. 10 years in, this recipe is still working for us. Next, condiments. A $4 billion category, so twice the size of ketchup. Two trends are shaping it. First, proteins like chicken and fish are on the menu more often and growing faster.
Fries are still on the menu in 4% of meal occasions and growing steadily, but chicken and fish are already in 15% of occasions and growing faster. Second, thanks to travel and social media, 90% of consumers actively seek exciting new flavors. We have built a portfolio with a great Heinz flavor for each fast-growing host food. Because let's face it, without something to elevate them, all these proteins can be pretty bland. To drive trial fast, we partner with our away-from-home customers, like Popeyes here, leveraging Heinz's unique strength in front of house. In the U.K., this same spicy chicken sauce is co-branded with Morley's, and it is already in the top three best-selling condiments. The results? Modern condiments grew 10% over the last 52 weeks. With a 10% value share, there is still plenty of room to grow.
Pasta sauces is our most significant new category expansion. Again, a $4 billion category, and with pasta on the table in 10% of meal occasions and growing. Also here, it starts with a winning proposition and a superior product. High-quality ingredients, great taste, and authentic craft, and with a clean label, 100% natural ingredients, and no added sugar. The ingredients are so good, we decided to put them on the front of the pack. Let's look at how that shows up in our advertising.
When your ingredients are this good, why have them on the back? Heinz Pasta Sauces. Naturally tasty, ridiculously good.
Then we add the unique Heinz brand character. Our competitors have created a bit of an Italian sea of sameness, and our taste and culture-led activations have really reignited a stagnant category. Since launching in the U.K. in 2022, we have already built a 7% value share, with sales value growing around 30% a year over the last three years. We are already the number three brand and the number one driver of category growth, with more than 45% of our sales incremental to the category. In fact, the results are so strong that we are now launching them in the Netherlands and Belgium, where our retailer response has been overwhelmingly positive. Now, great brands and superior products are the starting point, but to win, we also have to reach consumers at home and away from home. Three examples. Supermarkets.
France is arguably the most demanding retail market in Europe, and we stepped up our category management, our trade and shopper marketing, and our people and organization, and retailers noticed. In the Advantage Report, Kraft Heinz is now ranked number one in France. Discounters, Aldi and Lidl are not only huge in Germany, but also the largest retailers in Europe. Over the last five years, we have more than doubled our net sales with them. Away From Home, this is another $4 billion market in our core categories, and we win with the right portfolio, a strong brand experience, and a tailored go-to-market. Like everywhere, we partner with QSRs, but what sets Europe apart are the independent operators who account for roughly three-quarters of the total market spend. Spain and Portugal, home to our largest Away From Home business, shows just how we win with them.
This is a highly fragmented market. Spain alone has more than 270,000 outlets, and 90% of the outlets and 75% of the spend sit with independents and small and medium-sized groups. Away From Home is more than 40% of our sales there, and over the last three years, we have grown our sales with independents by 9% a year. Three things make the difference. Our data and team, a focused, data-driven execution machine run by a highly engaged team of real food service experts. Culinary expertise with chefs at the center. Our culinary advisors create demand through menu solutions and chef partnerships, and they build the capability of our distributor sales teams. Go-to-market, with a deep knowledge of our distributors and their customer networks, which lets us extend our reach in a highly fragmented market. Data and people, chefs, and go-to-market, a growth model that we can repeat.
Let me wrap up. One, we are a scaled, profitable, and highly cash-generative business. Two, we are accelerating growth in our core portfolio and transforming our non-core portfolio. Three, we have the proven playbooks to win in these markets today and globally tomorrow. With that, I will hand over to Janelle. Thank you very much.
Thank you, Willem. Good afternoon. We set a target to unlock $2.5 billion in productivity by the end of 2026. Since then, we have delivered at least 4% each year and are on track to exceed that goal. With this strong performance against our target, we have shown our ability to deliver results. Today, I will show you how we will increase our annual gross efficiencies above 4% through building a robust pipeline and executing with excellence. As Andre shared at CAGNY, our focus areas for productivity include manufacturing, logistics, and procurement. I will walk you through a few examples of value opportunities connected to our supply chain and procurement vision. Our approach is built around these four connected priorities, all underpinned by our people. Operational excellence creates the foundation with consistent ways of working that reduce variation and improve reliability.
Digital advantage connects the work, giving our people better information, faster tools, and greater visibility. Together, they give us time back to strengthen our productivity runway, removing waste, improving decisions, and scaling what works across plants, categories, and regions. That productivity funds capabilities for the future, the facilities, technology, and skills needed to support our innovation and growth agenda. These are not separate programs. They work together as one end-to-end system. Operational excellence allows us to measure and improve key KPIs like safety, quality, and service. Programs like the Kraft Heinz Management System, which focuses on manufacturing, and LOGOS, our logistics operating system, drive standardization of process and continuous improvement. This is demonstrated by our improved performance in yield to perfection and supply chain losses, both metrics that deliver productivity through reducing waste. After years of underinvestment, we see substantial opportunity ahead.
There is more we can do to improve equipment reliability, simplify work, and create more consistent standards across our network. As we have spoken about before, we have made substantial investment in digital capabilities for supply chain over the past several years. Our main focus has been on planning and logistics, and it has paid off. In North America, 60% of core supply and demand planning now runs autonomously. Machine learning forecasts and production plans flow through the integrated business planning process with no human touch. The other 40% is agent-assisted. Agents generate alerts and recommendations for planners to act on, and in some cases, execute tasks themselves using deterministic logic. We expect that the investments we have made in systems, process improvement, and agentic planning over the past three years will deliver 3.5x in 2026.
