By Jessica DiNapoli
NEW YORK (Reuters) – Kraft Heinz is no longer making Lunchables packaged lunches for low-income students receiving free and reduced-price payments under a federal program due to delicate demand, according to a company statement, the latest blow to one of its most renowned products.
Chicago-based Kraft Heinz (NASDAQ:) announced plans to sell its school lunch program early last year at an industry conference, saying it would target the $25 billion education market.
But demand fell compact of the packaged food maker’s expectations, the company said, as it looks to revive its tired brands such as Lunchables, Jell-O and Crystal Light and boost sales volumes that have weakened after repeated price increases.
A 90-gram Ham and American Cheese Lunchable costs $1.87 at Walmart (NYSE:.com).
“While many school administrators were excited to have these options, demand fell short of our goals,” Kraft Heinz said in a statement. “This sometimes happens across our wide range, especially when we explore new sales channels. Lunch items are not available in schools this year and we hope to return to them in the future.”
The U.S. Department of Agriculture’s School Lunch Program provides free and low-cost lunches to approximately 30 million children from low-income families or who meet other federal requirements.
Kraft Heinz hoped that this move would expand distribution and sales and aid the food company reach recent consumers. Schools were ecstatic to serve ready-made lunches, the preparation of which does not require additional work. But the launch fell compact after U.S. consumer watchdog group Consumer Reports reported in April that school lunch program breakfast items contained high levels of sodium, raising questions about whether cracker-and-bread combos should be given to children as youthful as kindergarten to high school.
In a statement Tuesday, the company said that “all Lunchables products are safe and made with high-quality ingredients that meet our own high standards, as well as the strict safety standards set by government agencies.”
“There is nothing more important to us than the quality and safety of our food,” the company said, adding that the reason for withdrawing the product from the school lunch program is unrelated to Consumer Reports’ findings.
Lunchables, created in the 1980s for time-poor working moms, drove Kraft Heinz’s overall sales in the quarter ended Sept. 28. Sales directly to customers fell 15%, Kraft Heinz CEO Carlos Abrams-Rivera said on an Oct. 30 call with investors.
“The negative publicity we received from this misleading special interest group appears to be lingering longer,” Abrams-Rivera said. “And remember, this is a brand focused on families and children, so it just takes time to rebuild that trust.”
Abrams-Rivera said one of the company’s suppliers was unable to continue to supply an critical ingredient for one of its best-selling varieties of lunchables.
During the conference call, he said the company continues to work on restructuring the Lunchables brand by expanding flavors such as piquant nacho.
Kraft Heinz has tried to reinvent lunch box staples over the years, including “Brunchables” in 2019. Last year, the company added fresh apples, grapes, pineapples and clementines to the mix.
Adding to this woe, Lunchables faces recent competitors. In recent months, YouTube personality Mr. Beast, introduced a competing product called Lunchly. However, the recent brand has been plagued by reports of mold on social media.
