Kraft Heinz to split into two publicly listed companies to revive growth

Packaged foods giant Kraft Heinz announced on Tuesday that it will split its business into two publicly traded companies, a move designed to address persistent underperformance and shifting consumer demand.

The decision comes nearly a decade after the food giant was formed through a $45 billion merger orchestrated by Warren Buffett’s Berkshire Hathaway and 3G Capital.

One of the new companies will focus on sauces, spreads, and seasonings, an area Kraft Heinz described as “taste elevation.”

This division will include brands such as Heinz, Philadelphia, and Kraft Mac & Cheese, which generated about $15.4 billion in sales in 2024, with sauces and condiments making up roughly three-quarters of revenue.

The other entity, temporarily referred to as North American Grocery Co, will oversee grocery staples including Oscar Mayer, Kraft Singles, and Lunchables, with annual sales of around $10.4 billion.

The share price of Kraft Heinz Co. was up by a modest 0.1% during premarket trading on Tuesday.

The Wall Street Journal had first reported on the planned split in July.

Leadership and strategy for the two entities

Carlos Abrams-Rivera, currently chief executive of Kraft Heinz, will lead the grocery-focused company.

The board has begun searching for a new CEO to head the sauces and spreads division.

“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,” said Miguel Patricio, executive chair of the Kraft Heinz board.

The company said the separation is designed to give each entity greater strategic and operational focus, with management aiming to preserve investment-grade ratings for both companies.

The two businesses are expected to maintain the current dividend level and generate ample cash flow to invest in organic growth, return capital to shareholders, and consider acquisitions.

Market pressures and shareholder discontent preceded the move to split

The decision to split follows a period of weak performance.

Kraft Heinz shares have fallen by about 20% in the past year, and the group has struggled to reignite growth since the merger that created it in 2015.

The company had been exploring options to boost shareholder value, including mergers and acquisitions.

Jack Pope, lead director of the Kraft Heinz board, said the split had unanimous backing from directors.

“We strongly believe that increased focus will translate into better performance and value creation for shareholders,” he said.

Still, the company acknowledged the separation would bring additional costs.

It estimates up to $300 million in “dis-synergies,” or higher operating expenses, once the two companies are fully independent.

Industry trend toward breakups

The planned separation is part of a broader trend in the packaged foods sector, where companies are reorganising to adapt to changing consumer tastes and market conditions.

Kellogg completed its own split in 2023, creating snack-focused Kellanova and cereal business WK Kellogg.

Just last week, Keurig Dr Pepper announced plans to buy Dutch coffee and tea group JDE Peet’s and then split into two companies.

The Kraft Heinz split will effectively unwind the 2015 merger of Kraft and Heinz, which followed Berkshire Hathaway and 3G Capital’s $28 billion purchase of Heinz in 2013.

Buffett later admitted he overpaid for Kraft, acknowledging mistakes in the deal.

Timeline for separation

Kraft Heinz expects the spin-off to be completed as a tax-free transaction in the second half of 2026, subject to regulatory approvals.

The two companies’ names will be determined at a later date.

By pursuing the breakup, Kraft Heinz is betting that simplification and sharper focus will help restore growth and investor confidence.