Good day. My name is Karen and I'll be your operator today. At this time, I would like to welcome everyone to The Kraft Heinz Company's Fourth Quarter 2016 Earnings Conference Call. I will now turn the call over to Chris Jakubik, Head of Global Investor Relations. Mr. Jakubik, you may begin.

Hello, everyone, and thanks for joining our business update for the full year and fourth quarter of 2016. With me today are Bernardo Hees, our CEO; Paulo Basílio, our CFO; and George Zoghbi, the Chief Operating Officer of our U.S. Commercial Business. During our remarks, we'll make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our press release and our filings with the SEC. We'll also discuss some non-GAAP financial measures during the call today. These non-GAAP financial measures should not be considered a replacement for, and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and at the back of the slide presentation available on our website. Before I hand it over to Bernardo, please note some changes to our financial reporting that were outlined in our earnings release. In the fourth quarter of 2016, we reorganized our operating segments to better align with our global growth strategy, and therefore have reflected these changes in our business segment reporting for all periods presented. As a result, our Russian business is now part of our Europe segment instead of rest of world, and cost associated with our Global Procurement Office have been reclassified from our Europe segment to general corporate expenses. Now, let's turn to slide 2, and I'll hand it over to Bernardo.

Thank you, Chris, and Happy New Year to everyone. As I hope you saw in our press release, we had solid Q4 results overall with solid sales and business investments to further improve the health of our brand. But I'll start by focusing more on what we have been able to accomplish in the first full year of The Kraft Heinz Company. It formed the base and in many ways that's our agenda for the year ahead. So, let's start with our progress against the three objectives of our strategy that we laid out at the beginning of our merger. In our first objective, to deliver profitable sales growth, on the top line, we built positive momentum through the year, despite the commodity headwinds that persisted during the year, resulting in profitable sales and flat to positive organic sales growth in all regions except Europe. We generated significant gains from our Big Bet innovation strategy in our efforts to capture whitespace opportunities. This was led by condiments worldwide, especially ketchup and barbecue sauce, pasta sauce in North America and Latin America; soy sauce in China, and hot sauces and mayo in Europe. Our investments also led to better market share trends over the course of the year in core categories such as sauces worldwide including pasta sauce in Canada and Latin America; green cheese and mac & cheese in the United States, UK beans; baby food in Italy; and in Australia, beverage. That said we still have significant areas to improve in 2017. They include Indonesia soy sauces, U.S. cold cuts, baby food in Canada, and our non-measured channel shares in the UK to just name a few. We also pushed into places, whitespace, where Kraft Heinz did not previously compete, products such as Devour frozen meal, Cracker Barrel mac…

Thank you, Bernardo, and good afternoon, everyone. Let's turn to slide four and our performance in the United States. The first point I would make is that we had a strong finish to 2016, in many ways giving us good momentum from a consumer takeaway perspective as we head into 2017. If you look at the charts on the right, there are few things I would note. First, in measured channel, the negative impact from commodity deflation on category growth persisted during 2016 and longer than we originally thought, although, we currently expect that this is likely to turn to inflation as 2017 progresses. Second and more importantly, you can see that we had improved measured channel share performance in Q4 versus our 52-week numbers below, driven by our Big Bets and better retail execution. Specifically, we drove strong consumption improvement from the launch of Devour and SMARTMADE in frozen meal, mainstream, and ground coffee and pods as well as nice turnaround in sandwich cheese, both Kraft Singles and Natural. This was supported by improved execution at retail with an increase in total distribution points, TDPs, versus the prior year in Q4 and better feature and display conversion. In fact, we exited the year with a shorter list of share challenges than we started the year with. We also saw a longer list of categories moving into share gains and ended the year with roughly 70% of our categories holding or gaining shares in Q4. The third factor I would highlight is that sales in Q4 were good. However, they included some one-off benefit that will not repeat. Foodservice was not a contributor to non-measured channel growth in Q4 as whitespace gains gave way to weakening trend in base consumption and store traffic. And although, we had further whitespace gains…

