Kraft Heinz pauses plans to split into 2 companies, says its problems are ‘fixable’

Kraft Heinz Halts Split Plans as New CEO Focuses on Growth Strategy

Kraft Heinz announced Wednesday it is suspending its previously announced plan to split into two separate companies, as newly appointed CEO Steve Cahillane shifts focus to driving growth across the existing integrated business.

“I have seen that the opportunity is larger than expected and that many of our challenges are fixable and within our control,” said Cahillane, who took the helm on January 1 after previously leading Kellogg Co. through its own corporate division.

The food manufacturing giant will instead invest $600 million in marketing, sales and product development initiatives, a strategic pivot aimed at revitalizing its portfolio of iconic brands. “We are confident in the opportunity ahead and believe this investment will accelerate our return to profitable growth,” Cahillane explained in a statement.

The reversal comes just months after Kraft Heinz announced in September its intention to separate into two distinct businesses. The original plan would have created one company housing stronger-performing brands like Heinz condiments, Philadelphia cream cheese and Kraft Mac & Cheese, while establishing a second entity for slower-growth lines including Maxwell House, Oscar Mayer, Kraft Singles and Lunchables.

Investors showed muted reaction to the announcement, with shares remaining flat in morning trading. The decision coincided with the company’s release of disappointing quarterly and annual financial results, raising concerns about the underlying strength of its business units.

Analyst Robert Moskow of TD Cowen noted in a research report that the reversal might signal to investors that “Kraft Heinz believes its businesses aren’t strong enough to stand on their own,” creating some market uncertainty about the company’s long-term prospects.

The company reported a 3% decline in net sales to $6.35 billion for the October-December quarter, slightly below the $6.37 billion anticipated by Wall Street analysts. North American sales fell by 5%, though international markets showed some growth. Net income plunged 69.5% to $651 million in the fourth quarter, while adjusted earnings per share of 67 cents exceeded analyst forecasts of 61 cents.

Kraft Heinz has faced persistent challenges since the landmark 2015 merger that created one of the world’s largest food manufacturers. That union began taking shape in 2013, when billionaire investor Warren Buffett partnered with Brazilian investment firm 3G Capital to acquire H.J. Heinz Co. for $23 billion, at the time the food industry’s most expensive acquisition.

The combined entity initially sought to leverage its massive scale and portfolio of household-name brands. However, shifting consumer preferences toward less processed foods and growing competition from lower-priced store brands have undermined the company’s market position. Despite strategic divestitures, including the sale of its Planters nut business and natural cheese division in 2021, Kraft Heinz has struggled to generate sustainable growth.

The company’s net revenue has declined consistently since 2020, when it experienced a temporary boost from pandemic-related consumer stockpiling. Last April, Kraft Heinz lowered its full-year sales and earnings guidance, citing weakened consumer spending in the United States and the impact of tariff policies.

Buffett, whose Berkshire Hathaway remains a major shareholder, has publicly acknowledged his disappointment with the investment, noting that the competitive advantage around the company’s brands wasn’t as robust as initially believed. Berkshire representatives resigned from the Kraft Heinz board last spring, and the investment firm subsequently took a $3.76 billion write-down on its stake.

Industry observers now speculate that Berkshire, under the leadership of Buffett’s successor Greg Abel, may be considering divesting its 325 million shares in the food manufacturer. Kraft Heinz recently alerted investors to this possibility in a regulatory filing, adding another layer of uncertainty to the company’s future.