Until recently, Kraft Heinz set the pace for finance, management and deal-making in food processing and the broader consumer goods sector. The 30% + operating margins it claimed were the benchmark against which corporate performance was measured. Its zero-based budgeting became the accounting standard. Its tough treatment of suppliers was admired and emulated. And its aggressive layoffs, closures and outsourcing met with the approval of shareholders and industry analysts. Other companies followed suit.
Long before the 2015 merger of the two companies, the IUF had consistently drawn attention to the brutal consequences for workers of a business model built on heavy borrowing and relentless cost-cutting to deliver high, short-term returns to investors at the expense of investment in growth. Only now, faced with the ice-cold shock of a dramatic decline in the share price and an investigation into KHC’s procurement and accounting practices by the US Securities and Exchange Commission has the financial industry discovered the obvious: due to systematic underinvestment, KHC is losing market share as consumers demand new food products.
In 2018, the IUF conducted a survey of its Kraft Heinz membership. The survey results showed that KHC workers suffer from increased health and safety risks due to an increase in workplace stress, the impact of labour shortages, declining worker training and excessive overtime (up to 70 hours a week in some facilities). Long before shareholders felt the bite, workers at KHC have been suffering the consequences of financial short-termism.
There will be a new CEO of Kraft Heinz in July 2019 and more detailed plans for the future are likely to be revealed soon. Kraft Heinz has already acknowledged that its cost cutting drive has undermined the value of some of its brands. Whatever the new CEO will bring, IUF affiliates with KHC membership must organize together to preserve jobs, protect working conditions and build their power to push KHC to reverse course and prioritize investment in its workforce, in its brands, and in product innovation.