Kraft Heinz announced on Tuesday its decision to divide into two separate companies, a move that follows disappointment expressed by renowned investor Warren Buffett, who helped orchestrate the merger nearly a decade ago.
Berkshire Hathaway, which holds a significant 27.5% stake in Kraft Heinz, conveyed that Buffett felt “disappointed” by the news of the split.
“It definitely wasn’t a brilliant idea to merge them in the first place, but I’m not sure breaking them apart will solve anything,” Buffett told CNBC.
Greg Abel, who will soon take over Buffett’s position at Berkshire, attempted to sway Kraft Heinz executives against the split during recent discussions, according to Buffett.
The company’s stock declined by 7% on Tuesday after Buffett’s comments.
The planned restructuring entails a $10 billion North American grocery segment featuring brands like Oscar Mayer, Kraft Singles, and Lunchables.
Carlos Abrams-Rivera, Kraft Heinz’s CEO, noted that managing nearly 200 brands across 55 categories in 150 countries has become a challenge in terms of investment.
“We need to focus our resources effectively to unlock potential and boost performance for each brand,” remarked Miguel Patricio, the executive chair of Kraft Heinz.
The company aims to finalize the split in the latter half of 2026 and is currently searching for candidates to lead the global operations.
The merger that formed Kraft Heinz in 2015 involved a $31 billion partnership between Berkshire Hathaway and Brazilian private equity firm 3G Capital.
3G Capital quietly divested from Kraft Heinz in 2023 after gradually reducing its stake.
Berkshire, on the other hand, has maintained its investment in Kraft Heinz without any sales since the 2015 merger.
If approached to sell shares, Buffett indicated that Berkshire would not entertain block bids unless equal offers were made to other shareholders.
Since the merger, Kraft Heinz has experienced a market value decrease of about $57 billion.
In 2019, the company acknowledged a $15 billion write-down associated with its Kraft and Oscar Mayer brands. At that time, Buffett conceded that Berkshire may have overpaid during the merger.
Recently, Kraft Heinz reported second-quarter losses, driven largely by non-cash impairment expenses totaling $9.3 billion, related to falling stock prices and challenges in capturing consumer interest in products like lunch and Capri Sun.
The company is shifting focus towards healthier options and recently engaged with Robert F. Kennedy Jr., who has served in health-related capacities.
Kraft Heinz is actively promoting sales strategies, including budget-friendly family meals like large boxes of macaroni and cheese priced under $2.
In July, the CEO warned of anticipated cost increases between 5% and 7% this year, while committing to absorb some of those costs instead of passing them all onto consumers.
TD Cowen analyst Robert Moskow remarked that large mergers often have a poor track record of success, suggesting that companies with more focused portfolios could fare better over time.
“Food companies have learned that a wide array of products in grocery stores doesn’t always yield the advantages they hoped for,” Moskow informed the Journal.
This year, for example, Kellogg separated into snack giant Keranova and the North American grain operation, WK Kellogg.
Meanwhile, Dr. Pepper Keurig has indicated plans to undo its 2018 merger that combined the coffee and soda businesses.
