Kraft Heinz is reportedly considering a spinoff of a large chunk of its grocery business as health-conscious American consumers increasingly shy away from processed foods.
The $31 billion food and beverage conglomerate, born out of the 2015 merger of Kraft and Heinz, is said to be mulling the creation of a new entity that would include many Kraft products and could be valued at as much as $20 billion, the Wall Street Journal reported on Friday.
The remaining company would house goods such as sauces and condiments like Heinz ketchup and Dijon mustard brand Grey Poupon, according to the Journal.
Shortly after The Journal published its story at around 1:30 p.m. ET, Kraft Heinz shares surged by nearly 4%. The stock traded at around $27 at 3:30 p.m. ET.
Kraft Heinz executives, who have given priority to more popular items such as hot sauces, dressings and condiments as opposed to processed lunch meats and cheeses, believe that the two distinct units would in tandem exceed the firm’s $31 billion market cap.
People familiar with the matter told The Journal that a split could be finalized in the coming weeks.
“As announced in May, Kraft Heinz has been evaluating potential strategic transactions to unlock shareholder value. Beyond that, we do not comment on rumors or speculation,” a Kraft Heinz spokesperson told The Post on Friday.
Despite talk of a possible breakup, Kraft Heinz has discussed other scenarios with its advisers and its board hasn’t signed off on a final decision, people familiar with the matter told The Journal.
The company is also in the process of determining which brands would be included in the newly created, spun-out division, sources told the paper.
Kraft Heinz failed to live up to its promise from a decade ago when the two iconic American brands merged as part of a deal struck between Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital.
At the time of the merger, the newly combined Kraft and Heinz generated around $28 billion in annual revenue. Its portfolio includes popular grocery staples such as Oscar Mayer meats, Maxwell House coffee, Jell-O, Planters nuts, Kraft cheeses and Heinz ketchup.
By 2019, the company acknowledged rising costs and mounting pressure on brand value, announcing a $15 billion write-down tied to the Kraft and Oscar Mayer labels.
“We were overly optimistic on delivering savings that did not materialize,” then-CEO Bernardo Hees said at the time. He resigned shortly afterward.
Since the merger, Kraft Heinz has seen little sales growth and declining profits. Its stock has dropped more than 60%, wiping out approximately $57 billion in market value.
Kraft Heinz shares have seen substantial volatility over the past decade. The stock peaked near $96 in early 2017, followed by a prolonged decline. The stock opened on Friday at $26.90, just above its 52-week low of $25.44 and well below its historical highs.
Core products like Lunchables, Capri Sun, macaroni and cheese and mayonnaise have struggled in the market. The company has attempted to reposition itself by investing in healthier offerings and recently said it would eliminate artificial dyes from its US product lines.
Kraft Heinz has also explored selling some of its underperforming brands, including Oscar Mayer and Maxwell House, though those efforts have not succeeded.
In May, the company said it was still evaluating strategic transactions to unlock shareholder value. It also announced that Berkshire Hathaway would no longer occupy board seats, a change widely interpreted by analysts as a precursor to major shifts.
Berkshire and 3G originally teamed up in 2013 to buy HJ Heinz for more than $23 billion. Two years later, Kraft was merged with Heinz. (The pair later attempted to acquire Unilever but were turned down.)
By the end of 2023, 3G had exited its entire stake in Kraft Heinz.
Berkshire remains the company’s largest shareholder, holding a roughly 28% interest.
The Post has sought comment from Berkshire Hathaway.
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