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Trillium News

December 4, 2019

Crain’s Chicago Business Op-Ed – Kraft Heinz: A cautionary cost-cutting tale

On December 3rd, 2019, Crain’s Chicago Business published a commentary authored by Environmental Health Strategy Center’s Mike Belliveau and Trillium Asset Management’s Susan Baker titled, “Kraft Heinz: A cautionary cost-cutting tale”. Read the full commentary below and online here.

Kraft Heinz: A cautionary cost-cutting tale

Facing financial woes and lagging profits, the food giant must clean up its act—and its supply chain—to win customers back.

With brands like Heinz ketchup and Kraft macaroni and cheese, Kraft Heinz is an iconic food company—and it’s in trouble.

The Chicago-based food giant is facing a tough turnaround. Kraft Heinz began the year by taking an enormous $15.4 billion write-down and acknowledging a Securities & Exchange Commission subpoena that revealed a federal investigation into the company’s accounting practices and internal controls. The company’s shares plummeted to an all-time low in August when it reported further declining sales and wrote down an additional $1.22 billion, and third-quarter results released last month showed the company’s profits still lagging.

Kraft Heinz is a cautionary tale. And to turn its fortunes around, it needs to leave its brutal cost-cutting tactics behind and earn customers back with investment in sustainable practices and healthier food, free of harmful additives and chemicals.

Trillium Asset Management works to leverage the power of stock ownership to promote social and environmental change while seeking to provide both impact and performance to investors.  With increasingly health-conscious customers rewarding brands that prioritize the wellness of people and the planet, prioritizing sustainability and consumer health can be a win-win for all stakeholders. And Kraft Heinz has a major opportunity to demonstrate itself as a new leader in this arena.

Two years ago, international headlines were made when lab testing found toxic plasticizer chemicals called phthalates in Kraft Heinz products, including its iconic mac and cheese. Over 100,000 consumers signed petitions demanding that the company take public action to keep these toxic chemicals out of its food.

Phthalates are making headlines these days, with a growing fertility crisis blamed in part on these plasticizer chemicals that disrupt reproductive hormones. The food we eat remains the top source of phthalate exposure for most Americans, with heavily processed food and fatty foods containing the highest levels. Phthalates can leach into food from some plastic tubing, conveyer belts, vinyl gloves, inks, adhesives, gaskets and other materials used in packaging and throughout the food supply chain—but safer alternatives are widely available, and affordable.

In fact, Kraft Heinz’s competitors are already taking action. Nestlé recently established a sustainability policy to remove all sources of toxic chemicals, including phthalates, from its packaging and supply chain.

So far, Kraft Heinz has refused to take this opportunity for a major public relations win, failing to take any public action to address phthalates. What’s worse, when a group of moms and kids attempted to deliver petition signatures to Kraft Heinz headquarters in Pittsburgh earlier this year, Kraft Heinz won itself further negative news coverage by sending down security guards that refused to let the concerned women and children in the building.

If Kraft Heinz shareholders are serious about reversing the company’s fortunes, they need to call on the company’s executives to prioritize what its own customers are demanding: healthier, safer food, without toxic additives and harmful chemicals in its packaging and processing equipment.

Kraft Heinz must clean up its act—and its supply chain—to win customers back.

Mike Belliveau is the executive director of the Environmental Health Strategy Center, which leads the national Coalition for Safer Processing & Packaging. Susan Baker is vice president of shareholder advocacy at Trillium Asset Management.

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Important Disclosure: This is not a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. The specific securities were selected on an objective basis and do not represent all of the securities purchased, sold or recommended for advisory clients.

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