Thank you, Paulo. Let me start by saying that 2016 was a solid year for our company. We made a great deal of progress in realizing our potential. But we still have a lot to improve in order to deliver our expectation for 2017. In 2017, we enter year two of our multi-year merger plan. Headwinds remain from highly competitive retail markets to persistent foreign exchange headwind, especially in Europe. So at the top of our agenda is an even sharper focus on profitable organic sales growth. By that, I mean that we will focus our investments in innovation, renovation and marketing on our leading brands, along with prioritizing fewer, bigger and bolder bets within our portfolio. These will include expanding our core by innovating into adjacent categories and new segments, where Kraft Heinz brand have the ability to win. It also includes Big Bets in existing categories by aggressively targeting on-trend segment where you're currently under indexed, such as the 2016 bet we laid in the U.S. natural cheese. For competitive reasons, we do not have a list of key initiatives to provide today, but we will certainly highlight them as we roll them out in the coming quarters. And finally, globally, we're focusing on three key brands: Heinz, Kraft and Planters, and in five categories with global potential; condiments and sauces, cheese, meals, nuts and baby food. The emphasis within these opportunities will be to increase investment levels and improve execution, which includes applying best practice for wining in each channel, from traditional retail and discounters to foodservice, and over time e-commerce. All this will be fueled by significant incremental investment in marketing, both for market capabilities and product development, covering North America, Europe and rest of the world. Our agenda also includes achieving best-in-class operating efficiency with…

Thank you. Our first question comes from the line of Andrew Lazar from Barclays.

Good evening.

Hi, Andrew.

I just have two things, if I could. One is you talk about profitable organic sales growth going forward, a sharpening of focus on that. I guess how should we externally measure the company against that goal of profitable sales growth? Is there a minimum amount of growth and sort of EBITDA margin that – or a combination of those two that we can use as, let's say, measuring sticks to assess the execution on this goal? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hi, Andrew. This is Paulo. So we aren't going to provide like a target on this. But the way that we see this profitable organic growth is that through our innovation process and through our all the initiatives that we're handling here in the company we expect to have sales that really move down to EBITDA over time.

Okay. And then if we think about – I guess if we think about the North American business investments that you talk about, that I think you mentioned were not contemplated at the time of the merger. Trying to get a sense of sort of exactly what you mean by netted out of the synergy? And should we take from that that the cost of growth essentially is more significant than you might have thought at the time of the merger or how should we put that business investment step up in context? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hi, Andrew. It's Paulo again. So what we're talking about here is that in the first half the business investment is pretty much investment that we're doing in quality improvements for the products, renovation, marketing pullout, new products, and more Big Bets. We're investing behind both markets to improve the retail execution that we have and also now expanded distribution in our foodservice segment. And, again, all of these investments, we were not contemplating to do that. We saw the opportunity to do this now and we're executing this. And just to be clear that we always decided to provide a savings target that was net of everything, so we're keeping doing this. We're just highlighting that we found more opportunities in the business and we're executing this. But, again, our target of $1.7 billion is still net of all of these investments.

Thank you.

Thank you. And our next question comes from the line of Steven Strycula from UBS.

Hello, everyone. Good revenue quarter. So, quick question, kind of like following up with Andrew. The timing of the factory closures, it seems like some of that is getting – taking a little bit longer than maybe expected or maybe we mismanaged how it would flow into the year. So, does that mean there is some kind of tail effect of cost savings dipping into early 2018? That'd be my first question.

Thank you, Steve. This is George. I will take this question. Our manufacturing modernization program is on track to deliver updated technology and low cost production. We are now in the peak activity and won't be past that peak until late 2017, as I shared on the last call. We remain in line with expectation and on budget to deliver what we shared with you on prior call.

