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 condensed consolidated financial statements and related notes included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q. 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.

Description of the Company:

We manufacture and market food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world.

We manage our operating results through four operating segments: North America, Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”). 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 17, Segment Reporting, in Item 1, Financial Statements, for our financial information by segment.

Proposed Separation Transaction:

On September 2, 2025, we announced our plan to separate the Company into two independent, publicly traded companies through a tax-free spin-off. The Separation is expected to allow each company to have greater strategic and operational focus to better serve customers, customize capital allocation, and accelerate profitable growth. We currently expect to complete the Separation in the second half of 2026. See Part II. Items 1A. Risk Factors of this Quarterly Report on Form 10-Q for further discussion of risks relating to the Separation.

Acquisitions and Divestitures:

On July 9, 2025, we entered into a definitive agreement to sell our infant and specialty food business in Italy, within our International Developed Markets segment, which is expected to close in the first quarter of 2026. In the first quarter of 2024, we closed the sale of the Russia Infant Transaction and the Papua New Guinea Transaction, both within Emerging Markets. See Note 5, Acquisitions and Divestitures, in Item 1, Financial Statements, for additional information on divestiture activities.

Business Trends and Items Affecting Comparability of Financial Results

Inflation, Supply Chain, and Tariff Impacts:

During the nine months ended September 27, 2025, we experienced increased inflationary pressures compared to the prior year, due in part to the recent tariff and trade policy actions taken by the United States and foreign governments. We have incurred increased cost of products sold within a subset of our North America segment (primarily within our Coffee and Hydration platforms) due to the impacts of tariffs on certain raw materials currently sourced from outside of the U.S. and on certain products that are manufactured through our integrated supply chain that spans the U.S. and Canada.

While these increased costs have had a negative impact on our results of operations, we have taken measures to mitigate the impact of this inflation through pricing actions, efficiency gains, and alternative sourcing. However, there has been, and we expect that there could continue to be, a difference between the timing of when these mitigative actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we take have, in some instances, negatively impacted, and could continue to negatively impact, our market share. As the situation continues to remain fluid due to the rapidly changing global trade environment, we continue to evaluate the potential implications of these actions on our business.

Consumer Trends:

In the second quarter of 2025, we announced our commitment to remove Food, Drug & Cosmetic (“FD&C”) colors from our U.S. portfolio of products before the end of 2027. Additionally, we have committed to ensuring that all new products launched in the U.S. will be free of FD&C colors. This initiative will impact a subset of the products sold within our North America segment, primarily within our Hydration and Desserts platforms. While we do not currently anticipate a significant impact to our input costs in our efforts to meet this commitment, our net sales, market share, or results of operations could be adversely affected if we are unsuccessful in our efforts to continue to satisfy consumer preferences.

Regulatory Landscape:

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States. The OBBBA includes, among other provisions, a broad range of changes to U.S. tax law, as well as changes to eligibility requirements for Supplemental Nutrition Assistance Program (“SNAP”) recipients. While OBBBA did not have a significant impact on our total tax provision as of September 27, 2025, we are still evaluating our position on the elective provisions of the law and the potential impacts of those elections on our financial statements.