Kraft Heinz revealed on Tuesday its plan to split into two distinct companies by the latter half of 2026, as shared in a recent press release.
One of the new entities, named Global Taste Elevation Co., will focus on shelf-stable brands like Heinz ketchup, Philadelphia cream cheese, and Kraft Mac & Cheese, bringing in about $15.4 billion in sales for 2024. The second entity, North American Grocery Co., will handle staple items in North America, which include Oscar Mayer, Kraft Singles, and Lunchables, projected to generate around $10.4 billion in 2024, according to the announcement from Kraft Heinz.
“Kraft Heinz’s brands are well-established and cherished, but the complexity of our current structure complicates the effective allocation of capital and prioritization of initiatives,” stated Miguel Patricio, executive chair of Kraft Heinz’s board. “By forming two separate companies, we can better focus our resources and attention to enhance each brand’s potential, ultimately aiming for improved performance and long-term value for shareholders. I’m eager to collaborate with [Kraft Heinz CEO Carlos Abrams-Rivera] and the team in the upcoming months to prepare for this transition.”
Financial analyst Jim Osman remarked on Twitter that the breakup seems more about protecting value rather than creating it. He noted, “When scale becomes more of a burden than an advantage, the only option is to narrow focus. This reflects the market’s realization that the 2015 merger was more about financial engineering than strategic planning.”
The merger in 2015, orchestrated by Berkshire Hathaway and private equity firm 3G Capital, turned out problematic rather quickly, as reported by CNBC. The Securities and Exchange Commission issued a subpoena to the company in February 2019 relating to their accounting practices. Following this, Kraft Heinz reduced its dividend by 36% and faced a massive $15.4 billion write-down on both the Kraft and Oscar Mayer brands. Warren Buffett noted that Berkshire Hathaway had likely overpaid for Kraft.
Since the merger, the company’s stock has plummeted nearly 60%. Management sold off its cheese division to Lactalis and the Planters brand to Hormel, and wrote down values on other brands like Maxwell House and Velveeta.
According to the press release, Carlos Abrams-Rivera, the current CEO, will head the grocery staples company, while an executive search firm has been engaged to find leadership for the other company.
