Kraft Heinz, the American food group behind brands such as Philadelphia cream cheese and Heinz tomato ketchup, has announced plans to split into two independent businesses, a decade after its creation in a $45bn merger.
The Chicago-based company said it would carry out a tax-free spin-off, creating two separately listed firms in an attempt to simplify its structure and revive growth following years of declining sales.
The move will unwind the 2015 merger of Kraft and Heinz, engineered by Warren Buffett’s Berkshire Hathaway and the Brazilian private equity firm 3G Capital, two years after the pair took Heinz private. At the time, the deal created one of the world’s largest packaged food companies.
The names of the two new businesses have not yet been confirmed. One, currently referred to as Global Taste Elevation Co, will focus on sauces, spreads and seasonings, with brands including Heinz, Philadelphia and Kraft Mac & Cheese. It will generate annual sales of more than $15bn (£11bn), based on 2024 figures. Kraft Heinz is seeking a chief executive for the division.
The other, provisionally known as North American Grocery Co, will be led by Kraft Heinz’s current chief executive, Carlos Abrams-Rivera. It will concentrate on grocery staples such as Oscar Mayer meats, Lunchables boxed meals and Kraft Singles processed cheese, with annual sales exceeding $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 in Pittsburgh in 1869 by Henry J Heinz, specialising in sauces and condiments. Kraft began as a wholesale cheese delivery business in Chicago in 1903, created by James L Kraft. In 2012, Kraft separated its snack division, later renamed Mondelez International.
Buffett admitted in 2019 that he had miscalculated the merger, saying he had “overpaid for Kraft”. Since then, the company’s share price has fallen by around 75%.
The split is expected to be completed in the second half of next year, following similar moves by other major US corporations including Kellogg, Warner Bros Discovery, Honeywell and General Electric.
Like many packaged food makers, Kraft Heinz has struggled with high ingredient costs and shifting consumer tastes towards healthier and more affordable options.
Shares in the group rose by 2.7% in pre-market trading on Tuesday, having lost more than 20% of their value over the past year.
Russ Mould, investment director at 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.”
