Kraft Heinz to split in two, with ketchup and hot dogs going separate ways

Kraft Heinz, the Chicago-based giant behind products like Heinz tomato ketchup, will split into two separate businesses a decade after the packaged food firms joined in a merger.

One of the new businesses will focus on fast-growing products like Heinz condiments, Philadelphia cheese and Kraft Mac & Cheese. The unit currently generates about $15.4 billion in sales, and is hunting for a new chief executive.

The other unit, which has a revenue of about $10.4 billion, will include grocery items that are not growing as quickly, including brands like Oscar Mayer hot dogs and Lunchables. The two new businesses have not been named yet, but the move is designed to simplify operations and boost profits after years of declining sales.

“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,” Miguel Patricio, Kraft Heinz’s executive chair, said in a statement. 

“By separating into two companies, we can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance and the creation of long-term shareholder value.”

Heinz was founded in 1869 in Pittsburgh by Henry Heinz, while Kraft emerged from a Chicago wholesale cheese delivery company set up in 1903 by James Kraft.

The two were brought together in 2015 in a $46 billion merger orchestrated by Warren Buffet and the private equity firm 3G Capital. That deal brought dozens of packaged food brands under one roof and created the third-largest food company in North America.

But business has dragged of late, with seven consecutive quarters of declining sales and shares falling more than 68% since the merger. Shoppers are increasingly looking to cut back on more expensive branded goods following several years of high inflation.

Rising ingredient costs and changing consumer attitudes towards healthier options have also hurt the firm. Buffett admitted in 2019 that he had been “wrong in a couple of ways” over the Kraft Heinz merger, and that he had “overpaid for Kraft."

Buffett told CNBC on Tuesday that he was “disappointed” with the move. With a 27.5% stake in the company, Berkshire Hathaway is Kraft Heinz’s largest shareholder. Buffett said he did not think splitting the company would fix its problems, per CNBC.

The breakup follows similar moves by other food and drink giants including Kellogg and Keurig Dr Pepper. Kellogg spun out its more popular brands like Pringles into a new company, Kellanova, in 2023. Mars said it would buy Kellanova for $30 billion last year.

Splitting Kraft Heinz will “unleash the power of our brands and unlock the potential of our business,” said Chief Executive Carlos Abrams-Rivera, who will become the CEO of the slower-growth grocery company after the spinoff.

Kraft Heinz said it expects the deal to close by the second half of 2026, and will be overseen by vice chair John Cahill, who is a previous chief executive of Kraft.

Russ Mould, an analyst at investing firm AJ Bell, wrote: “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.”