Okay. Great. And then, my other question would be related to pricing. We definitely saw very strong volume. So, George, if you could help us understand, would the U.S. business organically still have been positive ex, call it, the trade shift? And should we think about – with price/mix being just below flat this quarter should we start to see that improve as you think through revenue management initiatives for the Kraft portfolio this year? And also you're saying that commodity prices might be bottoming, if you could help us think through that, that would be great?

Yeah. Pricing for Q4 was in line with our strategy all along and in line with our expectation. And you'd probably saw both sides of revenue management at work, the side where we went dark in some categories, and the side where we went heavy in other categories and we're very happy with the results that we got. The reason we do that, Steve, is that lift on promotion, that traditional lift where you put a promotion and you measure the growth that it's no longer what it used to be. So we have to resort to a number of levers to be able to maintain volume. We tried a number of things in Q4. We are very happy with the results. And that would be reflected moving forward. So that's what you want to expect from us. Some category we're going to move harder. Others we would move softer. All in all, we will manage our revenues always to be ahead to improve our margins.

Great. Thank you.

Thank you. And our next question comes from the line of Bryan Spillane from Bank of America Merrill Lynch.

Hey. Good afternoon, everyone.

Hi, Bryan.

Just two questions from me. One is your thinking about – as we're looking at 2017 and at some point later this year, you'll start to begin the process I guess of repatriating some of the Kraft brands licenses from Mondelēz. Is there anything that you're doing in 2017 and maybe spending ahead of that or anything in there that affects that we should be thinking about in terms of 2017 growth or performance?

Hi, Bryan. Good afternoon, this is Bernardo. Look, about the repatriation, you're right, there would be the brands coming back to us in January 2018, and there is some work to be done in preparation. But from a cost standpoint or from a revenue standpoint, there is really no benefit or impact in the year, right. There is preparation from marketing, from distribution, from our manufacturing capabilities to hit the ground and be running, but I don't think there will be an impact to – on the cost or the revenue for the repatriation efforts.

Okay, thank you. And then just a couple of housekeeping items, can you give us now a sense of what we should look for D&A for this year, depreciation and amortization, interest expense? And maybe just how we should think about transactional foreign exchange? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hi, Bryan. This is Paulo. So, starting from the D&A, we are in Q4 – we're today in a related Q4, $135 million, that's where we are today, so this would take us in $440 million next year. And on top of that, we believe that we're going to have additional $50 million because of the footprint investment that we are doing during 2016. And it looks the interest rates is pretty much our – we have an average cost of debt of 2.9% per year, roughly $32 billion in gross debt, so this would be around $1.3 billion in interest rate. And again, we expect this to come down a little bit once we pay the $2 billion debt that we're going to have in the mid of the year.

Okay. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: So this is pretty much D&A interest expense. Regarding the transaction FX, now we are expecting to see some headwinds in Europe. But again I think our team – our local team is taking the right measures there to have a balanced approach in terms of setting these with price, and also – but also getting the best distribution and sales position to offset that. It's important to – again to remember that Europe for us is 4% of the business and UK is around 0.5% of that.

Okay. Thank you.

Thank you. And our next question comes from the line of Rob Dickerson from Deutsche Bank.

Good evening, everyone. I just have one simple question just on your pointing to the three core brands, and kind of the five core categories globally. So is the expectation, I guess mainly in 2017 as you plan to invest more in certain areas of opportunity in North America. Considering it is still about 75%, three-quarters of your EBITDA. Is the expectation that that investment will be in North America in those brands, and then later you would invest more so in those three core brands on a global basis, so you start in the U.S., but then you expect to continue investing in those brands globally to gain scope, then hopefully improve returns, or we just stick with the investment in North America for now because that's really where the majority of the cash flow is coming?

