CHICAGO — A $1.4 billion non-cash impairment charge largely attributable to its Lunchables business underscored the challenges the Kraft Heinz Co. faced during the third quarter of fiscal 2024.

“Lunchables is an important brand for Kraft Heinz, and it is a top priority to expand category penetration in a changing competitive landscape,” said Carlos Abrams-Rivera, chief executive officer, during an Oct. 30 conference call with securities analysts to discuss third-quarter results. “We are fully committed to making significant investments in the brand to boost household penetration and regain market share.”

Issues impacting the Lunchables business include negative publicity that has affected consumer perception of the brand, increased competition and a supply chain issue involving an ingredient supplier’s inability to deliver an ingredient for one of the brand’s most important stock-keeping units.

Steps the company is taking to reinvigorate the brand include increased promotional investments to improve household penetration, the introduction of new flavors and formats, and, in 2025, the company is planning to renovate the entire line.

“Lunchables is a very important part of our business and defending (its) No. 1 market share is a top priority,” Abrams-Rivera said.  “Full stop.”

While the Lunchables brand was responsible for many of the challenges Kraft Heinz faced during the quarter, other brands in North America, like Capri Sun, Mac & Cheese, Oscar Mayer and Spoonables also faced headwinds.

In fact, Abrams-Rivera said that the five brands in the company’s North America Retail business accounted for 80% of the unit’s decline.

With Spoonables, the company is focused on reengaging with lapsed users and with Capri Sun the focus is on optimizing the portfolio to reach additional occasions and consumers.

“We acknowledge that we have quite a bit of work to do, and meaningful improvement will take some time,” he said. “We have identified action items that will drive recovery through our key enablers.”

For the quarter ended Sept. 28, Kraft Heinz recorded a loss of $290 million, which compared unfavorably to the same period of the year before when the company earned $262 million, equal to 21¢ per share on the common stock.

Quarterly sales fell to $6.38 billion from $6.57 billion the year before.

In the North America business unit, quarterly sales fell 3.4% to $4.83 billion from $5 billion the year before. Organic net sales fell 3.2% during the period.

In the International Developed Markets business sales were flat at $882 million during the quarter compared with $883 million the year before, and Emerging Markets sales fell to $675 million from $692 million.

“… In Emerging Markets, we continue to capture share and grow organic net sales through both price and volume/mix,” Abrams-Rivera said. “Results were impacted by consumer and customer pressure in Brazil, as well as continued industry softness in China. In the rest of Emerging Markets, top line grew double digits versus the prior year.”

Given the challenges facing the company, Kraft Heinz updated its guidance for the remainder of the year with organic net sales now expected to be at the low end of its previous guidance range of 2% to flat.

“This change contemplates a slower recovery than originally anticipated in Lunchables, including a 20-basis point headwind due to an upstream supplier issue,” said Andre Maciel, global chief financial officer. “We have a solution and expect the impact to be limited to this year.”