Dive Brief:
- Kraft Heinz is set to divide into two separate entities, undoing much of the $46 billion merger that united one of the world’s largest food companies a decade ago.
- The first company will focus on sauces, spreads, seasonings, and shelf-stable meals, home to iconic brands like Heinz ketchup, Philadelphia cream cheese, and Kraft Mac & Cheese. An executive to lead this company, with nearly $15 billion in annual sales, is yet to be named.
- The second company will hold grocery staples such as Oscar Mayer, Kraft Singles, and Lunchables. Kraft Heinz CEO Carlos Abrams-Rivera will oversee this firm with $10 billion in annual sales.
Dive Insight:
Splitting up may be a challenging decision, but for Kraft Heinz, it could be the best course of action for a company that has faced difficulties since its formation in 2015.
Over the past decade, the food giant has experienced declining sales as consumers shift away from processed foods towards healthier alternatives. Factors like inflation and the rise of GLP-1 drugs have also led to reduced consumer spending and consumption.
In 2019, Kraft Heinz disclosed a $15.4 billion write-down on Kraft and Oscar Mayer, causing shares to plummet by approximately 60% post-merger.
Kraft Heinz believes that the split will enhance focus and streamline operations for both companies. Abrams-Rivera stated to The Wall Street Journal that managing nearly 200 brands in 55 categories and 150 countries had hindered investment opportunities. The separation will also differentiate the faster-growing sauces, spreads, and seasonings from the slower-growing grocery products segment.
“The complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives, and drive growth in our key areas,” said Miguel Patricio, Kraft Heinz’s chairman. “By splitting into two companies, we can allocate the right resources to unlock each brand’s potential, driving improved performance and long-term shareholder value.”
The new companies are yet to be named, but they will face similar challenges and consumer trends that have impacted Kraft Heinz in recent years. Food manufacturers are under pressure to remove artificial dyes and enhance product healthiness, aligning with evolving consumer preferences.
The split, scheduled for the second half of 2026, follows a trend in the food and beverage industry where companies are opting for smaller operations. Kellogg also split into two entities in 2023, and Keurig Dr Pepper recently announced plans to acquire coffee maker JDE Peet with intentions of separation.
Billionaire investor Warren Buffett, who orchestrated the Kraft Heinz merger, expressed disappointment in the decision to unravel the merger. Buffett’s Berkshire Hathaway, holding a 27.5% stake in Kraft Heinz, is the company’s largest shareholder.
Kraft Heinz’s stock experienced a 5% decline in midday trading on Tuesday.