Kraft Heinz to Split into Two Companies
Kraft Heinz will split into two listed companies, one focused on groceries and the other on sauces and spreads, the U.S. packaged foods maker said on Tuesday, seeking to jump-start growth after years of sluggish sales.
The move dismantles the decade-old merger between H.J. Heinz Co and Kraft Foods Group, which was backed by Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital, that created a $45 billion packaged food giant.
Tuesday’s announcement is also the latest in a series of corporate break-ups as price-conscious shoppers shifting to cheaper alternatives such as private labels force companies to pursue focused strategies.
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Details of the Split
Kraft Heinz’s decision creates one firm focused on sauces and spreads such as Heinz, Philadelphia and Kraft Mac & Cheese, which had sales of about $15.4 billion in 2024, while the other would consist of processed foods and ready meal brands including Oscar Mayer and Lunchables, that had about $10.4 billion in annual sales.
The combined company also oversaw brands such as Velveeta, Jell-O, Kool-Aid and Miracle Whip.
The grocery unit will be headed by Kraft Heinz’s current CEO Carlos Abrams-Rivera and the company said it was looking for potential CEO candidates for the sauces unit.
Reasons Behind the Split
“Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives and drive scale in our most promising areas,” said Miguel Patricio, executive chair of the Kraft Heinz board.
Kraft Heinz said in May it was looking at opportunities for mergers and acquisitions to shore up shareholder value.
The company expects the tax-free spin-off to close in the second half of 2026.
Market Reaction
The Wall Street Journal reported last week that Kraft Heinz was nearing a plan to break itself up.
The company’s shares were largely unchanged in premarket trading. The stock has lost about 21% of its value over the past twelve months.
Similar Moves in the Industry
Last week, U.S. soft drinks giant Keurig Dr Pepper announced an $18 billion takeover of JDE Peet’s that would result in the splitting of the merged entity’s coffee operations and other beverage businesses into two separate publicly listed companies.
The deal also partly reverses a 2018 merger that created Keurig Dr Pepper by combining Keurig Green Mountain and Dr Pepper Snapple.
Conclusion
In conclusion, Kraft Heinz’s decision to split into two companies is a strategic move to jump-start growth and improve profitability. The company’s iconic brands will be separated into two focused units, allowing for more effective allocation of capital and prioritization of initiatives. As the packaged food industry continues to evolve, it will be interesting to see how this move affects Kraft Heinz’s performance and the industry as a whole.
Frequently Asked Questions
Q: Why is Kraft Heinz splitting into two companies?
A: Kraft Heinz is splitting into two companies to jump-start growth and improve profitability. The company believes that separating its iconic brands into two focused units will allow for more effective allocation of capital and prioritization of initiatives.
Q: What brands will be included in each company?
A: One company will focus on sauces and spreads such as Heinz, Philadelphia and Kraft Mac & Cheese, while the other will consist of processed foods and ready meal brands including Oscar Mayer and Lunchables.
Q: When is the split expected to be completed?
A: The tax-free spin-off is expected to close in the second half of 2026.
Q: How will the split affect Kraft Heinz’s shareholders?
A: The split is expected to improve profitability and jump-start growth, which could potentially benefit shareholders. However, the company’s shares were largely unchanged in premarket trading following the announcement.