We expect to grow this return to 4x over the next three years as we continue to scale in automation and advancements of agents. Building on this foundation, the opportunity ahead is to expand our focus into digital manufacturing, as well as connect the systems and data across all functions and even further into the value chain to enable smarter and faster decision-making. Let me show an example that is already working for us and our consumers in retail execution. With our customers in U.S. retail, we saw an opportunity to improve on-shelf availability. The problem was not that we did not have the product. It was that we could not see what was happening on the shelf quickly enough. In 75% of the out-of-stocks, the product was already in our network or in the customer's distribution center. The issue was not a lack of supply.
It was disconnected and delayed information. We were planning based on shipments and order information. Store-level information was held in customer systems separate to ours, and our forecasts were based on warehouse withdrawals. Three different systems feeding us updates weekly at best. By the time an out-of-stock appeared in our data, multiple days had passed, and the sale was already lost. To address the problem, we ran a pilot with some of our U.S. customers and applied three targeted steps. First, we connected daily customer data, giving us visibility into forecasts and inventory across the network, down to the store level. Second, we applied machine learning to identify where product was not selling as expected, understand why, and prioritize the opportunities with the most sales at stake. Third, we embedded artificial intelligence agents to analyze the workflows and show us where our teams could take action. The result?
Our planning agents now analyze about 1,900 customer item combinations each week. These agents have improved forecast accuracy by 3 percentage points and reduced forecast error by 1.1 million cases in just 13 weeks. Today, the system does more of the repetitive analysis and gap identification so that decisions happen faster and our people can focus their time on creating more value. But greater internal efficiency is not the only benefit that came out of this pilot. These changes have generated positive improvements at the shelf too. Our teams are now executing over 5,000 prioritized actions each week. In the pilot phase, these capabilities have helped recapture approximately $3 million in lost sales. The significance is not necessarily the number mentioned here, but that there is even more runway ahead. We have a proven model that can scale to more than 80% of our customers.
Getting to industry-leading metrics in on-shelf availability requires a one-point improvement, which would generate $95 million in annual sales. If we can achieve our ambition of a two-point improvement, there's a potential to add $180 million in incremental sales from our products being available on shelf when consumers need them. The same capability that makes our work more productive also improves execution for our customers, increases product availability for consumers, and helps protect our sales. Operational excellence simplifies the work, and digital tools connect the work so that teams can focus more time on productivity. What gives us confidence in our ability to deliver beyond 4% productivity moving forward? We see productivity opportunities across multiple different areas, such as manufacturing, logistics, design to value, procurement, and shared services. Let me give you some examples. In manufacturing and logistics, productivity will be delivered by further reducing waste.
We expect to improve our yield to perfection KPI from 4.9% to 4%, enabled by investments we're making in digital manufacturing and maintenance. Automation and improved planning will allow us to reduce our labor cost per ton by 15% over time. Through further optimization and use of smart systems for task allocation, we foresee improving our warehouse efficiency by approximately 5%. We expect that the execution of these improvement areas will deliver north of $300 million in the next three years. When we think about opportunities in design to value, product superiority is imperative. With the progress we've made on the brand growth system, we have the clarity on what consumers value, which informs the right areas of focus to drive productivity. We are still early in applying design to value principles to our brand portfolio.
To date, we've identified $15 million-$20 million in potential projects and opportunities across a small percentage of our brands. As we continue to expand, we believe this to be a $150 million opportunity. In procurement, we are building cost models for 80% of our spend by the end of the year. These will enable strong market and category intelligence and more fact-based supplier negotiations. Further opportunities will come through closer collaboration with our key suppliers. Over the last several years, we've built a shared service capability with nearly 2,000 people across India, Mexico, and Manila. We expect to end 2026 with more than $70 million in cumulative savings realized over four years as the program expanded its scope, talent, and capabilities. In the next three years, we expect to improve upon this pace of savings.
Much of the infrastructure we need is already in place, which gives us three ways to continue creating value. First, standardize and simplify more work, reducing complexity. Second, move additional work into shared services to leverage scale and specialized expertise. Third, drive more productivity from the work already there through process redesign, automation, and technology. We've built the foundation and demonstrated this model can create value, and now we have the opportunity to scale it. Productivity is not simply about reducing cost. It also creates the capacity to invest in the capabilities that our business needs for the future. As we think about our manufacturing assets, our focus is optimizing the total manufacturing footprint and selectively investing in facilities, technology, and automation so that our network operates more efficiently. It also means ensuring our operations can support the innovation pipeline across Kraft Heinz.
As our portfolio evolves, our network must become more flexible, introducing new products, managing greater variety, and responding faster to changing demand. We will make those choices with discipline, balancing near-term productivity with the capabilities required for continued growth. Delivering over 4% gross efficiencies does not depend on one function, project, or technology. We have multiple sources of opportunity across the end-to-end value chain working together. As you can see, the pieces are in place and the path is clear. Let me leave you with three takeaways. First, we have demonstrated that we are well-positioned to unlock over 4% gross efficiencies annually. Second, we have a broad and healthy pipeline across manufacturing, logistics, and procurement and shared services. Third, we're building the digital, operational, and organizational capabilities required to capture those opportunities at scale.
