Kraft Heinz Co (KHC)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Objective:

The following discussion provides an analysis of our financial condition and results of operations from management's perspective and should be read in conjunction with the condensed consolidated financial statements and related notes included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q. Our objective is to also provide discussion of material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides an understanding of our financial condition, results of operations, and cash flows.

Description of the Company:

We manufacture and market food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world.

We manage our operating results through four operating segments: North America, Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”). We have two reportable segments defined by geographic region: North America and International Developed Markets. Our remaining operating segments, consisting of WEEM and AEM, are combined and disclosed as Emerging Markets.

During the second quarter of 2026, certain organizational changes were announced that are expected to impact our future internal reporting and reportable segments. We plan to combine our WEEM and AEM operating segments to form the Emerging Markets operating segment in order to increase efficiencies and drive sustainable growth across our global business. In conjunction with the creation of the Emerging Markets operating segment, we plan to move remaining European countries within the WEEM operating segment into the EPDM operating segment.

As a result of these changes, we expect to have three reportable segments: North America, Europe and Pacific Developed Markets, and Emerging Markets. We expect that the change to our reportable segments will be effective in the third quarter of 2026.

See Note 16, Segment Reporting, in Item 1, Financial Statements, for our financial information by segment.

Acquisitions and Divestitures:

On December 31, 2025, which was in the first quarter of our fiscal year 2026, we closed the sale of our infant and specialty food business in Italy within our International Developed Markets segment for cash consideration of approximately $146 million. See Note 4, Acquisitions and Divestitures, in Item 1, Financial Statements, for additional information on divestiture activities.

Business Trends and Items Affecting Comparability of Financial Results

Inflation and Tariff Impacts:

During the six months ended June 27, 2026, we experienced inflationary pressures in our supply chain costs at rates lower than those we experienced in the prior year period. However, we expect inflationary pressures to increase throughout 2026 due, in part, to the Iran Conflict, although there continues to be significant uncertainty. We continue to take measures to mitigate the impact of this inflation through efficiency initiatives, pricing actions, alternative sourcing, and hedging strategies. However, there has been, and we expect that there could continue to be, a difference between the timing of when these beneficial, mitigative actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we have taken have, in some instances, negatively impacted, and could continue to negatively impact, our market share.

Throughout 2025, we experienced increased inflationary pressures in our supply chain costs due to the tariff and trade policy actions taken by the United States. On February 20, 2026, the U.S. Supreme Court invalidated those tariffs imposed by the Trump Administration under the International Emergency Economic Power Act (“IEEPA”). In response to the Supreme Court's decision, the Trump Administration announced a new 10% global tariff under a different statutory authority; however, there remains uncertainty regarding the duration, scope, and likelihood of further legal challenges of the newly initiated tariffs.

Further, on March 4, 2026, the Court of International Trade ordered the Trump Administration to begin refunding all tariffs imposed under IEEPA. Kraft Heinz is not the Importer of Record for the majority of the raw materials we source from outside of the U.S. As a result, any recovery is dependent on the actions of our suppliers and the contractually negotiated outcomes with these suppliers. Therefore, the timing and the amount of recovery are uncertain at this time.

34

Iran Conflict

On February 28, 2026, the United States and Israel launched a joint military operation against Iran targeting the country's leadership, nuclear facilities, missile sites, and security forces. In response, Iran launched retaliatory strikes against Israel, Saudi Arabia, United Arab Emirates, and other countries in the Persian Gulf region. As of June 27, 2026, less than 1% of consolidated total assets were located in the impacted countries, and less than 1% of consolidated net sales were generated by our businesses in the region. While the Iran conflict did not have a material impact on our results of operations through the second quarter of 2026, the ongoing geopolitical tensions involving Iran have increased, and could continue to increase, the risk of supply-chain disruption and inflationary pressures, particularly related to procurement and logistics costs. As the situation is rapidly changing, we will continue to evaluate the potential impact that this conflict has on our business.

Regulatory Landscape:

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA includes a broad range of changes to U.S. tax law, which did not have a material impact on our total tax provision as of June 27, 2026, and we do not expect the elective provisions of the law to have a material impact on our effective tax rate in future periods. Further, certain provision of the OBBBA impact the timing of cash tax payments, which resulted in a reduction of our cash tax payments in 2025, and is expected to reduce cash tax payments in 2026, However, we do not expect these provisions to have a material impact on our cash flows in future periods.

The OBBBA also enacted modifications to the Supplemental Nutrition Assistance Program (“SNAP”). As of the second quarter of 2026, the modifications have resulted in a reduction of the number of SNAP participants and the average benefits received by the eligible participants, which has, and may continue to have, a negative impact on consumers’ demand for our products. While we have taken measures to attempt to mitigate these negative impacts, these modifications to the SNAP program may continue to have a negative impact on our results of operations, cash flows, and market share.

