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Kraft Heinz splits after a decade of post-merger underperformance

Kraft Heinz has announced plans to split into two independent businesses by the second half of 2026, a decade after it was created in a mega-merger.

The decision to separate its North American grocery portfolio from its global “taste” brands comes after years of strategic challenges, with the company aiming to simplify operations, prioritise investment, and improve financial performance.

“[T]he complexity of our current structure makes it challenging to allocate capital effectively, prioritise initiatives, and drive scale in our most promising areas,” Miguel Patricio, executive chair of the Kraft Heinz board, said in a statement released on 2 September.

Two new companies with grocery and ‘taste elevation’ portfolios

The split will create two businesses: North American Grocery Co, which will oversee US domestic brands such as Oscar Mayer, Kraft Singles, and Lunchables; and Global Taste Elevation Co, which will manage brands like Heinz Ketchup, Philadelphia Cream Cheese, and Kraft Mac & Cheese.

Carlos Abrams-Rivera, the current CEO of Kraft Heinz, will lead North American Grocery Co after the separation. Leadership for the global business is yet to be announced.

Kraft Heinz said there are no plans to change headquarters, which will remain in Chicago and Pittsburgh.

The new structure is intended to provide each company with sharper commercial focus and clearer investment priorities.

Diana Frost, chief growth officer at Kraft Heinz, wrote on LinkedIn: “The creation of these two companies will truly unleash the power of our iconic brands and will unlock new opportunities for innovation and expansion in all the markets we serve.”

Kraft Heinz: Share price buffeted

The decision marks a significant reset nearly a decade after the 2015 merger that created Kraft Heinz.

That $49 billion deal, backed by Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital, combined Kraft Foods Group with HJ Heinz to form one of the world’s largest food manufacturers. The intention was to expand Heinz’s global reach and apply 3G’s cost-cutting model across Kraft’s portfolio.

However, the combined company struggled to keep pace with shifting consumer preferences away from processed foods.

Cost reduction strategies came under fire for weakening product innovation, and in 2019, Kraft Heinz wrote down the value of its Kraft and Oscar Mayer brands by $15.4 billion. According to reporting by Reuters, the company’s share price has declined by 60% since the merger.

In recent years, Kraft Heinz has shifted towards higher-growth categories, selling off its Planters and natural cheese businesses to reinvest in brands like P3 protein snacks and Lunchables. The split is positioned as the next stage in this transformation.

However, investor reaction has not been positive thus far. Shares fell by more than 7% following the announcement, after Buffett told CNBC he was “disappointed” with the decision and did not believe a breakup would solve the company’s structural issues.

Spinoffs, splits, and restructuring

Kraft Heinz joins a growing number of major food and beverage manufacturers streamlining their corporate structures to focus on product category performance.

In 2023, Kellogg finalised its separation into Kellanova – which now manages global snacks including Pringles and Cheez-It – and WK Kellogg Co, which focuses on North American cereals. Both companies gained investor traction following their debut on the New York Stock Exchange.

Other multinationals have followed suit. Unilever is preparing to spin off its global ice cream division, including brands such as Magnum and Ben & Jerry’s, into a standalone listed business.

And in late August, Keurig Dr Pepper and JDE Peet’s announced plans to merge and then separate into dedicated coffee and cold beverage companies called Beverage Co and Global Coffee Co.