The Kraft Heinz Company announced its intention to separate into two distinct, publicly traded entities, effectively unwinding the 2015 merger between Kraft Foods Group and H.J. Heinz Co. This strategic move, expected to be completed in the latter half of 2026, aims to streamline operations, enhance capital allocation, and unlock the full potential of its brand portfolio amidst evolving consumer demands and years of underperformance.
Kraft Heinz Executive Chair Miguel Patricio stated that the current consolidated structure hinders effective resource deployment and prioritization of growth areas. The planned division is designed to foster greater agility and focus, enabling each new company to pursue tailored strategies. The separation will create two core businesses: Global Taste Elevation Co., provisionally named, will focus on sauces, seasonings, and taste-enhancing products, including brands like Heinz, Philadelphia cream cheese, and Kraft Mac & Cheese, with projected annual sales exceeding $15 billion based on 2024 figures. The second entity, North American Grocery Co., will manage established grocery staples such as Oscar Mayer, Lunchables, and Kraft Singles, with anticipated annual sales surpassing $10 billion. Carlos Abrams-Rivera, the current CEO of Kraft Heinz, is slated to lead the North American-focused business.
The 2015 merger, orchestrated by Berkshire Hathaway and 3G Capital, aimed to leverage scale and efficiency. However, shifting consumer preferences towards healthier, less processed foods and intense competition have presented challenges. Kraft Heinz experienced a significant $15.4 billion write-down on its Kraft and Oscar Mayer brands in 2019, reflecting difficulties in adapting to market shifts. The company's net revenue has seen a decline since 2020, with a 3% drop reported in 2024. This strategic realignment mirrors trends in the consumer goods sector, where companies like Kellogg and Keurig Dr Pepper have also pursued breakups to enhance focus and performance.
The company has indicated that current dividend levels are expected to be maintained. Management is targeting capital structures that will preserve investment-grade ratings for both entities. The split is anticipated to allow each new company to dedicate resources more effectively, driving improved performance and long-term shareholder value.