Kraft Heinz's investment with Microsoft is one of the largest in the company’s history.
The Kraft Heinz Company shared insight into the benefits it’s already recording as a result of its recent partnership with Microsoft, including how it's collaborating with retailers for store and inventory data.
First announced in April and a component of the CPG’s multi-year transformation journey, Kraft Heinz tapped Microsoft to migrate the bulk of its global data center assets to Azure and its ERP software to SAP on Azure. As part of this, it’s partnering for a number of digital initiatives that include building a supply chain control tower and creating digital twins for its manufacturing facilities in North America.
The investment with Microsoft is one of the largest in the company’s history, and Miguel Patricio, Kraft Heinz CEO, shared a trio of examples of the benefits and expectations surrounding the partnership at the Bernstein Annual Strategic Decisions Conference last week.
As consumer goods companies raise prices to preserve margins during historic inflation, effectively managing promotions has become table stakes. Noting that Kraft Heinz has spent billions of dollars on promotions in the past, the company has become more adept in understanding why certain promotions succeed vs. others.
With Microsoft, however, the company is now also using artificial intelligence to maximize its promotional budgets.
“What is better in New York in the convenience store is not better in California in a Hispanic supermarket, right?” noted Patricio. “And so, by analyzing all the data that we have, we can maximize this budget in a much better way and a faster way. … We could get there [but] it would take much more money, much more time.”
Kraft Heinz is working with Microsoft for improving operational planning for everything from revenue management to its supply chain to retail data sharing. This includes collecting store data from such retailers as Kroger, Walmart, and Albertsons, with product availability, distribution, and pricing data.
The two companies are also working to integrate data from both Kraft Heinz’s factories and warehouses with the retailers’ warehouses to improve forecasting.
“These will have incredible results,” Patricio predicted, including fewer out of stocks, more working capital, less waste, and higher revenues.
“We are still behind good. We have to get to good and then to great, and we still take a lot of time on innovation, and the success rate has not been the best,” he said. “So we are working with them on these two fronts — on reducing the time on innovation and on being much more accurate on the success of innovation.”
In addition to enlisting Microsoft, Kraft Heinz has also made changes to its R&D structure to improve its innovation capabilities. This includes creating a new head of R&D role to lead the strategic decision direction of innovation, reduce fragmented efforts, and serve as a stronger voice for R&D in the company.
The company aims to increase innovation by three-fold vs. where it is now, Patricio said, albeit without diluting the rest of the Kraft Heinz portfolio (such as with too many line extensions).
“[The] company made a mistake to put net sales coming from innovation as a KPI,” he noted, “and if you just do that, you’re going to have people doing a lot of stuff.”
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