We have more work to do, but the opportunity is clear, the foundation is in place, and our teams are equipped. With that, we'll take a break for lunch, so please join us in the Hamilton Room, and our team will help point you in the right direction.
[Break]
Oh, shit. They are already here. Okay. Is it on? Is yours on? Are they on? Okay, I will just project. There we go. Hi. Welcome. Yes.
Ready to start?
Yeah.
Okay. All right, good afternoon. I am Kim Morgan. I am the President of North American Away From Home.
I am Traci Graziani. I am the Head of Brand Marketing for Away From Home.
In our breakout this afternoon, we are going to take you on a journey and show you why we believe Away From Home will be a sustainable, profitable growth engine for Kraft Heinz in 2027 and beyond. First of all, let me give you the investment case. Away From Home in North America is roughly a $2 billion business. We have attractive economics, we have strong headroom for growth, and we have momentum. We have iconic brands that consumers ask for by name. In fact, these are brands that operators want to use in their recipes and put in front of house in their establishments as well. We have deep operator relationships that go beyond just price, and they are very hard to displace. We have multiple ways to grow. Most importantly, we know where that growth will be coming from.
Our business sits evenly between back of house and front of house, as you saw earlier from Nico. At the center of that are brands like Heinz and Philadelphia. They open the door for more of our portfolio to follow. Front of house puts our brands in the hands of consumers at the moment of consumption. Every day, millions of consumers across the country experience our brands, whether at restaurants, drive-through, sports events, or concerts. That drives about 50 billion brand impressions annually, with significant media value. We don't just monetize our brands away from home, we build them here. Back of house is different, but equally important. Here, our culinary teams and chefs work alongside our operator customers to build real menu solutions. Here, we focus on creating value beyond price per case.
Within the back of house environments as well, we also focus on helping with real operator pain points, like yield and consistency, or reducing labor and waste. Once our products are embedded in the customer's recipe or their menu, they-
[Break]
Oh. Thank you. Thank you. Great to be with you today. I hope you have seen the flywheel that we are building. A virtuous cycle of profitable growth where productivity fuels reinvestment, driving volume growth, and strong shareholder returns. Janelle highlighted productivity. Diana laid out the opportunity across marketing and product superiority, the areas where much of our investment is focused. Nico, Marcel, and Willem took you region by region, showing how our investments and strategies drive growth in service of generating attractive cash returns. Now, let me wrap up the day by walking you through how this translates into strong shareholder value. Starting how we allocate investments, where we choose to invest, and how we assess returns. We run commercial spend with the same rigor as capital allocation. That means a fixed envelope, a ROIC hurdle, a defined payback period.
And if an investment is not delivering, we redeploy it to where we can get stronger returns. Our decision process has two gates. The first is strategic, a business goal, Win Big, Win, Hold. That sets the size of the envelope. Win Big gets relatively more, Win gets selective investment, and Hold gets what it needs to defend share and cash flow. The second gate is economic, so every dollar has to earn its place, clearing a hurdle on incremental gross profit and ROIC. We distinguish between two kinds of spend. The sufficiency spend defends share and is the return, and it is the return the decline we avoid. And growth spend, on the other hand, tends to have a higher return with a payback window that fits the lever.
That is generally within the year for price and promotion, up to two years for marketing, and three for product superiority, talent, and capabilities. We review investments regularly by brand and lever, and we have great data and visibility that allow us to continuously optimize spend. In addition to the financial returns, we continuously track leading indicators such as household penetration and brand health metrics that give us confidence our investments are working. Now, here is where our incremental $700 million is being deployed this year. Approximately $325 million is going to marketing, bringing our brands to a healthy level of investment. $250 million is going to price. About $75 million is going to commercial talent across sales, marketing, R&D, and about $50 million to product and packaging superiority.
By category, approximately 60% is being invested into Win Big, 15% to Win, 10% to Hold, and 15% to cross-category capabilities. As Steve shared, these investments are driving improved trends across volume, market share, and organic net sales across the business. Looking at consumption by portfolio role, you can see that we are driving recovery across all three, Hold, Win, and Win Big. While the early momentum is encouraging, we know there is more work to be done. Now, let me further break down our investment performance in U.S. retail. Starting with where we concentrated our investment and focus. About two-thirds of our spending in the U.S. went behind categories that make up over half of our consumption dollars, including condiments and Kraft Mac & Cheese. In these categories, we are back to consumption growth in the third quarter, and you can see the sequential improvement.
There are areas where we made investments, and they are not yet delivering or we need to redeploy. This includes categories like Philadelphia Cream Cheese. We also have some categories impacted by headwinds from external dynamics, like salad dressings and commodity-driven pricing in coffee and bacon. Finally, categories where we limited incremental investment and trends have not improved. Where we prioritize investments, we are seeing results.
As we deploy dollars and build stronger plans behind long-term drivers like product superiority, R&D, marketing, we expect to drive more growth. Now, let us take a look at returns on our largest incremental investments: marketing, price, and innovation. We are increasing marketing spend to at least 6%. This is an all-time high for us. It is not just about spending more, though. It is about spending smarter. We see that our brands respond to investment, and now the job is to optimize every dollar.
We already see this working with household penetration trends improving in over 50% of our brand category combinations in U.S. retail. We have a lot of opportunities to make our dollars work harder. We have improved our return on ad spend by 8% versus 2024, but we still have a 25% gap to benchmark levels. Closing that gap is worth roughly $250 million in net sales with no increase in spend. Within price, we focus our investment equally across three areas: base price investments to close select gaps, opening price points, and customer agreements to protect distribution while our innovation pipeline builds. As we evaluate the return of each price investment, our opening price point investments are performing as intended, and the results are visible in our improving unit trends across U.S. retail, from down 3.6% in 2025 to declining 1.8% in the third quarter.
