Kraft Heinz is breaking up amid sales declines

Nearly a decade after Warren Buffett helped engineer the Kraft–Heinz megamerger, the food giant is splitting into two companies. The conglomerate’s stock dropped 7% after the announcement.

One firm will hold faster-growing brands like Heinz, Philadelphia, and Kraft Mac & Cheese, while the other will house slower-growth staples such as Oscar Mayer, Capri Sun, Maxwell House, and Lunchables.

The breakup follows years of sales slumps, massive write-downs, shareholder lawsuits, and an $8 billion loss reported in July. The company also saw seven straight quarters of sales declines and a 68% plunge in stock value since the 2015 merger.

Executives admitted the conglomerate spread itself too thin across 56 categories, hampering growth while rivals innovated. Several brands offered healthier and cheaper store brand alternatives to Kraft Heinz products.

Even billionaire Buffett had once conceded that his Berkshire Hathaway overpaid for the deal. He is, however, skeptical that splitting up will help Kraft Heinz’s problems.

Analysts say Kraft is taking a page from Kellogg’s 2023 split into Kellanova and WK Kellogg Co., which led to multibillion-dollar deals for both spin-offs.