Ladies and gentlemen, thank you for standing by. Welcome to The Kraft Heinz Company fourth quarter results conference call. At this time, all participants are in listen-only mode. After the speakers have made remarks, there'll be a question-and-answer session. To ask a question, please press star, then one on your touchtone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Chris Jakubik. Sir, you may begin. Thank you, and hello, everyone. Thank you for joining our Q&A session today. As you know, during our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties. These are discussed in our press release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call. These non-GAAP financial measures should not be considered a replacement for, and should be read together with, GAAP results. You can find the GAAP to non-GAAP reconciliations within our earnings release. Before we begin, I do want to highlight that we will provide greater details on our 2021 initiatives during our presentation at the CAGNY Conference this coming Tuesday. Today's session will be most productive if you limit yourself to one question and focus your questions on our results and the announcements that we have made today. With that, I'll hand it back to the operator, and we can start the Q&A. Thank you. One moment. Our first question comes from Andrew Lazar of Barclays. Your line is open. Good morning, everybody. Morning Andrew. Good morning. Hi there I guess for my question, I'd like to explore a bit your expectations for full year 2021, really in terms of your planning stance for demand. I guess some companies have been more aggressive in terms of their expectations around return to normalization and the impact on consumption. Others may be somewhat more conservative. I'm just trying to get a sense of how KHC is thinking about this in its guidance or, what end of the spectrum the company is on in thinking about this and how conservative or not your planning stance may be for 2021. Thank you. Hi Andrew. This is Miguel speaking. Well, we are looking at 2021 in a conservative way. I have to say that we saw very strong consumption gains in January and February is coming good as well. If this persists at this level, we may have an upside in our results. I think that with the environment so volatile, we better continue taking a quarter-by-quarter approach, which was the outlook that we gave you, and really concentrating our minds and our efforts on our transformation through our operating model. Paulo, I don't know if you have anything to add, but from my side No, that's it, Miguel. I think also, it's worth it to comment that we are in our outlook. We're including the view that we have for inflation, and also we are not considering the two divestitures that we've announced. Great. Thank you very much. Thank you. Thank you. Our next question comes from Chris Growe of Stifel. Your line is open. Hi, good morning. Morning Chris. Hi, I just had a question, if I could. Have you defined the amount of inflation you expect for the year, how you hope to overcome that? I suspect that's through a combination of pricing and promotional efficiencies. I want to get a better sense of the magnitude of the inflation. I wondered if you could speak to that, excluding Planters and cheese. I know those were kind of pass-along commodity type categories, just trying to think about the ongoing portfolio and the effect on the business overall this year. Sure, Chris. This is Paulo here. We are seeing the same inflation. We're also seeing the inflation that you're seeing and coming from non-commodities, non-key commodities, ingredients, especially packaging and transportation in the U.S. We think that the level and the type of inflation that we are seeing, it's manageable and is in our outlook, as I mentioned. We have two reasons behind that. The first one, that we are very confident on the supply chain efficiency programs that we have, that we'll expect to unlock savings across our supply chain. The second is on our revenue management initiatives across the globe, that in combination with the innovation, renovation, market investments that we're doing can help us with pricing if we need. As I said, we have incorporated this inflation in our outlooks today. I don't know if Carlos want to comment something on top of that. No, I think to reiterate your point, Paulo, that we feel that it's manageable, and I think that we are taking the appropriate revenue management initiatives to make sure that we can handle those things as they come. Thank you. Just to be clear on that, is that mostly U.S.-based inflation? As I think about freight in particular, that's more of a U.S. issue. Is there a kind of a wider array of inflation across the portfolio? Thank you. When you think about the commodities, the non-key commodities, ingredients, and packagings across. The global, think about the freight, the transportation is more focused in the U.S. One thing also that you've mentioned, when you think about the key commodities, the Big Four commodities that we have, we are not really seeing a lot of year-over-year inflation through the year, okay, when you add all of them. We were really talking about the non-key, non-big four commodities and packaging and transportation in the U.S. Thank you. You're welcome. Thank you. Our next question comes from Ken Goldman of JPMorgan. The line is open. Hi, good morning. Just to stay on the subject of cost and pricing. A few years ago, some manufacturers tried to pass through some list- pricing because of higher transportation costs. I think some of their customers at that time, on the retail side, pushed back saying, "Look, we'll give you some pricing when your ingredients go up. We've done that in the past, but trucking is you're on your own." I would imagine that this time around it's a little