By Jesse Newman

U.S. consumers are fed up with inflation and reluctant to pay higher prices. But food companies' own costs are still rising for key ingredients from cocoa to coffee.

Food giant Kraft Heinz said Wednesday that it is planning to offer lower prices on some products this year, part of an effort to boost sales on struggling staples including Lunchables, Capri Sun, macaroni and cheese and mayonnaise. Beyond increasing promotions, Kraft Heinz said it is considering changing the prices of some products.

"There is not a silver bullet," said Andre Maciel, Kraft Heinz's chief financial officer, of the various approaches the company has planned to bolster its business.

Though Kraft Heinz plans to increase promotions, the company said its discounting remains below pre-pandemic levels.

At the same time, the company said that it would raise prices in emerging markets and on products like coffee where its own costs are increasing.

Government data released Wednesday showed that on a monthly basis, U.S. grocery prices rose by the largest margin in over two years, driven in large part by soaring egg prices. The cost of groceries increased 0.5% in January from December, according to the Labor Department.

Wall Street analysts have pointed to mounting challenges for big food companies beyond rising costs, including growing adoption of weight-loss drugs and heightened scrutiny of processed food from U.S. regulators and politicians.

Some analysts were skeptical that an uptick in Kraft Heinz's promotions this year would be sufficient to improve sales. Shares in Kraft are down more than 3% in Wednesday trading.

"The question remains if [Kraft Heinz] will go far enough," said Piper Sandler's Michael Lavery. "A bigger reset may be necessary."

Other food makers have discussed their plans to try to thread the needle on prices, too.

Oreo maker Mondelez said last week that it would continue to raise prices amid record cocoa prices, while trying to protect key price thresholds.

"If cocoa prices remain elevated where they are today, that might require more pricing in the second half of this year and in 2026," said Mondelez CEO Dirk Van de Put.

Mondelez said its approach over the last few years has been to implement multiple price increases to allow consumers to acclimate to the changes.

Hershey, like Mondelez, said last week that it anticipates high cocoa prices to significantly pressure earnings in 2025. The maker of Reese's Peanut Butter Cups said that it is closely watching consumers' reactions to higher prices.

For both 2025 and 2026, the company said it expects to consider all tools necessary to manage higher cocoa costs, including price increases.

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(END) Dow Jones Newswires

February 12, 2025 13:21 ET (18:21 GMT)

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