We were able to hold more of our distribution on shelf. Efforts to close select price gaps have been more mixed. Where returns are falling short, we are redeploying the capital toward higher return opportunities. An example here is cream cheese. We made an investment, we didn't see the incremental volume, and now we are acting quickly to reallocate those dollars. Where we have already reverted that investment, we are seeing improved consumption. Our investments are also driving improved returns. So year-to-date ROI is up 4 percentage points versus the prior year. That said, we still have a 6 percentage point gap to benchmark ROI levels, and we have promotional spend that is dilutive. That's an opportunity that we will continue to go after. Closing the gap is worth roughly $100 million in net sales, again, with the same level of investment.
We are investing roughly $75 million in commercial headcount across marketing and sales, and about $50 million in product and packaging superiority. R&D is nearly at the 1% benchmark, up from 0.6% to 0.9% of net sales in a year. We expect these longer-term investments to result in a better and faster innovation pipeline, superior products that consumers are willing to pay for, better execution we recognize by our customers, and higher household penetration. We expect innovation to become a more meaningful contributor to our top-line growth over time. In U.S. retail, we expect to end this year with innovation at 3% of net sales, up from last year. The pipeline is getting stronger in 2027, as you saw today. We expect innovation to contribute approximately 5% of net sales, and we expect to build on that further in 2028.
With more R&D and marketing resources behind it, we are launching more and better innovation. Every 100 basis points of incremental contribution from U.S. retail innovation adds about 30 basis points to total Kraft Heinz top line. So, what does all this mean for the next few years? As Steve noted this morning, 2026 is our turnaround year. We are restoring investment back into the business, and as a result, narrowing share losses, recovering top line, and improving volume trends. 2027, we will build on that momentum with a return to top and bottom line growth in the second half of the year. 2028 will be the year of growth. We expect to deliver consistent top-line growth and margin expansion. By 2029, it's consistency and acceleration, a self-reinforcing cycle of profitable growth, volume-led sales, earned margin expansion, and strong cash return to shareholders.
We expect a double-digit TSR to come with a balanced contribution from earnings growth and shareholder returns, and the earnings growth is driven by both top-line growth and margin expansion. These are the milestones we expect to hit. As Steve said, we are not giving you an exact long-term algorithm today. Rather, we have shown you the path, and we earn the right to talk about an algorithm when we are running at it. That is the trajectory. But the near-term environment remains challenging, with worsening inflation, low consumer sentiment, and households squeezed by prices, interest rates, and trade uncertainty. We do not see this as structural, but they are a reality heading into 2027. Despite this backdrop, there is a lot to be excited about. As you have seen today, our innovation pipeline is set to ramp up.
We are expecting to reach 5% of net sales in 2027, with 60% more innovation than in 2026. We expect emerging markets and away-from-home in developed markets to grow at low double digits and low single digits, respectively. On productivity, we expect to generate efficiencies north of 4% of COGS. Our cash discipline continues, with free cash flow conversion expected to remain at least 100%. This reflects deliberate actions on working capital, CapEx discipline, treasury initiatives, and incentives aligned around cash generation. We will continue to optimize our $700 million investment, applying learnings from this year to spend smarter. So, what does all of this add up for 2027? While we will provide a more formal guidance on our fourth quarter earnings call, we wanted to share with you the initial contours of how we see things today.
For the full year, we expect organic net sales to be relatively flat, with a return to growth in the back half of the year. This contemplates the impact of business exits in Europe and Pacific developed markets, which is an approximate 40 basis points headwind in 2027. This profile also includes the coffee business in the first half of the year, which represents an approximate 10 basis points negative impact to this growth profile. We plan to price for a portion of inflation, alongside another year of strong productivity. Industry elasticities have been benign so far, but with consumers stretched, we are planning for higher-than-normal elasticities. Inflation is now expected to be slightly north of 5%, heavier in the first half of the year and moderating in the back half of the year.
When inflation steps up, because our pricing follows with a lag, we expect our adjusted gross profit margin to be temporarily pressured. We will maintain our $700 million investments in 2027, though we expect to shift funds depending on needs and returns. As a result, for adjusted operating income, we expect a pressured first half, primarily due to inflation, with growth returning in the second half as top line improves and inflation lessens. On a full-year basis, while we expect our operating margin to be below where we anticipate to land in 2026, we expect the fourth quarter of 2026 to be the margin trough, with improvements in our margins from there. As we see things today, for the full year, we anticipate adjusted operating income to be down approximately low single digits. Our low single-digit outlook is on an organic basis.
With an anticipated mid-2027 closing, the transaction would represent an incremental 150 basis points-200 basis points headwind to this outlook. Importantly, despite the pressures heading to the year, this represents continued improvement in our top-line performance. Now, let's turn to our balance sheet. None of our investments would have been possible without a strong financial foundation. Our balance sheet and attractive free cash flow give us the flexibility to invest, fund our dividend, and manage the portfolio from a position of strength. We have made significant progress deleveraging by deploying over $10 billion over the last several years to reduce debt. We expect to end this year between 3.2x and 3.3 x, with a path to reach three times as we continue to pay down debt and generate a solid level of excess cash after dividends.
