Kraft Heinz to break up a decade after mega-merger

Dive Brief:

• Kraft Heinz is planning to split into two companies, reversing much of the $46 billion merger that formed one of the world’s largest food giants a decade ago.
• The first business will focus primarily on sauces, spreads,seasonings and shelf-stable meals, housing some of the company’s most iconic brands such as Heinz ketchup, Philadelphia cream cheese and Kraft Mac & Cheese. An executive to run the company, which will have nearly $15 billion in annual sales, has yet to be announced.
• The second company will house grocery staples offerings such as Oscar Mayer, Kraft Singles and Lunchables. Kraft Heinz CEO Carlos Abrams-Rivera will oversee the firm with $10 billion in annual sales.

Dive Insight:

Breaking up may be hard to do, but for Kraft Heinz, it may be the best outcome for a company that has struggled since it was created in 2015.

During the past decade, the food manufacturer has faced declining sales as consumers gravitate away from processed foods in favor of healthier offerings. Inflation and the emergence of GLP-1 drugs more recently have caused shoppers to cut back on spending and on how much they eat.

In 2019, Kraft Heinz announced a $15.4 billion write-down on Kraft and Oscar Mayer. Shares of the company have dropped roughly 60% since Kraft and Heinz combined.

Kraft Heinz said the split will improve focus and reduce complexities for the respective companies. Abrams-Rivera told The Wall Street Journal that Kraft Heinz’s nearly 200 brands across 55 categories and 150 countries had made it difficult to invest in the products. The separation also will separate the faster-growing sauces, spreads and seasonings from the slower-growing grocery products unit. 

“The complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives and drive scale in our most promising areas,” Miguel Patricio, Kraft Heinz’s chairman, said in a statement. “By separating into two companies, we can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance and the creation of long-term shareholder value.”

Names for the new companies have yet to be determined. Still, they will face the same headwinds and consumer trends that have weighed on Kraft Heinz for years. More recently, food makers have faced pressure from Health and Human Services Secretary Robert F. Kennedy Jr. to remove artificial dyes and improve the healthiness of their products. 

The new companies will need to continue prioritizing innovation that better positions brands that are healthier and more aligned with emerging consumer trends —  a recent priority of Kraft Heinz. 

The breakup, which is expected to take place in the second half of 2026, continues a trend in the food and beverage space where companies seek to get smaller. Kellogg split into two companies in 2023, and just last week, Keurig Dr Pepper announced it would buy coffee maker JDE Peet with the intention of breaking up.

Billionaire investor Warren Buffett, who masterminded the Kraft Heinz merger, told CNBC he was disappointed in the company’s decision to unwind the merger. Buffett’s Berkshire Hathaway, with a 27.5% stake in the company, is Kraft Heinz’s largest shareholder. 

Kraft Heinz stock fell 5% in midday trading on Tuesday.