Kraft Heinz, one of the largest food companies globally, has announced its decision to split into two separate entities nearly a decade after their significant merger. This move divides the company into Global Taste Elevation Co., which will be responsible for well-known brands such as Heinz, Philadelphia cream cheese, and Kraft Mac & Cheese, and North American Grocery Co., which will manage brands like Oscar Mayer, Kraft Singles, and Lunchables. The new official names for each will be revealed later, but Kraft Heinz has indicated this separation is part of a strategic review initiated in May, reflecting the changing landscape of consumer tastes toward healthier food options.
The background of the merger dates back to 2013 when billionaire investor Warren Buffett, along with Brazilian investment firm 3G Capital, acquired H.J. Heinz Co. in a historic $23 billion deal—the largest in food industry history at that time. This merger aimed to leverage scale in a marketplace increasingly focused on cost-cutting through 3G’s stringent financial strategies. The motivation for the merger stemmed from Kraft’s need for a partner after its split from its snack division, Mondelez International, in 2011. The merger ultimately created the fifth-largest food and beverage company, generating $28 billion in annual revenue.
Despite the enormity of this merger, Kraft Heinz faced challenges almost immediately. Although they employed various strategies, including thousands of layoffs, the company struggled to adapt to changing consumer preferences that were moving away from processed packaged foods. Many consumers began favoring cheaper, store-brand alternatives, particularly in staple items such as ketchup where price discrepancies were notable; a 14-ounce bottle of Heinz ketchup could cost nearly three times that of a comparable store brand.
Adding to these difficulties, Kraft Heinz significantly reduced the value of its Oscar Mayer and Kraft brands by $15.4 billion in 2019, attributing this decline to operational costs and supply chain issues. Investors criticized the leadership for prioritizing cost-cutting over brand innovation—a crucial component for long-term success in a highly competitive market. Between 2020 and 2021, the company attempted to turn its fortunes around by selling off parts of its business, including its Planters nut business and natural cheese line, to reinvest in emerging growth brands.
Further complicating matters, Kraft Heinz projected a decline in net revenue each year since the pandemic-induced sales boom in 2020, exacerbated by economic conditions like increased customer spending challenges and the impact of tariffs. The company hoped to regain momentum with a renewed focus on innovative brands, but consumer trends remained a hurdle. Leadership continuity appears stable, as current CEO Carlos Abrams-Rivera will remain at the helm of North American Grocery Co. until the split is finalized, while a search for a new CEO for Global Taste Elevation Co. is underway.
Kraft Heinz plans to maintain its headquarters in Chicago and Pittsburgh post-split and anticipates completing this transaction by the second half of 2026. As the market reacted to this announcement, shares of Kraft Heinz experienced a modest increase. The strategic decision to separate signals a significant shift in approach for the company in the face of evolving consumer demands and market challenges. Despite the iconic status of its brand portfolio, the complexity of its existing corporate structure hindered effective capital allocation and initiative prioritization, leading to this pivotal restructuring move.
