Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Q4 results conference call. At this time, all participants are in listen-only mode. After the presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star, then 1 on your telephone keypad. Please be advised today's conference may be recorded. If you require operator assistance during the call, please press star, then 0. I'd now like to hand the conference over to Chris Jakubik, Head of Global Investor Relations. Please go ahead. Thank you, and hello everyone. This is Chris Jakubik, Head of Global Investor Relations at The Kraft Heinz Company, and welcome to our Q&A session for our Q4 2021 business update. 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, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures today during the call, and 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 and the supplemental materials posted on ir.kraftheinzcompany.com. With that, let's take your questions. If you'd like to ask a question at this time, please press the star, then the number one key on your touch-tone telephone. Please stand by while we compile the Q&A roster. Our first question comes from Bryan Spillane with Bank of America. Thanks, operator. Good morning, everyone. Two questions for me. The first one for Miguel. Just given how fluid the environment is, using, I guess, Paulo's words, and just the macro pressures that we're seeing in the market, how has that impacted your ability to execute, and are you not executing as an organization, I guess, up to or as well as you would like, just given all the pressure? Bryan, thanks for the question. I mean, the macro pressures that you are mentioning, they've been here for a while now. At the beginning, it was hard to adapt, but I think that this is the new normal, and we are absolutely embracing the change of the macro pressures every day. I'm personally very confident about the path forward, first because of our people. We have today a great team, very engaged, and with a low turnover, which is very different from two and a half years ago. Our business is growing, and we've been relatively strong when we talk about gross margins, despite the inflation that we are seeing, which, in a way, has enabled us to keep investing in our brands, and our cash flow and balance sheet is much, much stronger than two years ago. Now, moving forward, I think that what we have to do is even to accelerate the path and the speed, to accelerate profitable growth and unlock greater efficiencies. On that one, I will leave for the CAGNY for us to speak a little bit more next week. Thank you for the question, Bryan. All right. Thanks, Miguel. Then, Paulo, wanted to just ask if you could give us a little bit more help with phasing for the year. I guess, more specifically, as we're looking at the first half, is there anything we should consider, I guess, as we're thinking about first quarter versus second quarter, in terms of, I don't know, is inflation more pronounced earlier in the year, the impact of pricing to help offset inflation, how that flows? Also, in the prepared remarks, you talked a bit about, or there was some discussion about supply chain. Are some of the supply chain disruptions maybe more pronounced earlier in the year or earlier in the first half than the back half? Just any help you can give us in terms of the shape of the quarters would be really helpful. Sure, Bryan. If stepping back a little bit, we closed 2021 very strong. Our EBITDA was $6.37 billion. In this number, we had approximately $400 million of divested business, okay? Starting from there, we are expecting to see the benefit of our sales growth, the combination of pricing plus efficiencies that we have in our plan, mitigating the inflation, the higher inflation that we are seeing. Also, we expect some headwind from volume and mix. We are assuming more conservative levels of consumption and elasticities as the stimulus and government support fades, okay? Again, as you said, we are expecting closer to 47%-53% H1-H2. This reflects where we are currently on the inflation versus the price curve that we are implementing. Also, the recovery, as you mentioned, of the supply chain constraints that we have, that we expect this to improve through the first half. There is also here, in terms of the curve, we are going to have this year 53rd week that will benefit our Q4 in the magnitude of $60 million-$70 million. That's what we're expecting. In terms of inside the first half between Q1 and Q2, we expect Q1 to be softer in relation to Q2 because of the timing of Easter shipments that we're going to have this year and also the timing that we are executing our pricing. Okay. That's helpful. Thanks, Paulo. Thank you. Our next question comes from Andrew Lazar with Barclays. Great. Good morning, everybody. I was hoping to get a bit more clarity on the various buckets you broke out in the prepared remarks with respect to the supply chain constraints and market share. Maybe could you be a bit more specific on sort of what the one-time issues were in the fourth quarter and why you've got visibility to this being fixed by the end of Q1? Is the second bucket you mentioned of supply constraints simply demand outstripping supply and not necessarily execution-related? The third bucket, I assume, are brands that are losing share for other reasons than supply constraints. Maybe if you can just sort of give us a little more clarity on those three buckets, that'd be really helpful. Thank you, Andrew. It's Carlos. I'm happy to take it. As you said, in the prepared remarks, I broke this out, but let me give you a little more color in each of those. First, it was the 40% of our share loss in Q4 was, as you said, due to one-time supply and some other challenges. What I mean by that is things like we saw in places where Philadelphia Cream Cheese, for example, given some packaging issues that we had, that we know what happened. Those are related