bit different. I just kind of wanted to get a sense for, given your higher costs in packaging, higher transportation, and given the lack of elasticity among consumers right now, how reluctant are some of your customers to allow you to take some pricing, whether it's on the list side or on fewer promos? I just wanted to get a sense for your relationship with them and how much pushback you're getting on any kind of price increases you're trying to push through. I'll take that one. Just to give you kind of a view in terms of the U.S. and what we're seeing with our customers. First I would say is, what we're seeing, let me start with the consumer. Our consumer right now, as we have shifted towards being very much focused on understanding what they're going through and so forth, I think they're certainly showing quite an amount of resiliency through this process that we're going through. I think for us, our focus is how do we make sure we drive the renovation of our portfolio to make sure that we, in fact, continue to drive the right value for the consumer. Now, we're balancing that, too, with making sure that we have the right revenue management initiatives. When I say that, I say using the full availability of our tools in our toolbox to be able to handle the different pressures that may coming at us because of inflation. The way I think about it is our focus is driving that better value to consumers by making sure we are improving our portfolio, making sure we continue to invest behind the marketing, and improving the quality of our media, and making sure that we are seeing how that actually translating us, driving our improvement in shares throughout, like we did in 2020. At this point, I would say these are things that we can manage, and we don't see that as a major derailer as we go forward. Thank you. Thanks for the question. Our next question comes from Bryan Spillane of Bank of America. Your line is open. Hey, good morning. I guess my question is just related to the divestitures, and maybe, Paulo, could you give us a sense of-- I know we have a sense now of what the de-leveraging impact will be, but could you give us a sense of maybe what the dilution would be to EBITDA or to earnings? I guess trying to get underneath, not just EBITDA going out the door, but maybe the scope of stranded overhead, or is there any other meaningful cost that we should be thinking about as we're sort of trying to look at the model ex divestitures? Sure. When you look at this business, it's a business that has an average margin that is lower than the average that has a margin that is lower than the average margin of the company. We are really expecting minimal dilution from these divestitures okay? Also, we are also working internally here from now until we close to try to even offset that. I think what I could tell you today is exactly that it's a business with a margin below the average of the company, and we offset, expecting minimal dilution. I think we have time even for this minimal dilution to work internally to try to offset it. Okay. That's true for the cheese business as well? When we look at both divestitures, we shouldn't expect a lot of earnings dilution from both of them. When you look about the cheese divestitures, as I mentioned before, we were expecting around 5% dilution. Again, the same way for these divestitures, we are also working now with these two businesses out of the company to limit the dilution. Okay, great. Thank you. Thank you. Our next question comes from Jason English with Goldman Sachs. Your line is open. Hey, good morning, folks. Thanks for slotting me in. I appreciate it. I guess I kind of want to come back to a similar question, but it's all about trying to determine where you're going to land on EBITDA for the year. Can you put a finer point on the comment that you made in your press release that you expect EBITDA to come in ahead of your strategic plan? What does it imply? Where would your strategic plan place you? How much upside do you see? Back to Spillane's question, how much EBITDA is leaving with Planters and cheese, please? Thank you. It's Paulo again. Listen, we are not giving point estimations for our full year 2021 EBITDA. What we are conveying here is that, as Miguel mentioned, we are having a very good start for 2021. I think we gave a good clarity on our Investor Day about the curve that we had for our EBITDA, through our strategy plan. Again, we are seeing an upside on that. This upside is coming from not only from at-home consumption that we are seeing coming from this COVID situation, but also from better performance that we have in the business, in many areas of the business, including supply chain. That is how we are seeing that. Again, of course, we're going to be lapping at a very strong 2020 performance, but we're very confident in how we are starting the year and the potential upsides that we have, and are very happy that we are seeing a stronger beginning of the year and a stronger potential performance for us in 2021. About the impact from divestitures, it's pretty much what I was mentioning the question before about we expect pretty much from the Planters business, a minimal dilution, and we are working internally to offsetting even this dilution. This is more dilution that we can see now. Thank you. Our next question comes from David Palmer of Evercore ISI. Your line is open. Hi. Good morning. Just wanted to follow up on the cost picture, productivity savings, and other things that might impact 2021 versus 2020. It sounded like you said that the commodity cost would be fairly benign, perhaps you can dig into that versus freight and logistics, where we've heard about some inflation and how that might net across, against your productivity plans. Thanks. Paulo, you want to start on that one? Sorry, can you repeat