Generating strong free cash flow is only as valuable as how you deploy it. Our allocation priorities remain the same. We will maintain our attractive dividend and investment-grade credit rating. From there, we will continue to prioritize reinvesting the business to drive volume-led profitable growth, as this normally provides the highest returns, marketing at 6% of sales, R&D nearly at 1%, and CapEx well-funded at about 4% of sales. Second, managing our balance sheet with discipline, targeting our net leverage around three times. Third, pursuing our portfolio opportunities that complement our organic growth priorities. Once we are at our net leverage target, returning excess capital to shareholders, including through share repurchases. Every use is held to the same yardstick, with our cost of capital the floor. Growth CapEx and acquisitions have to clear an internal rate of return meaningfully higher than our WACC.
Everything is measured against buying back our own stock. I know that dividend is top of mind. Unlike several peers, our leverage is more favorable. The free cash flow conversion has stayed above 100%, and even in 2027, we expect excess cash of roughly $500 million after dividends. While our payout ratio will rise as we exit this turnaround year, we believe the best way to manage it is to grow cash and not cut the dividend. On portfolio, our goal is to play where we have the highest right to win and can lead with scale. Over time, we would like more of our revenue to be concentrated in Win Big categories and to increase our exposure to emerging markets. For us, that means we are open to targeted bolt-ons that strengthen these priority spaces.
Acquisitions must not only meet our strategic criteria, but must also demonstrate a strong financial profile with healthy gross margins and brands that are clearly differentiated and resilient. We will also consider partnerships and joint ventures for emerging markets distribution. With more than 95% global awareness for Heinz, the opportunity is very clear, and our job is to serve many more households. For parts of the portfolio that fall outside our priority spaces, where we believe the assets will be better positioned and better valued in the hands of others, we will act, just as we recently did with our North America coffee divestiture. Before we close, let me leave you with a few final thoughts. First, our step-up investment has built the right foundation and is starting to drive improved volume. We will actively redeploy investments to optimize returns.
Second, we are building a compounding growth engine, one in which productivity fuels reinvestment, which drives volume and returns, delivering long-term shareholder value. Third, our cash generation is robust and consistent, funding investments, debt paydown, and our dividends simultaneously. With that, thank you for your time, and, Anne-Marie, I will hand back to you for Q&A.
All right. I am going to invite all of the executive team, all the executive presenters up here on stage with me. We are going to bring up some stools for you to sit on, I believe. Otherwise, we are free-forming it up here.
Thank you.
Yeah. Little cramped.
Harder than running a company.
Okay. We do have some mic runners. Just go ahead and raise your hand, and we'll get someone to you. First hand that I saw raised was Michael Lavery here in the blue. Yeah.
Thank you. Thank you. Michael Lavery, Piper Sandler. I think it's interesting that Canada's got 11 quarters of growth. Maybe could you touch a little bit on compare and contrast maybe what's worked there or what's been different or not, and how much can you translate learnings from there to, say, the U.S., for example?
Yeah. I'm going to start, but then turn it over to Nico, who can really tell the story. Never underestimate the importance of leadership. We sent Simone to Canada. He saw the opportunity, he made structural changes, got a team in place, and started to execute. It's about leadership, it's about structure, it's about process, but mostly it's about leadership.
Yes. It is pretty much the same playbook that we showed earlier and that I showed. It goes back to the fundamentals around the core. It talks about innovation, it talks about execution, it talks about having the right team in place with the right structure to move fast and capture agility. That is exactly what Canada has done. Started three, four years ago, so it is a little bit ahead of the curve, but you see a lot of great innovation coming through. You see a lot of great execution. What I mentioned about what happens in the store is real. There is a lot of display, owning the shelf, but also, again, a lot of investment behind the core brands. They are very focused, very selective on where they have invested, and that is translating into the growth.
It is a replicable model of exactly what we want to do in the rest of the market.
Okay, that is helpful. Can I have a quick follow-up? One quick follow-up on the innovation targets, or the product superiority targets for 2027. You are aiming for or expecting 70% against your own benchmarks. Why wouldn't that be higher? Is it cost prohibitive? What does it take to get to what would seem to be the goal of 100%?
Absolutely. The way that we are looking at it first, and as you can see, the fuller roles that all of our brands play is they all have a role within product superiority. I think an important piece on that is benchmarks change over time. We are never going to be done. As new competitors come in, as we launch new innovation, we are going to keep testing and understanding what drives the category and then looking to be superior. It is not about not going after 100%, but we are starting with our Win Big and also our whole categories, understanding what the drivers are of the category, making them superior and going after it. You would have seen we are at 50%. We are looking at getting that to 70%, but our job is never going to be done there.
Okay, next question. Dave Palmer.
Thank you. Thank you very much. Dave Palmer, Evercore. I want to ask you, Andre, you had a stat up there about promotion efficiency. That's an oldie but a goodie for you. You've been working on that topic for a long time. It's good to see the improvement, and it's also interesting to see that there's still an opportunity to improve to get to benchmarks there. I guess I would ask you, with a lot of history on this topic, why are you getting improvement now? Is it that you got the sales force in place to help you make sure you get the promotions executed the way you should? Is it easier to get efficiency when you're actually increasing in certain places? Perhaps that helps your lean in and maybe lean out of other things. Any thoughts about that?
Do you anticipate why should this continue to improve?
Look, we have for a long time invested in the tools, so visibility has been there for a while. We have the dedicated revenue management team, which is very capable. We've, I believe the method of planning in the right window plays a big role on this. Maybe Francisco wants to comment on that, but I think that has a lot to do with how in advance we plan certain events.