Previously Announced Separation Transaction:

On September 2, 2025, we announced a plan to separate the Company into two independent, publicly traded companies through a tax-free spin-off (the “Separation”). On February 11, 2026, we announced that the Kraft Heinz Board of Directors (the “Board”) has decided to pause work related to the Separation. If work related to the Separation is resumed, the Separation would be subject to the satisfaction of customary conditions, including final approval by the Board, receipt of favorable tax opinions of our U.S. tax advisors with respect to the tax-free nature of the Separation, and the effectiveness of appropriate filings with the U.S. Securities and Exchange Commission. The timing of the Separation and whether it will be completed is uncertain and we cannot assure that the Separation will be completed on the anticipated timeline or at all or that the terms of the Separation will not change. We incurred $10 million of separation costs for the three months ended June 27, 2026, primarily related to employee-related and technology costs. We incurred $66 million of separation costs for the six months ended June 27, 2026, primarily related to consulting, advisory, employee-related, and technology costs. These costs were recognized in SG&A on our consolidated statements of income.

Results of Operations

We disclose in this report certain non-GAAP financial measures. These non-GAAP financial measures assist management in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our underlying operations. For additional information and reconciliations to the most closely comparable financial measures presented in our condensed consolidated financial statements, which are calculated in accordance with U.S. GAAP see Non-GAAP Financial Measures.

Consolidated Results of Operations

Summary of Results:

35

Net Sales:

(a)    Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Three Months Ended June 27, 2026 Compared to the Three Months Ended June 28, 2025:

Net sales decreased 1.4% to $6.3 billion for the three months ended June 27, 2026 compared to $6.4 billion for the three months ended June 28, 2025, including the favorable impact of foreign currency (0.5 pp) and unfavorable impact of acquisitions and divestitures (0.6 pp). Organic Net Sales decreased 1.3% to $6.2 billion for the three months ended June 27, 2026 compared to $6.3 billion for the three months ended June 28, 2025, primarily due to the unfavorable volume/mix (2.6 pp), which more than offset higher pricing (1.3 pp). Pricing was higher in each segment. Volume/mix in North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

Six Months Ended June 27, 2026 Compared to the Six Months Ended June 28, 2025:

Net sales decreased 0.3% to $12.3 billion for the six months ended June 27, 2026 compared to $12.4 billion for the six months ended June 28, 2025, including the favorable impacts of foreign currency (1.2 pp) and unfavorable acquisitions and divestitures (0.6 pp). Organic Net Sales decreased 0.9% to $12.1 billion for the six months ended June 27, 2026 compared to $12.2 billion for the six months ended June 28, 2025, primari

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Objective:

The following discussion provides an analysis of our financial condition and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and related notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Our objective is to also provide discussion of material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides an understanding of our financial condition, results of operations, and cash flows.

See below for discussion and analysis of our financial condition and results of operations for 2025 compared to 2024. See Item 7, Management’s Discussions and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 28, 2024 for a detailed discussion of our financial condition and results of operations for 2024 compared to 2023.

Description of the Company:

We manufacture and market food and beverage products around the world through our eight consumer-driven product platforms: Taste Elevation, Easy Ready Meals, Substantial Snacking, Desserts, Hydration, Cheese, Coffee, Meats, and other grocery products.

We manage our operating results through four operating segments: North America, Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”). We have two reportable segments defined by geographic region: North America and International Developed Markets. Our remaining operating segments, consisting of WEEM and AEM, are combined and disclosed as Emerging Markets.

See Note 21, Segment Reporting, in Item 8, Financial Statements and Supplementary Data, for our financial information by segment.

Previously Announced Separation Transaction:

On September 2, 2025, we announced our plan to separate the Company into two independent, publicly traded companies through a tax-free spin-off (the “Separation”). On February 11, 2026, we announced that the Kraft Heinz Board of Directors (the “Board”) has decided to pause work related to the Separation. See Item 1A, Risk Factors, for further discussion of risks relating to the Separation.

Business Trends and Items Affecting Comparability of Financial Results

Inflation and Supply Chain Impacts:

During the year ended December 27, 2025, we experienced increased inflationary pressures in our supply chain costs compared to the prior year period, due in part to the tariff and trade policy actions taken by the United States and foreign governments during the year. We expect these inflationary trends to moderate through 2026, although there continues to be significant uncertainty. Further, we continue to take measures to mitigate the impact of this inflation through efficiency initiatives, pricing actions, alternative sourcing, and hedging strategies. However, there has been, and we expect that there could continue to be, a difference between the timing of when these beneficial, mitigative actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we have taken have, in some instances, negatively impacted, and could continue to negatively impact, our market share. As the situation continues to remain fluid due to the rapidly changing global trade environment, we continue to evaluate the potential implications of these actions on our business.