more to whether it was packaging materials in the case of Philadelphia Cream Cheese, whether it was labor in case of Oscar Mayer bacon. We have visibility on those, and we know that we are able to actually come back and recover in Q1. The second bucket is around the 30% that was really due to, think of those as more production constraints that we actually expect to resolve in the first half to exit then in a good place as we end Q2. Those are things where the actual production was driving the constraints. Think of those as Heinz Gravy where capacity is limited, and we are now doing things in order to free capacity to service the high demand that we're seeing, whether that was in places like Lunchables where we have some ongoing labor constraints that we are solving, and we'll be able to, again, exit Q2 in a much better way. The third bucket essentially is in categories, and frankly, they're tilted towards frozen categories, where we're actually looking to implement new game plans this year. Think of those essentially as new creative ways in which we can deliver strong demand. When you pull it all together, I can tell you that we have the clear visibility on what needs to be done, and we actually have clear actions as well to make sure it happens. We feel very good as we exit both Q1 and Q2 to recover this. Thank you. Thank you. Our next question comes from Chris Growe with Stifel. Hi. Good morning. I just had a quick question for you to understand. I think this kind of follows on your answer there, Carlos, and Andrew's question. The production constraints you had, I think you said there were like 30% of the share losses. Can you help quantify how much that weighed on sales, what the missing opportunity was in the quarter? Then I also am just curious around that, you did talk about in your prepared remarks about a real focus on market share in 2022. I just want to get a better sense of kind of your expectations there and then how that could affect, say, volume and pricing and promotional efforts, that kind of thing, for the coming year. Thank you. First of all, thank you for the question. I would say rather I think it's a little bit difficult to quantify the share to the volume. What I can tell you is those are in that last 30%, those are categories, again, that we continue to see opportunity for us to service the consumer demand in a stronger way. We are something that is focused for us, and the reality is that we are actually thinking through very creative ways in which we can actually satisfy that demand going forward. To your point around our focus on share, absolutely. For us, it's something that we as a company take very seriously. We mentioned the fact that we have great bright spots within our business, big iconic brands that have been growing quite a bit of share. As we think about going forward, we want to make sure that it's consistently across our businesses. Us being able to deal with recovery both in Q1 and Q2 as we exit the first half is going to help us actually continue to grow in that perspective. If I could just add many times, oh, sorry. Go ahead. Please. No, go ahead. Okay. I was just going to add real quickly just that many times a focus on market share can imply heavier promotional spending or those kinds of things. It sounds like you've got more new product innovation, advertising, the kind of consumer pull more than consumer push to generate that market share. Is that fair to say? I think for me, whenever I talk about market share, think of it as profitable market share. I've been working in food company for a number of years, and there is no substitute to make sure that whenever we think about market share, it has to be done in a profitable way. We have to make sure we do everything that we do is with a consumer-first approach to make sure we, in fact, bring in consumer solutions, whether that is occasion-based, in-store, and online, but always focus on making sure that it's done with a drive on profitable market share growth. Thank you. Thank you. Our next question comes from Alexia Howard with Bernstein. Good morning, everyone. Good morning. Morning. Can I ask about what came through better than expected in the fourth quarter? When you reported at the end of October, you were talking about adjusted EBITDA, I think, in the $6.1 billion-$6.2 billion range, and it came through at $6.4 billion. That's a big step up for the last couple of months of the year. So could you just walk us through what the positive surprises were and whether those are likely to continue? Thank you, and I'll pass it on. Hi, Alexia. Paulo here. I think I can take this one. I think we saw we were able to, even with many constraints, we were able to produce better. It's fair to say that if we had more capacity, we would have sold even more. We were able to operate in terms of volume and capacity better than we planned. Also, our promotion strategy came in better than, and we promoted less than we were expecting initially. I think those two areas, together with overdelivery in terms of efficiencies, no, I would add this third point, were the main factors of our strong performance in the fourth quarter. Great. Thank you very much. I'll pass it on. Thank you. Our next question comes from Rob Dickerson with Jefferies. Great. Thanks so much. Just a question and a commentary around expected stronger consumption in 2022. Obviously, that's despite higher pricing. You said you're being somewhat conservative, it sounds like, on the volume side as you looked to your internal forecasts. I'm just curious, when you come up with those forecasts, as we think about back half of the year, right, is the feel that you might just be a little bit better positioned given price points, maybe a little bit more or, let's say, better positioned with respect to trade-down risk? I'm just trying to get a sense as to why you think consumption would actually be up, at least in the at-home channel. I