Yeah, so planning is important, but execution, to my later point on Canada and how we're translating that. For example, this year we had America 250 happening. Of course, that comes with the surrounding aspects of promotion, but now we're executing better. We have more displays. We're doing more broadly across bigger parts of the portfolio. It's just the way it builds again. So, it's being at the right time with the right place, with the right pricing. Also, we're being more selective in terms of where we invest, using all the capabilities from RGM, but then making sure that it's not broad, that we're being very specific on type of sizes, the type of brand, and definitely the channels where we are investing to get the biggest return. There's a lot of learnings, and we want to keep improving.
Yeah, and I think when you start to drive top-line growth over relying on pricing promotion, you end up inevitably going to lower return. The game that we're playing now is different, right? We are trying to really deliver top-line growth through velocity, base velocity improvement, base volume improvement, and that's why marketing R&D play a big role, so we don't need to rely on suboptimal promotion to drive top line in an artificial way.
Next question. Alexia.
You alluded in the earlier remarks to a change in the incentive compensation program. Andre, maybe you could talk a little bit about what has changed there and how that might change behaviors. Thank you.
Sure. Look, I think a couple of things that I had done. One is we moved a higher wave of the incentives to the local teams. Before, everyone was overly indexing on the total Kraft Heinz, so people felt they didn't have the proper accountability to drive the performance. The second thing is we had a very methodical and intense management objective, which had hundreds of targets cascaded throughout the whole organization, and that created an unintended consequence of creating a lot of unnecessary friction across functions. We did not have people marching towards the same direction. We radically simplified this for this year, for there are drastically less number of KPIs, much less form-like, and for the salespeople and commercial people in general, it's way more focused on deliver the top line in a profitable way.
Next question. Nik.
Hi. Thanks. Nik Modi from RBC. Steve, you talked about innovation being a big part of the growth agenda. Insight and data are obviously a big part of that. Can you just talk about Kraft Heinz's enterprise data strategy in terms of where you are in the process? Because if you think about companies like P&G and even Coca-Cola, it's taken them five to seven years to really organize their data lakes to kind of get the insight out that they need. I would love to get your thoughts on that, because I know you have a lot of things that you can invest in after 10 years of no investment, so just love to understand the phasing, how you think about it.
Yeah. So, innovation, as you know, starts with insight. What's the consumer insight? What's the job to be done? What's the gap? What's the white space? Where your brands can play? Which brands can take the opportunities that your insights are showing you? The one thing, and I've said a couple of things about the company when I came in that surprised me, and there's been positive surprises and the opposite. One of the positive surprises was the IT capability, the insight data that was available, the rigor that was put into really trying to understand what drove performance.
I do not think we are starting from behind and we are not needing to catch up, but what we do with that data and what we do with that insight is really the biggest opportunity, which is why you have seen, we have pointed out multiple times, the big gap that we have relative to the performance that we otherwise might have had has been through innovation. But it was not because we did not necessarily understand the consumer, it is because we did not invest enough to drive those insights into activities that led to innovation.
Okay. Next question. Matt.
Matt Smith from Stifel. Andre, I wanted to ask you talked about in your price investments discussion, there being some investments to protect distribution. As we think about innovation going forward and the ability to redeploy some of the investment spend, should we expect a step-up in that type of spend to support innovation rollout and retailer acceptance of the new items that you highlighted today, the impact they can have on organic sales?
Yes. This year, we already carved out a portion of the marketing investments to innovation, which is very different than before. What we funded, for example, in the PowerMac was a lot more than we had done in several other innovations. As we go to the next wave of innovation, the idea is should we deploy some of those dollars to the innovations that you saw today and a few more. We also deploy a portion of the price investments toward distribution protection while the innovation pipeline was building, and now the opportunity is should we deploy those dollars towards marketing, should we fund those innovations appropriately. These are two examples. Yes, that is absolutely right.
Andrew Lazar.
Hi. Thank you. Steve, I know we're not getting overly specific on forward guidance metrics right now and whatnot, but what should our expectation be as we go into 2027 around percent of the U.S. retail business that's either holding or gaining share maybe versus where we are today? Janelle, where would you peg overall capacity utilization at this point in the organization? If there's some room there, would there be opportunities for either more insourcing or more aggressive asset optimization type moves as well? Thank you.
Yeah, so I'll answer for Nico what his market share performance is going to be next year. It's going to continue to get better. We've talked a number of times about the importance of the spring reset window. If you think about what we did this year, we had an innovation pipeline that was insufficient because we hadn't been investing over the course of the last 10 years. We chose a couple of winners from that, and as Nico mentioned, PowerMac was one of those winners, Capri Sun Hydrate, and others. We said, "These are good ideas," and we invested appropriately in them and got the right results. You've seen that kind of stabilize our market share.
What's going to happen in 2027, as you saw in Nico's presentation, is we will have a much more sufficient innovation pipeline because we've been working on it since the beginning of the year. The spend that we're going to have is going to be much more efficient because it's against better shelf sets. We've got very constructive conversations going. You'll see that market share trajectory start to improve again. When we talk about our trajectory for next year being flat as a company and returning to growth in the back half of the year, you don't get that without 75% of your business following along that same trajectory. That's going to happen through market share performance because we're pretty much forecasting for the industry trends to be about where they are right now, no dramatic changes.
