Kraft Heinz Co

We manage our operating results through three operating segments, all of which are reportable segments: North America, Europe and Pacific Developed Markets, and 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, separation costs, and certain non-ordinary course legal and regulatory matters. 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 27, 2025, for additional information. We apply highly inflationary accounting to the results of our subsidiaries in Venezuela, Turkey, and Egypt, which are all in our Emerging Markets segment.

Net Sales:

Organic Net Sales:

Drivers of the changes in net sales and Organic Net Sales for the three and nine months ended September 26, 2026 compared to the three and nine months ended September 27, 2025 were:

Adjusted Operating Income:

North America:

Net sales decreased 3.4% to $4.5 billion for the three months ended September 26, 2026 compared to $4.6 billion for the three months ended September 27, 2025. Organic Net Sales decreased 3.2% to $4.5 billion for the three months ended September 26, 2026 compared to $4.6 billion for the three months ended September 27, 2025, primarily due to unfavorable volume/mix (2.4 pp) and lower pricing (0.8 pp). Unfavorable volume/mix was primarily due to declines in meats, sauces, and refreshment beverages, in part as retailers accelerated purchases into the second quarter and further reduced inventory in the third quarter. Lower pricing was primarily due to price investments in cream cheese and meats, partially offset by higher pricing in refreshment beverages to mitigate higher input costs.

Segment Adjusted Operating Income decreased 10.5% to $911 million for the three months ended September 26, 2026 compared to $1.0 billion for the three months ended September 27, 2025, primarily due to unfavorable volume/mix, lower pricing, higher variable compensation and related tax expenses, increased people cost, and inflationary pressures in manufacturing and logistics costs that outpaced our efficiency initiatives. These unfavorable impacts to Segment Adjusted Operating Income more than offset efficiency initiatives in procurement that outpaced inflationary pressures.

Net sales decreased 2.3% to $13.6 billion for the nine months ended September 26, 2026 compared to $13.9 billion for the nine months ended September 27, 2025, including the favorable impacts of foreign currency (0.1 pp). Organic Net Sales decreased 2.4% to $13.6 billion for the nine months ended September 26, 2026 compared to $13.9 billion for the nine months ended September 27, 2025, primarily due to unfavorable volume/mix (2.6 pp), which more than offset higher pricing (0.2 pp). Unfavorable volume/mix was primarily due to declines in meats, refreshment beverages, certain condiments, and coffee. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in refreshment beverages and coffee.

Segment Adjusted Operating Income decreased 12.7% to $2.9 billion for the nine months ended September 26, 2026 compared to $3.3 billion for the nine months ended September 27, 2025, primarily due to unfavorable volume/mix, increased advertising expense, inflationary pressures in manufacturing and logistics costs that outpaced our efficiency initiatives, higher variable compensation and related tax expenses, and increased research and development expenditures. These unfavorable impacts to Segment Adjusted Operating Income more than offset efficiency initiatives in procurement that outpaced inflationary pressures and higher pricing.

Europe and Pacific Developed Markets:

Net sales decreased 5.6% to $910 million for the three months ended September 26, 2026 compared to $964 million for the three months ended September 27, 2025, including the unfavorable impact of acquisitions and divestitures (4.2 pp) and the unfavorable impacts of foreign currency (0.1 pp). Organic Net Sales decreased 1.3% to $912 million for the three months ended September 26, 2026 compared to $923 million for the three months ended September 27, 2025, primarily due to unfavorable volume/mix (0.9 pp) and lower pricing (0.4 pp). Unfavorable volume/mix was primarily due to portfolio and network simplification as well as competitive pressures in Australia and New Zealand, which more than offset favorable volume/mix in the United Kingdom and Germany. Lower pricing was primarily due to price investments in the United Kingdom.

Segment Adjusted Operating Income decreased 32.8% to $96 million for the three months ended September 26, 2026 compared to $143 million for the three months ended September 27, 2025, primarily due to increased variable compensation and related tax expenses, spare parts write offs, and increased advertising expenses.

Net sales decreased 2.0% to $2.8 billion for the nine months ended September 26, 2026 compared to $2.8 billion for the nine months ended September 27, 2025, including the unfavorable impact of acquisitions and divestitures (4.3 pp) and the favorable impacts of foreign currency (3.2 pp). Organic Net Sales decreased 0.9% to $2.7 billion for the nine months ended September 26, 2026 compared to $2.7 billion for the nine months ended September 27, 2025, primarily due to unfavorable volume/mix (0.9 pp). Unfavorable volume/mix was primarily due to portfolio and network simplification as well as competitive pressures in Australia and New Zealand, which more than offset favorable volume/mix in the United Kingdom, Benelux, and France.

Segment Adjusted Operating Income decreased 12.6% to $380 million for the nine months ended September 26, 2026 compared to $435 million for the nine months ended September 27, 2025, primarily due to increased advertising expenses, increased costs related to variable compensation and related tax expenses, the Italy Infant Transaction, and spare parts write offs. These unfavorable impacts to Segment Adjusted Operating Income more than offset efficiency initiatives in procurement that outpaced inflationary pressures.

Emerging Markets:

Net sales increased 13.8% to $720 million for the three months ended September 26, 2026 compared to $632 million for the three months ended September 27, 2025, including the unfavorable impacts of foreign currency (1.8 pp). Organic Net Sales increased 15.6% to $704 million for the three months ended September 26, 2026 compared to $609 million for the three months ended September 27, 2025, primarily driven by favorable volume/mix (8.4 pp) and higher pricing (7.2 pp). Favorable volume/mix was driven primarily by Indonesia, Brazil, and Venezuela. Pricing was higher in EurAsia and LATAM to mitigate inflationary pressures.

Segment Adjusted Operating Income increased 22.5% to $81 million for the three months ended September 26, 2026 compared to $66 million for the three months ended September 27, 2025, primarily driven by higher pricing and favorable volume/mix. These favorable impacts to Segment Adjusted Operating Income more than offset increased inflationary pressures in procurement, manufacturing, and logistics costs that outpaced our efficiency initiatives, and increased SG&A, primarily due to increased advertising expenses.

Nine Months Ended September 26, 2026 Compared to the Nine Months Ended September 27, 2025

Net sales increased 11.1% to $2.1 billion for the nine months ended September 26, 2026 compared to $1.9 billion for the nine months ended September 27, 2025, including the favorable impacts of foreign currency (1.1 pp). Organic Net Sales increased 10.0% to $2.0 billion for the nine months ended September 26, 2026 compared to $1.8 billion for the nine months ended September 27, 2025, primarily driven by higher pricing (5.8 pp), and favorable volume/mix (4.2 pp). Pricing was higher in EurAsia and LATAM to mitigate inflationary pressures. Favorable volume/mix was primarily driven by Brazil, Venezuela, and China, which more than offset unfavorable volume/mix in Indonesia.

Segment Adjusted Operating Income increased 8.1% to $256 million for the nine months ended September 26, 2026 compared to $236 million for the nine months ended September 27, 2025, primarily driven by higher pricing, favorable volume/mix, and indirect tax recoveries within Brazil. These favorable impacts to Segment Adjusted Operating Income more than offset inflationary pressures in procurement, manufacturing, and logistics costs that outpaced our efficiency initiatives, increased advertising expenses, and higher variable compensation and related tax expenses.