Kraft Heinz Co

Objective:

The following discussion provides an analysis of our financial condition and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and related notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Our objective is to also provide discussion of material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides an understanding of our financial condition, results of operations, and cash flows.

See below for discussion and analysis of our financial condition and results of operations for 2024 compared to 2023 and for 2023 compared to 2022.

Description of the Company:

We manufacture and market food and beverage products around the world through our eight consumer-driven product platforms: Taste Elevation, Easy Ready Meals, Hydration, Meats, Cheeses, Substantial Snacking, Desserts, Coffee, and other grocery products.

In the first quarter of 2024, we divided our International segment into three operating segments — Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”) — to enable enhanced focus on the different strategies required for each of these regions as part of our long-term strategic plan. Subsequently, we manage our operating results through four operating segments. We have two reportable segments defined by geographic region: North America and International Developed Markets. Our remaining operating segments, consisting of WEEM and AEM, are combined and disclosed as Emerging Markets.

See Note 20, Segment Reporting, in Item 8, Financial Statements and Supplementary Data, for our financial information by segment.

Items Affecting Comparability of Financial Results

Impairment Losses:

Our results of operations reflect goodwill impairment losses of $1.6 billion and intangible asset impairment losses of $2.0 billion in 2024. We recognized goodwill impairment losses of $510 million and intangible asset impairment losses of $152 million in 2023. We recognized goodwill impairment losses of $444 million, intangible asset impairment losses of $469 million, and net property, and plant, and equipment asset impairment losses of $86 million in 2022. See Note 8, Goodwill and Intangible Assets, in Item 8, Financial Statements and Supplementary Data, for additional information on our goodwill and intangible asset impairment losses.

53rd Week:

We operate on a 52- or 53-week fiscal year ending on the last Saturday in December in each calendar year. Our 2024 fiscal year was a 52-week period that ended on December 28, 2024, our 2023 fiscal year was a 52-week period that ended on December 30, 2023, and our 2022 fiscal year was a 53-week period that ended on December 31, 2022.

Acquisitions and Divestitures:

In 2024, we closed the sale of our infant nutrition business in Russia (the “Russia Infant Transaction”) and the sale of 100% of the equity interests in our Papua New Guinea subsidiary (the “Papua New Guinea Transaction”), both within Emerging Markets. In 2022, we completed the Hemmer Acquisition within Emerging Markets, and the Just Spices Acquisition within our International Developed Markets segment. See Note 4, Acquisitions and Divestitures, in Item 8, Financial Statements and Supplementary Data, for additional information on our acquisition and divestiture activities.

Inflation and Supply Chain Impacts:

During the year ended December 28, 2024, we experienced moderate inflation in our supply chain costs compared to the prior year period, which we expect to continue through 2025. While inflationary pressures within procurement, manufacturing, and logistics costs had a negative impact on our results of operations, we experienced increased stability of these costs as compared to the prior year period. Further, we continue to take measures to mitigate the impact of this inflation through efficiency initiatives, pricing actions, and hedging strategies. However, there has been, and we expect that there could continue to be, a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we have taken have, in some instances, negatively impacted, and could continue to negatively impact, our market share.

The Organization for Economic Co-operation and Development (OECD), a global coalition of member countries, proposed a two-pillar plan that aims to ensure a fairer distribution of profits among countries and impose a floor on tax competition through the introduction of a global minimum tax of 15%. Many countries have enacted, or begun the process of enacting, laws based on the two-pillar plan proposals.

As part of our planning for the changes in the international tax environment, as well as to achieve greater operational synergies, we have enacted changes to our corporate entity structure which included a transfer of, and will result in the movement of, certain business operations to a wholly-owned subsidiary in the Netherlands resulting in a tax benefit of $3.0 billion recorded as a non-U.S. deferred tax asset in December 2024. The deferred tax asset was recognized as a result of the book and tax basis difference on the business transferred to the Netherlands subsidiary with the tax basis determined by reference to the fair value of the business. The determination of the estimated fair value of the transferred business is complex and requires the exercise of substantial judgment due to the use of subjective assumptions in the valuation method used by management. The associated valuation allowance of $0.6 billion is related to uncertainty in the Pillar Two legislative interpretation and is based on our latest assessment of the total tax benefit that is more likely than not to be realized. The recognition of our future tax benefits associated with this transaction is dependent upon the acceptance of the business valuation and tax basis step-up by the associated taxing authorities.

The legislative developments in conjunction with changes we made to our corporate entity structure are estimated to increase our cash tax rate by 2.0% to 3.0% and our effective tax rate by approximately 5.0%. The estimated rates could be impacted by the outcome of examinations by taxing authorities and future legislative developments.