have a quick follow-up. Well, I can start here, and maybe Carlos can complement if he feels the need. What we have embedded in our outlook is that we are again, we expect, as we said, low single-digit organic sales growth in this year with greater contribution from the growth platforms that we have. Our food service channel is also recovering and gaining share in all the emerging markets' performance and our continued strong performance through distribution. Also, as I was mentioning before, some relief of the key supply chain constraints as the year progresses. As we were discussing, we also are embedded in our forecast, in our expectation, some headwinds in volume and impacts in volume in 2022 because we are taking into consideration the fact that we are going to be lapping stimulus from the government, support that happened, and also more conservative levels of elasticity than we saw before. Net-net, that we have assumptions that are more conservative in terms of elasticity and consumption that we're seeing today, but we think it's the appropriate way to go in our outlook. Yeah. The one thing, I guess, I would add to what Paulo just said is that as we're doing that, we also continue to make investments to make sure we improve our brand value proposition. We're doing that through renovation of our brands, driving disruptive innovation, and continue to service new occasion-based solutions, whether that's for in-store, online, for today's consumer's needs. That continues even as we are continuing to progress throughout the year. Thanks for the question. All right. Super. Very quickly, Paulo, you've done a very nice job of improving your leverage position at the end of the year, still with a decent cash balance. Should we just be thinking, as you go forward, that kind of use of cash would either be for kind of smaller add-on acquisitions or just kind of an ongoing deleveraging cycle as you get through 2022? That's it. Thanks. No, sure. Our leverage target is below 4x, and we are well below that level today. We expect to remain consistently below that going forward. I just want to highlight one point here. Investment grade for us remains really strategically important. We have enough flexibility today in our balance sheet, in our capital structure, to continue to evaluate opportunities to accelerate our strategy in an accretive way and with price discipline. We are really close now. The way that we are today in terms of flexibility in the balance sheet that we have, we feel the company is in a very strong position. All right. Super. Thank you so much. Thank you. Our next question comes from Pamela Kaufman with Morgan Stanley. Hi. Good morning. Morning. Morning, Pam. Morning. Can you comment on where overall inflation came in for 2021 and what assumption you're making for inflation in 2022? I guess, just how much of your costs are covered for the year and what your visibility is on the cost outlook? Sure. Let me take that. Our Q4 inflation, we were higher than we expected in our October call. We ended up with a low double-digit. For 2022, we are likely to see or expecting today a year of inflation of low teens for the full year, okay? We expect this inflation to be higher in the first half than in the second half. Just to complement here, by the end of last year, in 2021, we took the necessary actions to mitigate the inflation we were seeing. Since then, more inflation has come, and we are taking these additional actions as we've been discussing. When we look about in terms of our hedging position, we normally hedge although we hedge a more significant part of the commodities, when you talk about our total COGS, we only hedge around 20%-30% of the COGS because there are a lot of other costs that are not only commodities in our cost. Again, that is the range that we have hedged. It's not material when we have a situation that we're having today that we are seeing inflation in pretty much all the lines of our COGS. Thank you. That's helpful. Thank you. Our next question comes from Ken Goldman with JPMorgan. Hey. Good morning. Thank you. I'm curious, in your guidance for 2022, how much does the outlook require or bake in, I guess, what I would consider rational behavior from your competitors? In other words, are there any assumptions that as the consumer maybe gets a little bit more stretched, as prices rise a little bit, as some of your competitors also add to their capacity, is there any expectation built-in that there might be. You talked about elasticity certainly being there, but maybe a little bit more of an aggressive stance from some of your rivals? I'm just trying to get a sense for what's baked in. The other thing, I think that I'm not going to comment on what they're doing and how they're going to run their business. Let me tell you a little bit about how I see our business and why I feel good about the way kind of we think about us going forward. For us, the important thing is to make sure we continue to stay investing in our differentiated portfolio. We're doing this because we actually are able to provide consumers, whether it's an entry into the category, a mainstream product, or a premium product, consumers actually have a way in which to acquire products from Kraft Heinz. You see that in places like Mac and Cheese where it goes from an Easy Mac to the original version of Mac and Cheese. We also are continuing to strengthen our portfolio because, as you know, we have made some important divestitures that really have reduced kind of our exposures to private label and other places where historically has been more competitive. In fact, we've gone from 17% of exposure to private label to now 11%, which I think is industry average is around 20%. We are making investments. We have a place in which consumers can come into the category. We're less exposed to historically private label businesses. We continue to make sure we're offering great quality products at prices