Hi, Rob. This is Bernardo. I think, it was important to highlight that, just to give a sense of the direction of the focusing looking at three global brands and five top categories that really, when you mix all them represent 70% of the business, and you're going to move forward. That is United States and North America like I mentioned, but also worldwide. And so I don't think there is a distinction really in the amount of investment between U.S. and international. They will be – they'll be moving together. They'll pursue different states and different – what the business is by country and by region, but as a focus looking mid-term, those are the ones. I think, it's important in your question also to highlight that our business is a balance between global brands and local brands. Global brands having the strength and the scale to grow multi-categories and multi-regions; and the local jewelry (39:49) like we like to call customizing to consumer needs on local markets and regions. So we are really happy with our portfolio and the balance we have today between the global brands and local brands, and the specific categories. But those three global, we're calling global brands, in those five categories is really what's going to push us to the next level that we're calling this balance towards profitable growth. I don't think there is a distinction between investment in North America or internationally. It would be case-by-case depending on the state of the business at the regional level.

Okay. Great. Thank you.

Thank you. And our next question comes from the line of Robert Moskow from Credit Suisse. Robert Moskow - Credit Suisse Securities (USA) LLC: Hi, thank you. I just wanted to make sure I understood how the savings will flow through as you build up to $1.7 billion. If I assume that things kind of stay the way they are in the first half of 2017, you would still have quite a bit of benefit versus first quarter a year ago and second quarter a year ago. In fact, I could argue that that gives you the best tailwind in first quarter, but you are guiding to a weaker first quarter. So can I understand like do you expect first quarter to be like your weakest EBITDA growth quarter because of these other Easter factors and such? Or is that offset just by the easy comparison on the saves? Thanks. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hi, Rob. This is Paulo. So I think I hear two questions here. So in terms of how the savings will flow through our P&L in 2017, yeah, as we're seeing with this new, this updated guidance we're giving, we're seeing more savings come in the second half of the year versus the first half of the year. This is pretty much driven by two things is: one, that we're having the investments that are inside the savings number, as I mentioned before, in the first half of the year; and two, there is addition of saves that we found also is going to start more in the second half of the year as we expected today. So that's one thing. In terms of seasonality, in terms of Q1 versus the full year next year, I think the three things that…

Thank you. And our next question comes from the line of Michael Lavery from CLSA.

Good afternoon and thank you. Can you just confirm – I think I caught this, but one of the five categories you said you would focused on, I think it was baby food and you clearly have a smaller footprint there now. I think it's mostly Italy and a little bit in China. When you talk about that as a white space opportunity, is that just organically or would you consider M&A to be a part of that as well?

Hi, Michael. Look, we always look with this, the way that we think the categories and the brand, we always look and think about profitable and organic growth. So the way you're directing here is all organic. And the reason for that is actually you're right to say it's true. A small part in the total portfolio, but very relevant in many countries important for us, including Canada, including Australia, including the UK, for sure Italy like you mentioned, for sure China, Mexico, you're getting to Brazil, Russia that's the biggest category we have there. So when you see all this, even the small presence, where we have a presence it's significant through the Heinz brand most part of the time, sometimes local brands like Plasmon in Italy and so on. And we believe there is a lot of opportunities, like you said, in whitespace geography, again, country-by-country, region-by-region. There is a role that can be played and we want to look at that with the right expectation.

Okay. Thank you. That's very helpful. And then just one other clarification on 1Q. You talked about the Easter shift and the higher investments and the savings pacing being more back-half loaded. Is the Easter shift – that seems more like it affects a shift into 2Q? You also talked about the trade loading in helping 4Q. Is that also potentially one of the headwinds in 1Q or do you think that was that more a pipeline fill for new products or something that might not have as much of a drag on 1Q?

Michael, George here. So as I said in my earlier remark, we have two things that will affect the first Q. One is the Easter shift. And, normally, we put that at just over 1%, 1% to 1.5%, something like that. And the second one that is unique to this year. Because of the strong promotional activities that we've had in the month of December, we put a lot of inventory to support that. That inventory is working its way off in January. And as I said in my remarks, that would be about a 0.5 point. So that will be, to give you an idea, what are the headwinds we will be facing in Q1. One of them is the shift between Q1 and Q2 and the other one is a one-off due to the inventory work-off.

