Kraft Heinz to set up separate companies worth up to $20 billion. The Wall Street Journal reported that this move is an extreme reversal for a firm hailed as the future of American food by billionaire investor Warren Buffett and Brazilian private-equity house 3G Capital.
By focusing on trendier, faster-growing categories like dressings, sauces, and condiments, the split is also part of a broader strategy to restore growth. Traditional brands, Heinz ketchup and Grey Poupon mustard, will be included. The new firm will have slower-moving categories like processed meat, packaged meals, and some Kraft-named staples.
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When Kraft and Heinz merged in 2015, the consolidation held out for dramatic efficiency, global scale, and revitalised brand clout. Buffett and 3G Capital envisioned it as the ideal packaged food move. But in a matter of years, the strategy unravelled. 3G’s much-vaunted “zero-based budgeting” didn’t pay off in the end. In 2019, the company cut the value of its Kraft and Oscar Mayer brands by $15 billion.
According to Money Control, the stock dropped more than 60% from the merger peaks. Sales have levelled off, profits declined, $57 billion of market value has been erased. Friday’s 2% gain in the stock was a lone bright spot.
Kraft Heinz’s signature brands—mac and cheese, mayonnaise, and cold cuts—are not popular anymore. As consumers gravitate more toward fresher, less processed fare, the company has not followed. It has promised to eliminate artificial colouring from American products and has attempted to sell struggling brands like Oscar Mayer and Maxwell House, without success.