Kraft Heinz – Risk Profile
- As per GlobalData's proprietary risk methodology, Tyson Foods' overall risk score is 3.23, signifying medium risk
- Country and operational pillars have boosted the overall risk profile of the company
- High liabilities have affected the liquidity ratios and poor interest coverage ratios have impacted the overall financial risk score
The Kraft Heinz Co (Kraft Heinz) has a good risk profile and is one of the leading companies based on our proprietary risk assessment of the food sector in the consumer industry. The company's country and operational risk scores are higher than the sector's average. The company has a diversified sales and manufacturing network with a vast customer base. However, inadequate cash flow is a cause for concern.
About the Company
Kraft Heinz is a food and beverage company. Its product portfolio includes cheese and other dairy products, meats, refreshment beverages, coffee, refrigerated meals, packaged dinners, condiments and sauces, beans and pasta meals, snack nuts, dressings, frozen food, soups, infant nutrition, and other food and grocery items. Kraft Heinz markets its products under Kraft, Heinz, ABC, Ore-Ida, Capri Sun, Oscar Mayer, Planters, Philadelphia, Velveeta, and Maxwell House brands.
Kraft Heinz is one of the leaders in the food industry, with a market cap of $45 billion. It reported revenue of $26 billion in 2021, which declined 0.55% over 2020. Net income increased 184% in 2021 compared to 2020.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
Kraft Heinz's overall risk score is at par with the sector's overall score. Companies like Dali Foods Group Co Ltd, Calbee Inc, and Foshan Haitian Flavoring Food Co., Ltd. are the leaders in the sector.
Country Risk:
Kraft Heinz has a country risk score of 4.60. is better than the sector's average. The company's majority of the revenue is from the United States (73.33%), followed by Canada (6.25%) and other regions (20.39%). Though the company operates in the US, the UK, Canada, and other international locations, it generates the majority of its revenue from the US. Dependence on the US could affect the company's operational and financial performance and increase its business risks as it would be subject to the economic and geopolitical risks associated with the region, which could affect the demand for its products or disrupt the supply chain and reduce its market share and growth opportunities. It also hinders the company's growth in international markets.
Industry Risk:
The company's primary exposure is to the food sector. Most of its revenue comes from the food business (86%), followed by non-alcoholic beverages (10%). Low-profit margins and weak growth projections characterize the food and non-alcoholic beverage sectors, resulting in an average industry risk score of 3.
Operational Risk:
The company has an operational score of 3.66, primarily attributed to its scale. A strong market position combined with a comprehensive brand position provides a competitive advantage to the company. The company has over 60 brands and sells and distributes its products worldwide. Though the company's sales declined in recent years, profitability has improved. Improving profitability increases the company's ability to provide higher returns to its shareholders, enabling it to gain their confidence. However, low asset turnover remains a concern.
Financial Risk:
Kraft Heinz's financial score of 2.09 is less than the industry's average. High liabilities have affected the liquidity position of the company. Low liquidity might prevent the company from meeting its short-term obligations efficiently. The company's cash flow from operation is inadequate relative to its debt, affecting the cash flow ratios score.
About our Methodology:
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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