The trajectory comes from an improved market share, starting especially after the spring resets.
Then, Andrew, on your question on capacity utilization, it is definitely not where we want it to be today. That, as you well know, is not a Kraft Heinz-specific problem. It is definitely an industry problem. It is also something that the two levers that you mentioned, we absolutely look at to see where it makes sense to in-source from external manufacturers. If we need to take decisions around utilization, we will take them as needed.
Scott.
Hey, thank you. Scott Marks from Jefferies. I wanted to ask, as we look ahead towards the growth that you are speaking to in H2 2027 and 2028, I think there is some question or concern about the portion of the business that is maybe getting less investment, the hold portion of your business. So wondering if you can maybe help us understand how you see that contributing to the top line and how you see each of those three buckets contributing, hold, win, and Win Big, as we look out to next year and beyond. Thanks.
Yeah, I think when you talk about wanting to win at retail, it is important to think about the distortion of investments. Some are going to get more. When we look at our taste elevation, when we look at Away From Home, we look at emerging, there are a lot of areas of our company that have really great growth opportunities. As Nico said, and Andre has also said, hold doesn't mean neglect. Hold means we are not going to distort investments there, but we are also going to stop losing, right? We do not see it as a big opportunity to be a growth engine, but equally, we cannot have it be a problematic leaky bucket. Right now, we are going to eliminate that from being a problematic leaky bucket while we distort our investments towards opportunities where we know we have a right to win.
We've got terrific brands, and we've got an innovation pipeline that's heavier against those as well, and less innovation where you might find a hold. All of that adds up to the guidance that we gave. We're not worried about our approach to the hold bucket, but we're very, very excited about our opportunities in Win Big, and therefore, the investment follows that sentiment.
All right. Rob Moskow.
Thanks. I was encouraged to see, Nico, that you're now testing your brands against competition for quality perception. I think the number was 50% are ahead of competition now. You hope to get to 70. But I think that was also for the percentage of the business that you're testing. So what percentage of the business do you intend to test? It just kind of begged the question. Then the next question is Lunchables. Have you determined what's the root cause for the challenges in Lunchables? It looks like you're still in the early stages of developing what to do.
Yes. The intent is to test them all. Of course, we have limited capacity in terms of just hands to do everything. We have so many categories, so many brands. But the intention is to test it all. So we're progressing, okay? We're starting with Win Big, some of the holds that were mentioned that are right now problematic. So we are progressing at pace on what we need to test. So we'll go further as much as we can. We also know that there are some brands that are in good shape. So the little bit of the understanding that we need to do there is make sure that, yes, new competitors coming in, we'll need to continue to stay active throughout time. But this is not about not doing it.
It's just a matter of the pacing required right now and making sure that where we are finding opportunities, we are also activating. It's not just a matter of testing, but then going and activating that. It's just the regular pacing that we can do and where we're putting the focus, again, following the different roles that we have behind the brands.
Lunchables, please.
Lunchables, that's a great question. By the way, Lunchables, we started last year. We have reformulated some of the products that we have there, and we will continue to do that. We have a broad portfolio. We have lost distribution. That's really the driver here. But when you look at some of the areas that are starting to work, we see positive signs. There are a couple of customers where we lose, where we lost distribution, 100% of the distribution. When we remove those, we're starting to see the momentum picking up. So it's just a matter of making sure that we get to where we're lacking that and the new innovation is kicking in. Then we're going to start seeing better performance there.
Tom.
Hey. Tom Palmer, JP Morgan. Andre, when you were discussing a little bit of the factors in 2027 and the cadence to kind of keep in mind, there was the messaging about the timing of when pricing will flow through versus the stepped-up inflation. I think another factor that we've kind of wondered with the $700 million step-up in costs this past year is how much the cadence of that investment pace might change as we think about 2027. For instance, if it was more balanced, I guess it would be more weighted on a year-over-year basis to the first half. Are there kind of firming up plans on that at this point? Thanks.
Yeah. Because we are going to concentrate a lot of the investment the second half of the year, because we wanted, among other things, to have this all in the base, and we wanted to give that initial injection, that boost to products, you should expect marketing, for example, to be a lot more normalized, almost linearly across the year. We do not have that over-concentration the second half. So you are going to see that ongoing marketing pressure. Price is the same. We have a little more concentration the second half, which we also expect to be following more of the key execution windows like we do. And the headcount, I mean, at this point, they are going to be exiting of 90% in the base, so you are going to see the SG&A pretty much stable throughout the year as well.
Max.
Excuse me.
Thanks, Max, from BNP Paribas. Steve, I think one of the big learnings for you is that this company was under-invested in for a number of years. Your key action here is to invest $700 million more to turn the business back to organic sales growth. But you also noted that your operating margins, even with that investment in the base, will be 200 basis points higher than peers. Why is that type of operating margin sustainable for this company? What do you think makes Kraft Heinz garner that higher margin on a sustainable basis? And then just one follow-up for Andre. In the second half, the bottom line growth target, is that on an adjusted basis or organic? Does it include what sounds like might be a 300 to 400 basis point drag from the coffee divestiture? Thanks very much.
So, good question. I think the operating margins that we had several years back were not sustainable, right? That is why we have done what we have done. We have got to 6% of marketing as a percentage of sales, 1% R&D, and made all these investments in people. As we look at it, we feel it is very sufficient to be where we are, and we end up, as you said, still 200 basis points higher than some of the peers. I point to you a couple of things. Number one, we have the brand Heinz, and it is very, very hard to match the brand Heinz and its worldwide strength and just the power of the brand. We have a terrific away-from-home business as well that is highly profitable, where we have a dominant lead in the front-of-house position.
