Kraft Heinz, the US company behind kitchen staples such as Philadelphia cheese and Heinz tomato ketchup, has announced plans to split into two independent businesses a decade after it was created in a mega merger.
The Chicago-based packaged food group said it would separate into two publicly traded companies through a tax-free spin-off to try to reduce complexity and improve financial performance after years of falling sales.
The breakup will undo the 2015 merger of Kraft and Heinz, engineered by the veteran US investor Warren Buffett and the Brazilian private equity firm 3G Capital, creating a $45bn multinational two years after the pair took Heinz private.
The names of the two new companies are yet to be determined.
One of them – provisionally called Global Taste Elevation Co – will mostly focus on sauces, spreads and seasonings, with brands such as Heinz, Philadelphia and Kraft Mac & Cheese, generating annual sales of more than $15bn (£11bn), based on 2024 figures. Kraft Heinz is looking for a chief executive for this new business.
The other, now known as North American Grocery Co and led by the Kraft Heinz chief executive, Carlos Abrams-Rivera, will concentrate on grocery staples such as Oscar Mayer meats, Lunchables boxed meals and Kraft Singles processed cheese, and will have annual sales of more than $10bn.
Miguel Patricio, the executive chair of Kraft Heinz, said: “Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritise initiatives and drive scale in our most promising areas.”
Heinz was founded by by Henry J Heinz in Pittsburgh in 1869 to specialise in sauces and condiments. Kraft grew out of a wholesale cheese delivery business set up in Chicago by James L Kraft in 1903. Three years before the merger, Kraft span off its snack division, which was renamed Mondelez International.
Buffett later admitted that he had been “wrong in a couple of ways on Kraft Heinz”, saying he had “overpaid for Kraft”.
The breakup is expected to be completed in the second half of next year. It comes after other big US companies broke themselves up this decade, including Kellogg Company, Warner Bros Discovery, Honeywell and General Electric.
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Like other packaged food makers, Kraft Heinz has been hit by high food ingredient costs, and a shift among consumers towards healthier, more affordable snacks and condiments.
Its share price rose by 2.7% in pre-market trading, after losing more than a fifth of its value in the past 12 months.
Russ Mould, the investment director at the stockbroker AJ Bell, said: “The demerger at Kellogg in 2023 unlocked some value and perhaps Kraft Heinz is looking to cook up something similar, after a 75% slump in the company’s share price since the merger between HJ Heinz and Kraft back in July 2015.”
