Kraft Heinz Co

Management evaluates segment performance based on several factors, including net sales, Organic Net Sales, and Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding restructuring activities); in addition to these adjustments, we exclude, when they occur, the impacts of divestiture-related license income, restructuring activities, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, certain non-ordinary course legal and regulatory matters, and equity award compensation expense (excluding restructuring activities). Segment Adjusted EBITDA is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management also uses Segment Adjusted EBITDA to allocate resources.

Under highly inflationary accounting, the financial statements of a subsidiary are remeasured into our reporting currency (U.S. dollars) based on the legally available exchange rate at which we expect to settle the underlying transactions. Exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in other expense/(income) on our consolidated statement of income, as nonmonetary currency devaluation, rather than accumulated other comprehensive income/(losses) on our consolidated balance sheet, until such time as the economy is no longer considered highly inflationary. See Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data, for additional information. We apply highly inflationary accounting to the results of our subsidiaries in Venezuela, Argentina, and Turkey, which are all in our International segment.

Net Sales:

Organic Net Sales:

Drivers of the changes in net sales and Organic Net Sales were:

Adjusted EBITDA:

North America:

Net sales decreased 1.0% to $20.1 billion in 2023 compared to $20.3 billion in 2022, including the decrease from lapping a 53rd week of shipments in the prior period (1.7 pp) and the unfavorable impacts of foreign currency (0.3 pp). Organic Net Sales increased 1.0% to $20.2 billion in 2023 compared to $20.0 billion in 2022, driven by higher pricing (7.5 pp), which more than offset unfavorable volume/mix (6.5 pp). Higher pricing was primarily driven by increases to mitigate higher input costs, particularly in the first half of 2023. Unfavorable volume/mix was primarily due to elasticity impacts from pricing actions and due, in part, to the reduction of Supplemental Nutrition Assistance Program (“SNAP”) benefits.

Segment Adjusted EBITDA increased 6.0% to $5.6 billion in 2023 compared to $5.3 billion in 2022, primarily due to higher pricing and efficiency gains, which more than offset higher commodity costs, including the impact of realized gains and losses on commodity hedges; unfavorable volume/mix; higher supply chain costs, reflecting inflationary pressure in manufacturing costs; increased SG&A, particularly advertising expenses; the decrease from lapping a 53rd week of shipments in the prior period (2.2 pp); and the unfavorable impact of foreign currency (0.3 pp).

International:

Net sales increased 6.0% to $6.5 billion in 2023 compared to $6.1 billion in 2022, including the unfavorable impacts of foreign currency (3.2 pp), lapping a 53rd week of shipments in the prior period (1.8 pp), and acquisitions and divestitures (0.5 pp). Organic Net Sales increased 11.5% to $6.6 billion in 2023 compared to $5.9 billion in 2022, driven by higher pricing (13.6 pp), which more than offset unfavorable volume/mix (2.1 pp). Higher pricing included increases across markets primarily to mitigate higher input costs. Unfavorable volume/mix was primarily due to the elasticity impacts from pricing actions, particularly in our Northern Europe region, which more than offset favorable volume/mix growth in emerging markets within our Eastern Europe and LATAM regions.

Segment Adjusted EBITDA increased 7.6% to $1.1 billion in 2023 compared to $1.0 billion in 2022, primarily due to higher pricing and efficiency gains, partially offset by higher supply chain costs, reflecting inflationary pressure in manufacturing and procurement costs; increased SG&A, particularly advertising expenses; higher commodity costs; unfavorable volume/mix; the unfavorable impact of foreign currency (4.3 pp); and the decrease from lapping a 53rd week of shipments in the prior period (1.8 pp).