the question you got here? Sure. Question on some of the gives and takes with regard to your margins and EBITDA for 2021. Okay. You mentioned commodity costs were fairly benign. I'm wondering if maybe you can put some expectations or quantify that a little bit more about your commodity outlook. Also talk about freight and logistics. We've heard a good bit of inflation is out there on the shipping side. If you could maybe break that out or speak to that net of productivity plans for this year. Thanks. Yes. That's clear. We are seeing the inflation, as I was mentioning before, we are seeing the inflation. When you separate this, we are seeing inflation coming from the same type of inflation that we're seeing. It's a broad inflation from non-key commodities and also packaging. We're also seeing inflation coming on the transportation in the U.S. Okay. On the Big Four commodities that we have, we are not seeing any overweight inflation. Okay. It's more stable. As I was mentioning, the type of inflation that we're seeing and the level that we're seeing, we believe is manageable, through not only the supply chain initiatives that we have, but also with the revenue management initiatives that we were describing, Carlos was mentioning a few questions ago. Again, we are seeing the inflation, we believe is manageable and is embedded in our outlook. Thanks. Welcome. Thank you. Our next question comes from Alexia Howard of Bernstein. Your line is open. Good morning, everyone. Morning. Good morning. Morning. You talked about the Taste Elevation platform doing very well, and you've got the slide seven to demonstrate that. Can you talk explicitly about exactly which products, and which geographies are working best there, and whether you expect that momentum to continue? Actually, we are doing pretty well on Taste Elevation across the board. There's not one specific country. That since U.S. is so critical in our portfolio, U.S. is a big part of this growth. I would mention Canada, U.K., Australia. Even the emerging countries, Brazil, Russia, Middle East, we are doing very well in Taste Elevation. We are having record shares with our brand Heinz, with ketchup and sauces, everywhere in the world. It's not only Heinz. We have Lea & Perrins, we have Heinz Mayo, we have basically our portfolio, the entire portfolio on Taste Elevation doing very, very well, both growing volume and share. Do you expect that momentum to continue even as the pandemic eases? I do. I think that we have a pretty strong innovation plan ahead that will strengthen that performance. I think we have great momentum, and that will continue. Great. Thank you very much. Just to build Miguel's point, I think you're going to hear more about it when we go through our category discussions. because I think that our Taste Elevation has proven to be an advantage part of our business that will be something that we'll continue to lever as we go forward. Thank you. Great t hank you all. Just to continue building on that, this is our true global platform, and we are benefiting from experiences and tests that we are doing in countries and leveraging and scaling up in other countries much faster than we did in the past. We are working much better as a team. Great. Thank you. -to gain agility. Thank you. Thank you. Our next question comes from Michael Lavery of Piper Sandler. Your line is open. Good morning. Thank you. You noted that your marketing spend was up 11% last year. Does that get you to where you think is about the right level or should we expect more investments there? When you say further prioritization efforts are underway, is that a reallocation of spending, or does that mean just giving more money to the priority initiatives or a bit of both? We, in our strategic review, we talked about increasing 30% marketing in five years. Last year, we increased more than what would be the compound annual growth rate for five years, of course. This year, we are seeing great opportunities for us on efficiencies in marketing. We are buying media in a much better way. We have a new contract with great savings on media. We are improving our creative and content, and really sweating the assets and leveraging a better ROI. I think that things are in accordance to plan in marketing, and we are going to get better every year. We are very excited with that. Carlos, I don't know if there's anything you want to add, but No. You covered it well. Thanks, Miguel. Great. Thank you very much. Thank you. Our next question comes from Jonathan Feeney of Consumer Edge. Your line is open. Good morning. Thanks very much for the question. I look at the natural cheese divestiture versus Planters. Certainly some similarities around the challenges in differentiating the customer, there's also some important differences. I would love to know what's the bright line within Planters. You listed some things that make sense to me, but where you decided it was maybe something that wasn't a problem not worth trying to solve, relative to the many other brands where you are having success, rethinking, reframing, driving the brand to success where maybe there hasn't been in the past. Just what were the attributes of it that really put you over the line that this is something that's better in someone else's hands? Look, Planters is a very iconic, very strong brand, so this is not something that we took lightly. To improve our portfolio, we must focus on areas where we see the greatest competitive advantage, the greatest potential, and returns. When we look at Planters is one of the brands that is most affected by private label in our portfolio. It's also, of course, affected as a commodity. When we looked at that, in order to have more flexibility towards the future on building a portfolio, I think that we made that choice, and we are very happy with that. Clear