In the early morning hours of September 2, as Americans reached over the breakfast table to grab their favorite decade-old ketchup recipe, they were unaware that the global food giant Kraft Heinz had just announced its decision to split the company up.
The larger of the two companies, primarily including shelf-stable meals and condiments, will house customer-favorite brands of Philadelphia cream cheese, Heinz ketchup and mustard, and Kraft mac and cheese. Valued at $15.4 billion in net sales in 2024, the company says that 75 percent of this profit comes solely from sauces and seasoning, according to CNBC.
The second company, home to North American staples, includes classic Kraft singles cheese, Lunchables, Oscar Mayer, and other renowned brands. Although not as much as the first company, the secondary segment is also worth a whopping $10.4 billion in net sales last year. Current Kraft Heinz CEO Carlos Abrams-Rivera will serve as chief executive of this grocery staples-focused company after the separation.
This decision, although seen by the board as a move to increase necessary attention and devote resources more effectively, stems from rising inflation in the past two years. Consumers are veering away from pricier, well-known brands and choosing store or cheaper options. Additionally, recent rises in health awareness have caused many to avoid highly processed foods. The company reported in July that global net sales fell nearly two percent in the second quarter, as price hikes—particularly in coffee—drove down demand for cold cuts, frozen snacks, and powdered beverages, as stated by The New York Times.
However, the split also marks the unwinding of a storied corporate union. According to CNBC, the move essentially reverses the legendary agreement from 2015 when Kraft and Heinz combined into one of the largest food companies in the world. By doing so, the company reached more than $28 billion in annual revenues, becoming a true conglomerate giant. The investment, put together by 3G Capital, a Brazilian investment firm, and Warren E. Buffett’s Berkshire Hathaway, was hailed as a masterstroke. But by 2019, cracks had begun to show. Kraft Heinz disclosed it had received a subpoena from the Securities and Exchange Commission over its accounting practices, slashed its dividend by more than a third, and wrote down $15.4 billion in value from Kraft and Oscar Mayer. Buffett himself admitted to CNBC that Berkshire had “overpaid for Kraft.”
Leadership shakeups and further write-downs followed, along with divestitures of major businesses, including the sale of its cheese unit to Lactalis and its Planters nuts division to Hormel. Though the company has tried to revive growth by investing in brands like Lunchables and Capri-Sun, its stock has lost roughly 60 percent of its value since the 2015 merger.
Kraft Heinz is hardly alone in trying to reconfigure itself. The New York Times reported that the Kellogg Company spun out its cereal brands, including Frosted Flakes and Froot Loops in 2023, while keeping its faster-growing snacks division under the new name Kellanova. Mars Inc., famous for M&M’s and Snickers, acquired Kellanova last year in a deal valued at $35.9 billion while Ferrero, the Italian maker of Nutella and Tic Tacs, announced in July that it would buy WK Kellogg’s cereal business. Keurig Dr Pepper, meanwhile, has said it will undo its own 2018 merger after acquiring Dutch coffee company JDE Peet’s.
In this landscape, Kraft Heinz’s restructuring looks less like an isolated move and more like part of an industry-wide reckoning. For the companies behind America’s pantries, growth in snacks, sauces, and international markets has become the prize—while slower-growth staples like cereals and packaged meats risk being left behind.
