Summary
- Kraft Heinz announced the appointment of Miguel Patricio as incoming CEO effective July 2019.
- Kraft and Heinz’s merger did not turn out as planned, as investors worry about the company’s prospects.
- The decision to appoint a new CEO signals to investors that the Board of Directors is serious in implementing a turnaround.
- Share price undervaluation to persist pending further visibility into the turnaround.
Kraft Heinz Co. (KHC) disclosed that the Board of Directors has appointed former AB InBev (BUD) Chief Global Marketing Officer Miguel Patricio as Chief Executive Officer. Mr. Patricio has a good track record in building brands at ABI, signaling to investors that the KHC Board is serious about turning around its operations. In the near term, investors are more concerned about key fundamental issues such as margin compression and excessive leverage. Consequently, we don't think the appointment of Mr. Patricio is much of a quick fix. Thus, we think KHC’s share price undervaluation will persist for a while until investors see signs of a fundamental turnaround and remain on hold.
Crafting a New Chapter
Kraft Heinz Co. announced several days ago that the company’s Board of Directors appointed Miguel Patricio as Chief Executive Officer effective July 1, 2019, replacing acting CEO Bernardo Hees, who will transition back to 3G Capital. Mr. Patricio has carved a solid reputation at AB InBev over a couple of decades, serving in various capacities, including heading the North America and Asia-Pacific businesses. His latest stint was as Global Chief Marketing Officer, where he implemented a strategic playbook for AB InBev's global brands. Before AB InBev, he was connected with several consumer companies, including Philip Morris (PM), Coca-Cola (KO) and Johnson & Johnson (JNJ).
