Shares have dropped by 7.2% on Tuesday afternoon’s trading, despite Wall Street largely expecting the split after Kraft Heinz.
Kraft Heinz announced that it will split into two separate companies. One company will focus on grocery items and the other on sauces and spreads. The package goods giant is being dismantled as it was unable to meet the growth expectations it set for itself a decade ago.
The spinoff, which is expected to be finalized in the latter half of 2026, is the latest in a trend of major global consumer brands that once adopted the conglomerate model but are now reconsidering their business model amid sluggish sales, low valuation, and high tariffs.
For investors, the outcome remains unclear. Since the announcement, shares have dropped by 7.2% on Tuesday afternoon’s trading, despite Wall Street largely expecting the split after Kraft Heinz indicated in May that it was exploring ways to increase shareholder value.
The 2015 merger that Warren Buffett’s Berkshire Hathaway helped engineer in partnership with Brazilian private equity firm 3G Capital created a company valued at $45 billion, formed with the goal of reducing costs and boosting growth in iconic brands like Heinz beans, Jell-O, and Philadelphia cream cheese. The company’s value has now dropped to $33 billion.
At the same time, Kraft was in search of a partner after splitting its snack business in 2012, which subsequently became Mondelez International.
Buffett expressed on Tuesday that he felt “disappointed” about the split. The merger did not prove to be a great concept, but picking the company apart would not resolve its issues, he added. Shares have decreased by 60% since the merger, as consumers have reduced their spending, especially after the COVID-19 pandemic. Last month, Berkshire reported a $3.76 billion write-down on its 27.4% share in the company.
Miguel Patricio, executive chair of the Kraft Heinz board, stated that due to the complexity of their current model, it is hard to effectively allocate capital, prioritize initiatives, and scale their promising business areas.
The company recorded $9.3 billion in impairment losses in the second quarter due to a continuous decline in its stock price and overall market value.
For investors, this move could be valuable only for the short term; however, the executive risks are evident. Unless both businesses invest in innovative initiatives and counter the influence of private label products, the separation will only be a temporary period, according to Emarketer analyst Suzy Davidkhanian.
Activist Elliott Management revealed, highlighting the challenges, that they are investing $4 billion in PepsiCo, urging the beverage and snack company to grow. Meanwhile, shares of Nestle dropped after the European company fired its chief executive just a year into the job for violating the company’s code of conduct.
The split would help allocate the appropriate distribution of attention and resources to develop each brand to its highest potential, Patricio stated.
The split will ensure one brand focuses on sauces and spreads such as Heinz, Philadelphia, and Kraft Mac & Cheese, which reported sales of $15.4 billion in 2024. The other brand would focus on processed food and ready meal brands such as Oscar Mayer and Lunchables, which give $10.4 billion in annual sales. The grocery brand will be led by Kraft Heinz’s current CEO, Carlos Abrams-Rivera, and for the sauce unit, they are seeking a CEO.
BNP analyst Max Gumport commented, noting that the issues under the carpet, which caused poor performance, may need investment and improvement. He is doubtful whether the separation would help the companies alone. The company expects the split will cost $300 million, but aims to minimize the expenses swiftly.
Recently, US soft drink giant Keurig Dr Pepper announced an $18 billion acquisition of JDE Peet’s, resulting in the split of its coffee operations and other beverage businesses into two publicly traded companies.