We have an emerging market business that is, although not really from an operating margin standpoint, the same level of effect there, but it is completely different than some of our peer sets. You add all of that up, and you have a company that has a portfolio of brands, geographies, and channels that is simply superior to some of the ones that we are comparing with.
On the second half, yes, we should expect 300-400 basis points headwind from the divestiture on coffee in the second half, but we believe we are still going to be in a position to grow.
Kate.
Thanks. Maybe a jump ball question for Steve and Willem, whoever wants to take it. You have gone through this process of reorganizing or resegmenting the business, and now you have exited or are exiting some businesses in New Zealand. Are there other areas around Europe and developed Pacific to prune more, simplify portfolio, whether that is shuttering brands or selling things off, just as you streamline going forward? Thanks.
Sure. As mentioned, 90% of the business is core, and that is taste elevation of meals, and that is where we really see the opportunity to Win Big, or at least win in the case of meals. So, that is where we are focusing our efforts, and the rest has to earn its place, both on returns and growth. When it does, it is fine to stay, but we keep evaluating that on an ongoing basis. If it does not, then we look at alternative options, and that can be exploring whether it is worth more to another owner than to Kraft Heinz. If that is not an option, and it makes financial sense to discontinue a business like we have done in New Zealand, then that is a decision that we will not shy away from. We look at that on an ongoing basis.
But 90% is the core, 10% is the non-core, and that's an ongoing exercise that we do.
Next question. Steve?
Thank you very much. You've talked about the $700 million that you've deployed this year working more for you, the next year and the year after. It sounds like most of that enhanced return is just a function of the spending being in place for a specific year. But there also seems to be a component of, there's money we spent in 2026 that didn't pan out the way we thought or could work better if spent some other way in 2027. How big is that bucket of spend that it can be better spent in 2027, and how much of an impact is that expected to have in the year ahead?
Yeah. I don't know if Andre has a specific number on that, but I'd say, it's real. When we talk about the Philadelphia Cream Cheese pricing and then the fact that it didn't work, that number's in our base, however, and it'll be against something that will work next year. Talked about distribution protection, which is important because as Nico said, for Lunchables and other things, when you lose a lot of distribution, it's very difficult to grow your business. Your sales per point of distribution has to grow inordinately to make up for that. But we've protected that distribution where we've spent that money. We won't have to do that again. So, I don't know that we've quantified what that-
Oh, look.
broadening.
Yeah, we show one chart. It is a simplification, but it is 30% of the investment in U.S. retail. If you look in the aggregate, it is not delivering the trend improvement that we expected, with cream cheese being a biggest contributor for that. If you go inside price and marketing, there is a decent portion of those investments that are not at the full potential, without giving you a number, but there is a decent portion that can be optimized. But if you think about this ballpark of 30%, this is not out of
The only other thing I would add to that is, we talk a lot about the $700 million as a discrete figure. It is in our base now, right? We are looking to optimize the totality of the $700 million, plus everything that was already there, which is a very large number. The opportunity to continue to get smarter and optimize and move things is very real, and it just got $700 million more real.
We have time for one more question. Chris?
Yeah. Chris Carey, Wells Fargo. Thank you. What was it about the coffee business that created, I do not know, the parameters by which you were willing to sell it? What were the characteristics of coffee that you did not think fit with your business over time? The context of the question is, it is a bit like Pete's question, but we did not hear a ton about portfolio changes. This was much more of the offensive strategy behind the current portfolio, but mindful over time, there could be other opportunities, as just suggested. So, what was it about coffee that got you over the line that you did not think was going to fit with the business long term, so that we could think about these things in the coming years to assess whether such similar decisions could or would or would not make sense? Thanks.
Yeah. I would say, when we talk about portfolio today, the message we want to get across is we are always looking at it. And obviously, we are not going to signal something till something is done. But to answer your question, coffee, which is essentially Maxwell House, Gevalia, but Maxwell House, a very large brand, had not, like the rest of the portfolio, but maybe even more so, had not been invested in for a very long time, and was disadvantaged, and we did not see ourselves as having a fundamental right to win in that space. And very, very exposed to commodities, as coffee obviously goes up and down.
We put all that into the mix and said, "Okay, if we have an additional $1 million to invest in the business, to what degree do we think that would go to Maxwell House before it would go to Kraft Mac & Cheese and Heinz and emerging markets and so forth?" And it is not going to make the cut. And then couple that with you find an owner that sees the value in that and sees the opportunity to make those big investments and have a team 100% focused on turning that business around and seeing the value in it, when we quite frankly would not have made those same choices in the totality of our portfolio, that means there is a better owner for that business than for us. And that is essentially what happened there. We think they are going to be very successful with it.
We think they have a great chance to be very successful with it, which is why we are continuing to participate with a 30% ownership.
And that concludes the Q&A session today. Thank you for all your questions. I am going to turn it back over to Steve to wrap things up.
I just close by saying thank you very much. This is a big day. It is a long day. You have made a big commitment to be here. We really appreciate the interest. We appreciate your questions. We appreciate your total engagement. And the final thought I would leave you with is, a lot of these things that we talked about today come down to fundamentally execution. And this is an execution game, always has been, always will be. I have a great team here that we have assembled, and we will never get bored of driving the fundamentals. So, thank you very much.