answer. Thank you very much. I appreciate it. Thank you. Thank you. Our next question comes from Steve Powers of Deutsche. Your line is open. Yes. Hey, thanks. I guess two follow-ups on the Planters divestment, if I could. First is just the 15x EBITDA multiple that you articulate on slide 22 of your deck today. I just want to clarify, does that include overheads in the implied EBITDA base that will be stranded? I appreciate that you'll try to offset that, but just wanted to confirm. Then strategically, I guess just to press a bit on Jonathan's questions from a moment ago. Back in September, Real Food Snacking was something that you highlighted as a growth platform, and I'm assuming it still is. Planters was part of that. I appreciate and understand the rationale you're articulating today around why Planters might not fit as well going forward, especially at the deal price that you've announced today. Was there a strategic pivot? Was there something that happened between September and today, aside from an offer coming in, that changed your perspective on Planters? Again, it was positioned as part of that growth platform five, six months ago. Thank you. Okay, let me get the first one here and then ask Carlos to take the second part of your question. Yes, when we look at the multiple that we disclosed, that is 15x 2020 and 17x 2019. It includes some small allocation of our strength costs, a small part of that. It includes in both numbers, okay? In the 17x 2019 and the 15x 2020. I'm going to ask Carlos to get the second part of the question about the platform. Yeah. Thank you. You're right. The idea of us focusing on Real Food Snacking is something that we laid out in September, and we continue to be very much focused on driving that as part of our growth platform. That, just want to be clear, that has not changed. I think today you saw in the press release that we highlighted there's still two specific areas within Real Food Snacking that we believe we have huge amount of advantages, and we're going to continue to drive those as we go forward. Specifically, we think about Real Fuel for Kids, where Lunchables is a cornerstone of that particular area and segment, as well as real meal alternative, where we think about adult opportunities to substitute meals, things like what we see in areas like P3, for example. When I look at the entire strategy, I think is for us, we continue to stay focused on Real Food Snacking. The transaction today is actually only going to help us add additional fuel to support that strategy that we laid out in September. Thanks for the question. Thank you. Our next question comes from Jenna Giannelli of Goldman Sachs. Your line is open. Hi, good morning. Thanks so much for taking the question. In your prepared comments, you said that IG was important to you, but obviously without sacrificing the speed of the transformation. I'm curious in your mind where the business and leverage needs to be in order to get to IG, and in your mind, what are the primary benefits of achieving that rating? Thank you. Hi. Let me take this one. Listen, we believe investment grade, as I said, is important for the company. As we were mentioning also, we closed the year at 3.7x. We want to be consistently below 4x net leverage, in the organization. We believe we are on track to stay there, to get and stay below 4x, even without the two divestitures that we've announced, okay? The proceeds of these two additional divestitures would give us additional half a turn of deleveraging, and this would give us flexibility. I think that is important, flexibility to accelerate our strategy. This acceleration would come organically with the initiatives that we are following here. Again, that is the plan that we have today. We want to keep the leverage below 4x, and we are on track to be there. I think the proceeds from the divestitures are going to give us additional flexibility to accelerate our strategy. Again, we are very comfortable with the path that we have in terms of deleveraging with our credit position. We are feeling very good on the capital structure and credit side. Thank you. Thank you. At this time, I'd like to turn the call back over to Miguel Patricio for any closing remarks. Well, I wanted to thank you all for being with us here. I just wanted to finish and say that we couldn't be more optimistic and positive about the momentum that we have in the company right now. We are progressing fast in this transformation journey that we are. We have today a very different company that we had just 12 months ago. We have a much better team. We have a far better employee morale and engagement, despite the fact that we've been all working from home. We have the priorities in terms of strategy and geographies very well-defined. We have a north. We talked about efficiencies in the supply area, and we brought them. We executed them, despite the fact that we had the best year in quality and safety in our plants. We put back in marketing $100 million in 2020. We are starting the year strong. Jan and Feb are strong months for us. Have new households with getting better in market share every quarter. We have a very strong renovation in innovation that we are going to share with you better at the CAGNY. Investment levels are ramping up. From a financial standpoint, this transformation is well underway. We are on track to remain below four times leverage. The 2021 financial will be ahead of our strategic plan. The divestitures that we just announced will accelerate deleveraging, increasing flexibility for creative investment. One year ago, we had a lot of hopes and plans. I would say we are ahead of where we thought we could be. Thank you very much. Thank you for your time. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating, and you all disconnect. Have a great day.