Promoted
Business

Kraft’s Earnings Could Melt From Velveeta Shortage

The Velveeta cheese wells have run dry, largely due to a surge in demand from celebrations surrounding the New Year and post-season football.

AP Photo/Paul Sakuma, File

What’s being called Cheesepocalypse — a nationwide shortage of Velveeta cheese product — could have larger implications for Kraft, whose stock dropped by nearly $1 per share after news of the low supply broke Tuesday.

The company has called early January its busiest time of the year, citing New Year’s Eve and post-season football as factors contributing to the recent surge in demand for Velveeta’s cheese product. But with the gooey dip staple not expected back on grocery store shelves until February, the company’s first quarter earnings and its stock may be in trouble.

As a whole, cheese makes up about 20% of Kraft Foods. According to analyst estimates, Velveeta represents 5% to 8% of the company’s revenue, a big enough chunk to potentially move the needle come earnings season.

“If you’re Kraft, you wish you could fill the demand,” said Brian Yarbrough, an analyst covering Kraft at Edward Jones. “They hate it because there are some private labels that may knock out demand for Velveeta, but the customers don’t think it tastes as good.”

Still, Yarbrough said the shortage could affect sales by as much as a half percent. While that doesn’t sound like much, it could very well be to Kraft, which is already suffering from consumers cutting back on some of its other packaged food products like Mac ‘N’ Cheese in recent months.

A lot of the Velveeta shortage’s impact on Kraft’s earnings will come down to how long it lasts. And with the company likely to supply larger retail customers first, some smaller grocery stores will be left guessing for at least a couple of months as to when their shipments will come in, Yarbrough said, adding that it remains to be seen just what financial ramifications will be for the quarter.

“It may impact first quarter results just slightly,” Yarbrough said. “Recalls are bigger deals and sometimes don’t move the market.”

Check out more articles on BuzzFeed.com!

Mariah Summers is a business reporter for BuzzFeed News and is based in New York. Summers reports on hospitality, travel and real estate.
Contact Mariah Summers at mariah.summers@buzzfeed.com
 
 
Here Are The Top Stories
  • Police in Athens used pepper spray on protesters two days ahead of Greece's major bailout vote.
  • A medical helicopter crashed in Colorado. The crash killed the pilot and injured two crew members.
  • Serena Williams survived an upset at Wimbledon and defeated current Britain's Heather Watson. She'll play her older sister Venus in the next round of the tournament ?
Get The News App

More News

More News

Now Buzzing