Consumer Trends:

In the second quarter of 2025, we announced our commitment to remove Food, Drug & Cosmetic (“FD&C”) colors from our U.S. portfolio of products before the end of 2027. Additionally, we have committed to ensuring that all new products launched in the U.S. will be free of FD&C colors. This initiative will impact a subset of the products sold within our North America segment, primarily within our Hydration and Desserts platforms. While we do not currently anticipate a significant impact to our input costs in our efforts to meet this commitment, our net sales, market share, or results of operations could be adversely affected if we are unsuccessful in our efforts to continue to satisfy consumer preferences.

Regulatory Landscape:

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the United States. The OBBBA includes a broad range of changes to U.S. tax law, which did not have a material impact on our total tax provision as of December 27, 2025, and we do not expect the elective provisions of the law to have a material impact on our effective tax rate in future periods. Further, certain provision of the OBBBA impact the timing of cash tax payments, which resulted in a reduction of our

28

cash tax payments in 2025, and is expected to reduce cash tax payments in 2026; however we do not expect these provisions to have a material impact on our cash flows in future periods.

The OBBBA also enacted modifications to the Supplemental Nutrition Assistance Program (“SNAP”). The modifications are expected to reduce the number of SNAP participants and the average benefits received by the eligible participants, which could impact consumers’ demand for our products. We intend to take measures to mitigate the potential negative impacts through pricing strategies and changes to our product portfolios. However, the modifications to the SNAP program may have a negative impact on our results of operations, cash flows, and market share.

Impairment Losses:

Our results of operations reflect goodwill impairment losses of $6.7 billion and intangible asset impairment losses of $2.6 billion in 2025 compared to goodwill impairment losses of $1.6 billion and intangible asset impairment losses of $2.0 billion in 2024. See Note 9, Goodwill and Intangible Assets, in Item 8, Financial Statements and Supplementary Data, for additional information on our goodwill and intangible asset impairment losses.

Acquisitions and Divestitures:

In 2025, we entered into a definitive agreement to sell our infant and specialty food business in Italy, within our International Developed Markets segment. On December 31, 2025, which is in the first quarter of our fiscal year 2026, we closed the sale for total cash consideration of approximately $146 million. In 2024, we closed the sale of our infant nutrition business in Russia (the “Russia Infant Transaction”) and the sale of 100% of the equity interests in our Papua New Guinea subsidiary (the “Papua New Guinea Transaction”), both within Emerging Markets. See Note 5, Acquisitions and Divestitures, in Item 8, Financial Statements and Supplementary Data, for additional information on our acquisition and divestiture activities.

Results of Operations

We disclose in this report certain non-GAAP financial measures. These non-GAAP financial measures assist management in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our underlying operations. For additional information and reconciliations to the most closely comparable financial measures presented in our consolidated financial statements, which are calculated in accordance with U.S. GAAP, see Non-GAAP Financial Measures.

Consolidated Results of Operations

Summary of Results:

Net Sales:

(a)    Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Fiscal Year 2025 Compared to Fiscal Year 2024:

Net sales decreased 3.5% to $24.9 billion in 2025 compared to $25.8 billion in 2024, including the unfavorable impacts of foreign currency (0.1 pp). Organic Net Sales decreased 3.4% to $24.9 billion in 2025 compared to $25.8 billion in 2024, primarily due to the unfavorable volume/mix (4.1 pp), which more than offset higher pricing (0.7 pp). Pricing was higher in each segment. Volume/mix in North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

29

Net Income/(Loss):

(a)    Adjusted Operating Income is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Fiscal Year 2025 Compared to Fiscal Year 2024:

Operating income/(loss) decreased 377.4% to a loss of $4.7 billion in 2025 compared to income of $1.7 billion in 2024, primarily due to non-cash impairment losses that were $5.6 billion higher in the current year period. In addition to the impact of these non-cash impairment losses, operating income/(loss) decreased $715 million due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, separation costs incurred in the current year, unfavorable changes in unrealized losses/(gains) on commodity hedges, increased advertising expenses and increased research and development costs. These unfavorable impacts to operating income/(loss) were partially offset by higher pricing and decreased general corporate expenses.

Net income/(loss) decreased 313.0% to a loss of $5.8 billion in 2025 compared to income of $2.7 billion in 2024. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above, higher income tax expense and higher interest expense, partially offset by favorable changes in other expense/(income).

•Our effective tax rate was an expense of 7.4% on pre-tax loss in 2025 compared to a benefit of 220.5% on pre-tax income in 2024. The year-over-year increase in the effective tax rate was due primarily to higher non-deductible goodwill impairments in the current year and recognizing a non-U.S. deferred tax asset as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands offset by establishing valuation allowances on certain non-U.S. deferred tax assets in the prior year.

•Other expense/(income) was income of $171 million in 2025 compared to $85 million in 2024. This change was driven by a $53 million increase in interest income primarily due to interest earned on our available-for-sale securities, and a $42 million net loss on the sale of a business recognized in 2025 compared to a $81 million net loss on the sale of businesses in 2024. These positive impacts on other expense/(income) were partially offset by a $28 million decrease in our net pension and postretirement non-service components.

Adjusted Operating Income decreased 11.5% to $4.7 billion in

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]