that consumers can afford. We are focused on making sure that everything we're doing is around delivering great value, meaning quality products in a way that is accessible to consumers. That's what we're focused here in Kraft Heinz. Makes sense. Thank you. Very quickly, follow-up. Thank you. For the gross margin, the Street's modeling, pretty flat-ish figure in 2022 versus 2021, recognizing you don't provide specific guidance for this line item, just directionally, I guess, is it fair to say the gross margin's more likely to be down than flat, just especially in light of, I guess, your reminder this morning that in the context of inflation, you're aiming to recapture gross profit dollars, not necessarily percentages? Yes. Listen, when you think about as costs stabilize and price realization and efficiencies continue, our margin percentage will normalize, okay? As we have mentioned before, we are expecting lower run rate margin percentage levels at the beginning of this year. Our actions are to protect the dollar profitability. We are protecting the dollar margin year-over-year. That's how we are thinking here. Great. Thank you. Thank you. Our next question comes from Steve Powers with Deutsche Bank. Yes. Hey. Good morning. Thank you. Following up on the topic of elasticity, I was just wondering if you could provide any more context in terms of your assumptions for the coming year in that regard and really any variation you're thinking about and we should be thinking about how elasticity is anticipated to maybe vary across your platforms or across your geographic regions? I think that I'm guessing that you're referring mostly to our U.S. business. Let me just take that out first. I think so far and Paulo spoke to this a little bit earlier, our expectation for elasticity has proven to be conservative. As we go forward, we're expecting some of those more, I would say, normal levels of elasticity to impact in 2022. Just to be clear, our outlook contemplates both those elevated levels of elasticity and the continued investments on our brand value proposition. Now, when you look at overall kind of how the way we look at the business is that demand really has remained pretty much intact. The inflation, which is, as you know, being broad-based and not specific to any one category, is really kind of impacting everywhere similarly. Now, if you look at it deeper, personal spending on food has been more stable than disposable income or even discretionary spending over time. If you go even further, when you look at Kraft Heinz specifically, the reality is that we have, as I said earlier, quality products in categories in which we can compete at a price that is affordable to consumers. I mean, just to give you a sense, I mean, when you think about Kraft Mac & Cheese, in our blue box, it's about $0.50 per serving. If you think about Oscar Mayer hot dogs, it's about $0.25 a piece. If you think about Heinz Ketchup, it's about $0.10 an ounce. Those are things that we continue to feel strong about because we have a way in which we create great quality products at a way that consumers can afford. We're also taking more actions than that. We also are using our design-to-value to make sure that we're thinking around how do we boost quality in our products while reducing costs, essentially making sure that we give consumers exactly what they're looking for and not the things they don't need. Lastly, we're also making sure that we're investing in better creative and communication so that we have, in fact, stronger relevance of our brands that actually are helping us make sure that we continue to drive better renovations, innovations in a way that matters to what consumers are looking for today. Thank you. Okay. Great. If I could follow up on a different topic, actually, there's a good deal of discussion about your strategy to expand and drive growth in emerging markets. I guess as we think about the strategic investments that you've embedded in the 2022 plan, can you just talk about sort of the allocation of those investments in your developed markets versus your emerging markets and just how much of an accelerated push towards the emerging markets you're thinking about and we should be thinking about as it relates to the new year? Hi. Maybe I can take it here as Rafael speaking. Look, we continue to be very optimistic of our strategy with focus on emerging markets, right, and taste elevation. I mean, we continue to expect a double-digit organic growth, further gains on market share in the future, and leveraging our repeatable go-to-market model. I mean, this has been live in about 30% of the countries we operate today in emerging markets. We look to continue growing this and boosting our go-to-market further in 2022. I mean, the strategy remains the same. We'll play it as we've been doing. We did four acquisitions in 2021, add-ons in different markets that enable us to expand within our taste elevation focus in specific countries that we see a big opportunity for growth. That strategy should remain. It's paying off, and we will continue. Rafael, I would just add that the engine for growth in these emerging markets is really the brand Heinz that is in unbelievable shape and getting better every day from a consumer standpoint, which gives us a lot of opportunities for growth to expand Heinz further, not only ketchup but other products. Emerging markets will continue being a great engine of our growth. Okay. Very good. Thanks to you all. Thank you. Thank you. That concludes today's question-and-answer session. I'd like to pass the call back to Chris Jakubik for closing remarks. Well, thanks, everyone, for joining us today for follow-up questions. Myself and the rest of the IR team will be available for any additional questions. Thanks again for joining us today, and we'll see you at CAGNY next week. This concludes today's conference call. Thank you for participating. You may now disconnect.