Kraft Heinz Announces Split into Two Companies After Decade-Long Merger

NEW YORK (AP) — In a significant move, Kraft Heinz is set to split into two distinct entities, marking a decade since the merger that created one of the largest food companies in the world. This decision comes as the company faces changing consumer preferences and challenges in its operational structure.

Details of the Split

The split will yield two companies: one tentatively named Global Taste Elevation Co. and the other North American Grocery Co. Global Taste Elevation Co. will focus on shelf-stable meals and include well-known brands such as Heinz, Philadelphia cream cheese, and Kraft Mac & Cheese. North American Grocery Co. will encompass brands like Oscar Mayer, Kraft Singles, and Lunchables. The official names for both companies will be revealed later.

Context Behind the Decision

Kraft Heinz initiated a strategic review in May, signaling a potential restructuring. The merger, completed in 2015, aimed to leverage scale but has faced hurdles as consumer preferences shift towards healthier food options. Executive Chair Miguel Patricio highlighted the complexities of the existing structure, stating, “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.”

The Merger’s Legacy

The pathway to the original merger began in 2013, when billionaire investor Warren Buffett partnered with Brazilian investment firm 3G Capital to acquire H.J. Heinz Co. The $23 billion deal was a record high for the food industry at that time. 3G Capital, known for its rigorous cost controls, was also behind the formation of Restaurant Brands International and Anheuser-Busch InBev.

Challenges Post-Merger

Despite its ambition, the merged company encountered difficulties in adapting to shifting consumer demands, as households moved away from highly processed foods. The gap between Kraft Heinz’s brands and cheaper store alternatives created additional pressure. For instance, a 14-ounce bottle of Heinz ketchup retails at $2.98, while Walmart’s Great Value brand offers the same size for merely 98 cents.

Financial Woes and Strategic Moves

In 2019, Kraft Heinz made headlines by slashing the value of its Oscar Mayer and Kraft brands by $15.4 billion due to escalating operational costs and supply chain challenges. Investors expressed concerns that the company’s stringent cost-cutting measures undermined brand innovation. In subsequent years, Kraft Heinz divested its Planters nut business and its natural cheese division, seeking to reinvest in high-growth brands like P3 protein snacks and Lunchables.

Future Outlook

Since 2020, the company has seen a decline in net revenue each year following a pandemic-related sales surge. In April, Kraft Heinz adjusted its full-year sales and earnings forecast, citing weaker consumer spending in the U.S. and the impacts of tariffs imposed during President Trump’s administration.

Leadership and Headquarters

Carlos Abrams-Rivera will continue as CEO of Kraft Heinz and take the role of CEO for North American Grocery Co. post-split. Kraft Heinz has confirmed that it will maintain its headquarters in Chicago and Pittsburgh, with the separation expected to conclude in the latter half of 2026.

Following the announcement, shares of Kraft Heinz experienced a slight uptick in pre-market trading.