Okay, perfect. Thank you very much.

You're welcome.

Thank you. And our next question comes from the line of Ken Goldman from JPMorgan.

Hi. Thank you. Two for me. First, there's obviously a lot of uncertainty in general right now regarding U.S. tax law, currency exchange rates, et cetera. So I'm curious if that uncertainty – to what degree does it affect your desire, your ability to pull a trigger on a next deal whatever that might be because obviously it's more challenging than usual for any company, not just you, to forecast cash flow for any potential target in this kind of environment? I'm just curious is the macro uncertainty high on your list? It's not really high on your list of concerns. How do you think about that when you think about potential M&A going forward? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hi, Ken. This is Paulo. So, again, I think, first of all, we don't need another acquisition to drive value. And, again, as Bernardo mentioned, we have brands that can sell well. We have a lot of whitespace in front of us. And, again, we are going to evaluate any opportunity that makes sense for the company, that creates value for the company. But again, as a matter of practice we don't comment on possible opportunities.

But you can't comment even on the general way of thinking about it? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: I prefer not to comment on how so and hypotheticals.

Okay. And then, Paulo, you've talked to us in the past, maybe the answer is no comment here as well, but I'll try anyway. You've talked to us in the past about how important it is for this vehicle, The Kraft Heinz, to have, I think in your worlds, iconic brands. And I'm just trying to get a sense, not in an M&A sense, but given what you have already. Why is this quality so critical? Why do you value it so heavily? Really what does it mean to Kraft? I'm just trying to get a sense for maybe why certain assets with I guess call it good brands that maybe don't qualify in your mind as iconic wouldn't be a great fit for what you're trying to do? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Ken, what we've always said is that we believe that we like a lot the industry and we believe that the most valuable asset and the most valuable asset that we have, the asset that gives us the most competitive advantage are the brands. So we value a lot the brands that we own, so that was pretty much the mention I made at that time.

Okay. Thank you. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: We think it's very important, very strong brand in the portfolio.

Thank you very much. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Thank you.

Thank you. And our next question comes from the line of Jason English from Goldman Sachs. Jason English - Goldman Sachs & Co.: Hey, guys. Thanks for carving out some time for me. Appreciate it. Congratulations on a strong year in totality. A couple questions for me. First, the pricing of the commodities benefit for the year. Where did we stack and rack as the year finished out? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hi, Jason, this is Paulo. So when we said in terms of the commodity, we said that in 2016 we had a deflationary year. We mentioned at the beginning – not the beginning, in the mid of the year that we would expect this benefit to stay but it didn't. And in 2017, when we take a look at the spot and forward rates, we're likely to see year-over-year inflation. And we're already seeing that in cheese, coffee, bacon, as George mentioned. So that's what we are today. Jason English - Goldman Sachs & Co.: Okay. Any specificity in terms of the benefit though, that PNOC benefit for the year? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Yeah. So, if you think about what we saw in Q4, we had – definitely we had benefit in price in our results in Q4. But as we're implementing revenue management, key commodity costs are just one of the inputs of our category strategy. And separating the impact of price or PNOC from the variances of the commodity is not as informative as it used to be. So I can say that we had a price benefit in our results in Q4, but I think separate the price initiatives that we had from PNOC is not as informative as it used to be. Jason…

Thank you. And our next question comes from the line of Alexia Howard from Bernstein Research. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Good evening, everyone.

