By James Rogers, Tomi Kilgore and Bill Peters
The report from the Wall Street Journal follows recent struggles with competition and a broader shift toward health-conscious diets
After merging a decade ago, packaged-food giant Kraft Heinz Co. is weighing a breakup, the Wall Street Journal reported on Friday, following recent struggles with inflation-fatigued shoppers, competition and a broader shift toward health-conscious diets.
Citing people familiar with the matter, the Journal reported that the company (KHC) – known for Kraft macaroni and cheese, Heinz ketchup, Capri Sun and Lunchables – is looking to spin off a large chunk of its grocery business. The spinoff would include many Kraft products, and the new entity could be valued at as much as $20 billion, according to the report.
Another company would sell sauces and spreads, such as Heinz ketchup and Grey Poupon mustard, the Journal said. The Journal noted that Kraft Heinz had been focusing more on items like sauces, dressings and condiments, which had seen faster growth.
Plans for a breakup could be worked out “in the coming weeks,” the Journal said. But the paper added that no decision had been finalized and that the company was discussing other options.
“As announced in May, Kraft Heinz has been evaluating potential strategic transactions to unlock shareholder value,” a spokesperson for the company told MarketWatch in a statement. “Beyond that, we do not comment on rumors or speculation.”
The stock traded in negative territory for most of the day, then spiked higher to a gain of as much as 4.2% soon after the Journal’s report published. It subsequently pared gains and was up 1.2% in afternoon trading, at last check.
Since the merger between Kraft and Heinz closed in July 2015 – a megadeal arranged by Warren Buffett and private-equity firm 3G Capital Partners – shares have tumbled 69.6%. Meanwhile, the Consumer Staples Select Sector SPDR exchange-traded fund XLP has climbed 67.5% and the S&P 500 has run up nearly 202%.
Over this year, shares of Kraft Heinz have fallen 12.8%, compared with the S&P 500 index’s SPX gain of 6.5%.
In May, when Kraft Heinz announced it was exploring a possible transaction, management said Buffett’s Berkshire Hathaway (BRK.A) would no longer hold seats on Kraft Heinz’s board.
TD Cowen analyst Robert Moskow wrote in a research note that month that Kraft Heinz “should slim down its portfolio.” He also raised questions about what Berkshire would do with its 27% stake in the company, adding: “Our guess is that they will start selling this year, thus creating an overhang on the stock.”
More broadly, analysts have said Kraft Heinz still has its work cut out for it to reclaim lost customers.
Higher-end competition has hit mac and cheese, and competition from Hellmann’s has weighed on the company’s mayonnaise products. A recipe change to Capri Sun, intended to cut sugar, also posed challenges. Meanwhile, Consumer Reports last year raised concerns about health risks in Lunchables.
Kraft Heinz lowered its full-year outlook this spring amid what it called a “volatile” economic backdrop, marked by worries over tariffs and higher costs of living. The results marked the eighth straight quarter that top-line numbers missed expectations.
The company, during its earnings call in April, said it was doing “everything we possibly can” to avoid price increases. But analysts have said it may need to step up ingredient quality while offering discounts in order to bring back customers.
Kraft Heinz would not be alone in pursuing the breakup route to elevate shareholder gains. Earlier this year, for example, Honeywell International Inc. (HON) split into three companies in an effort to boost shareholder returns. Last year, entertainment giant Comcast Corp. (CMCSA) said it was considering spinning off its cable networks.
Parts of a conglomerate can be worth more separately than together, and investors may prefer to bet on pure plays on certain industries rather than having to contend with exposure to unwanted trends. Investors who hold onto their shares through the breakup would basically be paid the difference between the whole and the parts.
The Journal’s report on Friday arrived after consolidation happened elsewhere among companies whose products have become grocery-aisle mainstays. WK Kellogg Co. (KLG), the maker of Corn Flakes and Froot Loops, on Thursday agreed to be bought for $3.1 billion by Ferrero Group, the maker of Ferrero Rocher and Nutella.
-James Rogers -Tomi Kilgore -Bill Peters
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07-11-25 1544ET
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