Kraft Heinz announced on Tuesday that it will be divided into two independent companies: one focused on grocery products and another in sauces and spreadables, thus dismantling a giant of packed consumer goods that never achieved the expected growth since its creation a decade ago.
The split, which is expected to be completed in the second half of 2026, is the most recent of a series of restructuring between the great global consumer brands, which previously bet on the conglomerate model but now rethink their business structure against weak sales, depressed assessments and high tariffs.
For investors, the decision continues to generate doubts: the shares fell 7.2% on Tuesday afternoon, although Wall Street already anticipated the separation since Kraft Heinz announced in May that he was looking for ways to increase the value for shareholders.
The fusion of 2015-organized by Berkshire Hathaway by Warren Buffett together with the Brazilian firm of private capital 3g capital-created a company valued at 45 billion dollars, with the aim of reducing costs and stimulating the growth of iconic brands such as Heinz, Jell-O and Philadelphia. Today, the company is worth only 33 billion dollars.
In parallel, Kraft had already looked for a partner after separating his snack division in 2012, which became Mondelez International.
Buffett declared CNBC on Tuesday that he was “disappointed” with the split.
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“The merger did not turn out to be a brilliant idea, but separating the company will not solve its problems,” he said.
Since the merger, the actions have lost 60% of their value, in part because consumers reduced their expense, especially after the Covid-19 pandemic.
Last month, Berkshire registered an accounting loss of 3.76 billion dollars about its 27.4% share in the company.
“The complexity of our current structure makes it difficult to assign capital effectively, prioritize initiatives and climb in our most promising areas,” said Miguel Patricio, executive president of the Kraft Heinz Council.
The company also reported 9.3 billion dollars in losses due to deterioration in the second quarter, due to the sustained drop in the price of its shares and its market value.
“For investors, the measure could unlock value in the short term, but the risks of execution are clear: unless both entities invest in innovation and defend themselves from the progress of white brands, separation may only achieve a temporary financial relief,” said Suzy Davidkhanian, emarketer analyst.
Elliott Management presses Pepsico while Kraft Heinz bets on a split to simplify operations
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Highlighting the challenges faced by the big consumption brands, the Elliott Management activist fund on Tuesday revealed a participation of 4 billion dollars in Pepsico, urging the giant of drinks and snacks to boost its growth. At the same time, Nestlé’s actions fell after the European company dismissed its CEO after only one year in office for a violation of the code of conduct.
A less complex structure
The Kraft Heinz split aims to facilitate a more efficient allocation of resources and strategic approach.
“The division will help to assign the proper level of attention and resources to release the potential of each brand,” said the president of the Miguel Patricio Board on Tuesday.
The restructuring will create two different companies:
- A focused on sauces and spreadables, which will include brands such as Heinz, Philadelphia and Kraft Mac & Cheese, with sales of approximately 15.4 billion dollars in 2024.
- Another focused on processed foods and lists, such as Oscar Mayer and lunchables, with annual sales of 10.4 billion dollars.
The grocery division will be directed by the current CEO of Kraft Heinz, Carlos Abrams-Rivera, while the company is looking for a new executive director for the Salsas Unit.
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Skepticism on impact
“We are still skeptical that this separation alone helps individual companies,” said Max Gumport, BNP analyst, noting that the underlying problems behind the low performance may require years of investment and improvements.
Kraft Heinz estimates that the split will cost up to 300 million dollars, but hopes to recover much of that expense quickly.
Trend in the industry
This strategy reflects a growing trend between great consumption firms that seek to simplify and focus. Last week, Keurig Dr Pepper announced an acquisition of 18 billion dollars from Jde Peet’s, which will also result in the separation of their coffee businesses and other drinks in two companies quoted separately.
With Reuters information.
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