Quick overview

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Heinz Kraft Co. announced on Tuesday that it plans to split into two separate businesses, reversing a major deal that was started ten years ago and made Kraft Mac and Cheese one of the biggest packaged food sellers

After the split, one company will retain Heinz ketchup along with other popular condiments and boxed meals, which together represent its fastest-growing international brands with annual sales of $15.4 billion. Slower-growing grocery items like Oscar Mayer hot dogs and Lunchables, generating $10.4 billion now, will be part of the other company.

Kraft Heinz’s stock dropped as much as 5 percent, the largest decline since February 12. This year, the stock has fallen roughly 14%, while the S&P 500 has gained 9%.

The goal of the split is to shift underperforming grocery staples into a new business that is expected to provide steady cash flow, while freeing up resources for the company’s top-selling spreads and sauces.

Executives said they expect each company to benefit from more focused management after the split, which will happen through a tax-free spinoff. The names of the two businesses will be decided later. The Kraft Heinz split follows other food and beverage companies that have split similarly, such as Kellogg, which divided into two companies in 2023, and Keurig Dr Pepper, which recently announced it would revoke a 2018 agreement that combined its beverage and coffee operations. A $46 billion merger that united two iconic brands ten years ago is now complete. The only financial advisor to Kraft Foods Group Inc. was Centerview Partners, which played an important advisory role during the 2015 merger.

Berkshire Hathaway arranged, and 3G Capital arranged the failed merger, founded by Warren Buffett, established a massive industry giant just before new factors, such as rising inflation, new weight-loss medications, and a growing demand for less processed, healthier foods, started to alter how Americans shopped. Buffett was disappointed with the planned split, even though he admitted that the merger wasn’t a good idea.