Good evening. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Hey, good evening. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: So for investors last quarter, there was a concern about the trends in Europe, and I think things have changed over there, but that's still an element of concern. Basically, that's the legacy Heinz business that you've now owned for a little over three years. This time around the EBITDA still shrinking, I guess attributed to some step-ups and timing of overhead spending. How you – how can you address the concern that that European business and maybe particularly the UK seems to be slipping? How much were those overhead timing effect this time around, and when do you expect that business to gain some traction again? Thank you.

Hi, Alexia, it's Bernardo. Like we mentioned in the last call and continue to be, the point, our goal in Europe is to return to profitable growth. We really think that our performance – that was a weak performance in 2016 and Europe has absolutely no correlation with the cost side and like you mentioned the overhead, I think, there was a lot of correlation on the stakes, on the go-to-market and things on the promo side, volume mix that didn't work out as we showed, and what we are actually encouraged about is when you see the Q4, the performance by all the business, especially the Benelux and the UK had improved significant looking at sell out consumption, looking at share on the main category, soup, beans, sauces, and you already have 70% of renovation for the year ready in the market. So the results from the Q4 plus what you're seeing now in January moving into February, I really encouraged by a much better performance 2017 in Europe than you had 2016. Still going to be challenged, the retail environment is challenged like the density (54:59) between FX rate and everything that's happening in the continent. But that being said, I think the performance Q4 is really encouraging about we can have a better performance looking at 2017, than our weak performance in 2016. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Will you be able to get some EBITDA growth at some point in Europe? I guess the question is, yes, the top-line is improving. But at what cost, that's the question I am getting.

Look again, when we talk about profitable growth and like Paulo mentioned in the beginning, our idea of sales mix, really sales flowing to the bottom line. We have no intention of gaining sales without profitability. Component that come attached to that. There are investments that needs to be done in the marketing side and in go-to-market side that I think we have been doing and we'll continue to do it. But that being said, if we're able to create profitable growth sales in Europe that should come also with a better performance in the bottom line. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Thank you. I'll pass it on.

Shall we take maybe one more question?

Certainly. Our final question for today comes from the line of Chris Growe from Stifel. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi, good evening. I just had two quick ones for you. I wanted to ask if I could first, with reference to the revenue management program, is that contingent on capital investments and footprint rationalization such that we wouldn't see much of that benefit until the second half of the year or does that program sort of kick in early in the year.

Chris, thank you. This is George. We've been working on establishing the revenue management program infrastructure, processes, and the benefit of it for quite some times now. And as we said in a number of key items we saw that what we used to call our pricing strategy or pricing commodity or trade spend. All of it now is part of our revenue management program. So we're not separating where the efficiency is coming from. So the best, it works best for us just in the investment in the footprint, but more in investment in brands and particularly in building the brand equity as we invest in marketing activity, as we invest in new products, as we invest in renovations like taking out official stuff out like what we did with Mac & Cheese, what we did with frozen meals. You see categories that were declining at double-digit. Now they're all of a sudden increasing at high single-digits. So that's giving us the power to one, price and two, the ability to increase household penetration, so renovation of product and innovation of product. So that's for us is the better working model. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. That's helpful. Thank you. And then just one quick one, I think for Paulo. You talked about in the quarter some incremental investments. I believe marketing was up in the quarter as well as some of the overhead timing. Could you quantify those in anyway percentages or give us any idea of how much that could have burdened the fourth quarter? Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Yeah. So when you think about the Q4, North America, EBITDA increase that we have, the majority of the EBITDA came from savings. We also had, as I said, some benefit coming from price in our EBITDA and this timing of overhead that each of them offset each other then they're both in the range of $50 million. That's what we saw. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for your time. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Thank you.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to Chris Jakubik for any closing comments.

Well, thank you, everybody for joining us this afternoon. For any of the analysts who have follow-up questions, myself and Andy Larkin will be available to take your calls. And for anybody in the media with follow-up questions, Michael Mullen will be here for you as well. So, thank you very much and have a great evening.

Thank you. Paulo Luiz Araújo Basílio - The Kraft Heinz Co.: Thank you.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.