Kraft Heinz Co

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.

Management evaluates segment performance based on several factors, including net sales, Organic Net Sales, and Segment Adjusted Operating Income. Segment Adjusted Operating Income is defined as operating income/(loss) excluding, when they occur, the impacts of 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, and certain non-ordinary course legal and regulatory matters. Segment Adjusted Operating Income for Emerging Markets, which represents the aggregation of our WEEM and AEM operating segments, is defined and presented consistently with the Segment Adjusted Operating Income of our reportable segments — North America and International Developed Markets. Segment Adjusted Operating Income is a financial measure 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 Operating Income 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 condensed consolidated statements of income, as nonmonetary currency devaluation, rather than accumulated other comprehensive income/(losses) on our condensed consolidated balance sheets, until such time as the economy is no longer considered highly inflationary. See Note 2, Significant Accounting Policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2024, for additional information. We apply highly inflationary accounting to the results of our subsidiaries in Venezuela, Turkey, and Egypt, which are all in Emerging Markets.

Net Sales:

Organic Net Sales:

Drivers of the changes in net sales and Organic Net Sales for the three months ended March 29, 2025 compared to the three months ended March 30, 2024 were:

Adjusted Operating Income:

North America:

Net sales decreased 7.0% to $4.5 billion for the three months ended March 29, 2025 compared to $4.8 billion for the three months ended March 30, 2024, including the unfavorable impacts of foreign currency (0.5 pp). Organic Net Sales decreased 6.5% to $4.5 billion for the three months ended March 29, 2025 compared to $4.8 billion for the three months ended March 30, 2024, primarily due to unfavorable volume/mix (7.1 pp), which more than offset higher pricing (0.6 pp). Unfavorable volume/mix was primarily driven by declines in cream cheese, Meats, and Desserts due, in part, to the shift in Easter timing, as well as declines in Lunchables and Coffee. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee.

Segment Adjusted Operating Income decreased 9.4% to $1.1 billion for the three months ended March 29, 2025 compared to $1.2 billion for the three months ended March 30, 2024, primarily due to unfavorable volume/mix, increased procurement cost inflation, which more than offset our efficiency initiatives, higher depreciation expense, and the unfavorable impact of foreign currency (0.4 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing and decreased SG&A, primarily due to lower variable compensation expense and decreased advertising expenses.

International Developed Markets:

Net sales decreased 4.4% to $817 million for the three months ended March 29, 2025 compared to $855 million for the three months ended March 30, 2024, including the unfavorable impacts of foreign currency (2.7 pp). Organic Net Sales decreased 1.7% to $840 million for the three months ended March 29, 2025 compared to $855 million for the three months ended March 30, 2024, primarily due to unfavorable volume/mix (1.5 pp) and lower pricing (0.2 pp). Unfavorable volume/mix was primarily due to industry slowdowns of meals and sauces in the United Kingdom, which more than offset favorable volume/mix in Australia and New Zealand primarily driven by lapping a prior year inventory reduction by a regional customer.

Segment Adjusted Operating Income decreased 7.0% to $127 million for the three months ended March 29, 2025 compared to $136 million for the three months ended March 30, 2024, primarily driven by higher procurement costs, due, in part, to the impact of cocoa inflation in our Netherlands business, lower pricing, and the unfavorable impact of foreign currency (1.2 pp), which more than offset decreased SG&A, primarily for advertising expenses.

Emerging Markets:

(b) Segment Adjusted Operating Income for Emerging Markets, which represents the combination of our WEEM and AEM operating segments, is defined and presented consistently with the Segment Adjusted Operating Income of our reportable segments - North America and International Developed Markets.

Net sales decreased 4.7% to $694 million for the three months ended March 29, 2025 compared to $728 million for the three months ended March 30, 2024, including the unfavorable impacts of foreign currency (7.5 pp) and acquisitions and divestitures (1.1 pp). Organic Net Sales increased 3.9% to $728 million for the three months ended March 29, 2025 compared to $700 million for the three months ended March 30, 2024, primarily driven by higher pricing (4.3 pp), which more than offset unfavorable volume/mix (0.4 pp). Higher pricing was taken primarily in certain countries within WEEM to address inflationary pressures. Unfavorable volume/mix was due, in part, to the shift in Ramadan timing.

Segment Adjusted Operating Income increased 20.3% to $99 million for the three months ended March 29, 2025 compared to $82 million for the three months ended March 30, 2024, primarily due to higher pricing and lower SG&A. These favorable impacts to Segment Adjusted Operating Income more than offset higher supply chain costs reflecting inflationary pressure in WEEM, the unfavorable impact of foreign currency (8.3 pp), unfavorable volume/mix, and higher depreciation expense.