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Kraft Heinz, the food giant whose products include Jell-O and Oscar Mayer meats, released Thursday a startling series of bad news including a multi-billion dollar write-down, signaling a drop in the value of some of its most famous brands.
Kraft Heinz added that last year, it received a subpoena from the Securities and Exchange Commission regarding an investigation into the company's accounting and controls. It also reported disappointing results for the fourth quarter, prompting some analysts to question whether stringent corporate controls over costs could have adverse effects.
The flood of bad news led to a drop in the company's shares of nearly 21% after the close of the negotiations.
Kraft Chief Executive Bernardo Hees said the company's profits were insufficient because they did not provide sufficient cost savings.
"For this, we assume full responsibility," he said Thursday during a call to investors and analysts.
The huge depreciation seems to come from a change in consumer consumption pattern, which favors fresh produce over processed products. The write-down reduced the balance sheet value of US and Canadian operations and the brands Kraft and Oscar Mayer, the company said.
Kraft and Heinz, two pillars of the grocery aisles, merged in 2015 as part of an agreement combining the investments of 3G Capital, a Brazilian private investment group, and Warren E. Buffett's Berkshire Hathaway. Together, the two investment firms held nearly half of Kraft Heinz at the end of last year. Buffett left the company's board last year.
But society has had to deal with both the changing tastes of buyers and the reduction of costs. On this latter issue, the in-depth review of the S.E.C could add to investor concerns.
Kraft Heinz said the regulator had considered "agreements, side agreements, as well as changes or modifications to its agreements with its suppliers". With external accounting and legal consultants, Kraft conducted an investigation to record a $ 25 million increase in costs in the fourth quarter. The company said it should have saved $ 25 million from previous periods.
Kraft Chief Financial Officer David H. Knopf said during the investor call that this anomaly "is not material to our current and prior year financial statements".
Kraft said it would make changes to reduce the risk of making similar accounting mistakes in the future, adding that she continued to cooperate with the board.
3G Capital is well known for its reduced costs from the companies it owns. On Thursday, an analyst asked Mr. Hees whether the tightening of Kraft's belt had gone too far and was now damaging some of its most prominent brands.
"We continue to firmly believe that our model is working and has a lot of potential for the future," said Hees.
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