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Kraft Heinz's Primal Nutrition Buyout Likely to Aid Growth

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The Kraft Heinz Company (KHC - Free Report) is committed toward strengthening its product portfolio, evident from its latest move of expanding in the paleo-friendly food space, as explained by industry experts. Kraft Heinz inked a deal to buy Primal Nutrition, LLC for roughly $200 million. However, Primal Nutrition will continue to operate as an independent entity.

Expected to close in 2019 beginning, the deal will bring Primal Nutrition under Kraft Heinz’s Springboard platform, which is aimed at developing, scaling and speeding up growth of nascent and disruptive brands in the U.S. food and beverage arena. Primal Nutrition is a better-for-you brand that mainly concentrates on condiments, dressings and sauces such as mayonnaise, avocado oil and salad dressings.

Created by Mark Sisson, Primal Nutrition is clearly focused on products in the healthy snacks category, among others. While Primal Nutrition (which makes Primal Kitchen branded products) is expected to gain from Kraft Heinz’s solid infrastructure and assets, the buyout will help Kraft Heinz move closer to its goal of emerging as the best food company. Incidentally, Primal Kitchen’s addition is deemed to complement Kraft Heinz’s key categories, including condiments and sauces.

Will These Initiatives Help?

Notably, Kraft Heinz is focused on improving the performance of three key brands — Heinz, Kraft and Planters — and five global product categories, which are condiments and sauces, cheese, meals, nuts and baby food. Management earlier stated that the company will make significant investments in marketing, go-to-market capabilities and product development. These capabilities and platforms are expected to further add to the company’s gains in the second half of 2018 and 2019.

Further, this Zacks Rank #3 (Hold) company focuses on improving many areas, including Indonesia soy sauces, U.S. cold cuts, baby food in Canada and its non-measured channel shares in the U.K. Further, Kraft Heinz has various innovation initiatives planned in the foodservice space to fuel additional growth across all regions. Also, the company is making innovation efforts in the e-commerce channel, which witnessed nearly 80% growth year to date in the United States.

Additionally, with growing awareness of the nutritional value of food products, responsible and sustainable sourcing of raw materials has become an important issue for food companies. The importance of using real ingredients and minimal processing in packaged food products is also being emphasized increasingly. As a result, a large number of companies in the food industry are switching or have already switched to the use of cage-free eggs. Kraft Heinz plans to switch to 100% cage-free eggs for its North American operations by 2025.

We expect such efforts to help bring a turnaround to this stock that has declined 11.1% in the past three months compared with the industry’s drop of 3.8%.

Don’t Miss These Solid Food Stocks

Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share growth rate of 19%, carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Natural Foods (UNFI - Free Report) has long-term earnings per share growth rate of 7.2% and a Zacks Rank #2.

Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 11%.

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