Kraft Heinz Splitting Into Two Public Companies

The rumors are true. Ten years after its creation by merger, Kraft Heinz Co. will split into two publicly traded companies, one focused on condiments and sauces, the other on general grocery products. Neither company has been named yet.

One, tentatively called “Global Taste Elevation Co.,” will include iconic brands and “local jewels,” with three billion-dollar brands: Heinz, Philadelphia and Kraft Mac & Cheese, with approximately 75% of sales coming from sauces, spreads and seasonings. It will represent approximately $15.4 billion in 2024 net sales and $4.0 billion in before-tax 2024 adjusted earnings (EBITDA).

“North American Grocery Co.” will be a scaled portfolio of North America staples with about $10.4 billion in 2024 net sales and $2.3 billion in 2024 adjusted EBITDA. It also will have three billion-dollar brands: Oscar Mayer, Kraft Singles and Lunchables.

Kraft Heinz currently expects the transaction to close in the second half of 2026.

The split has been rumored since July. The bet is that a new Kraft and a new Heinz would be worth more separately than together. Kraft Heinz’s current market value is around $33 billion, the result of underperformance, asset sales and several write-downs.

The most recent devaluation was a $9.3 billion non-cash impairment charge announced in July, “primarily driven by a sustained decline in our share price and market capitalization,” the company said on July 30. That resulted in a net loss for the second quarter of $7.8 billion against sales of under $6.4 billion.

Kraft Heinz sales were $26.5 billion one year after the 2015 merger. In the years since, only 2023 sales eclipsed that, and only by $153 million. Last year’s sales were $25.8 billion.

Kraft Heinz's stock price peaked at $92.20 a share on May 31, 2017. It sank below $26 in late June, just before the first Wall Street Journal story of a possible split, and has been hovering around $27 since.

The merger of the two hundred-year-old companies was engineered in 2015 by Brazil’s 3G Capital and Warren Buffett’s Berkshire Hathaway, which together bought H.J. Heinz Co. two years earlier.

“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,” said Miguel Patricio, executive chairman of Kraft Heinz. “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.”

Back to the two emerging companies:

The Global Taste company will have approximately 20% of sales are in emerging markets and about 20% away from home. It will be led by Kraft Heinz’s current CEO Carlos Abrams-Rivera.

North American Grocery Co. will get approximately 75% of sales from brands that are No. 1 or No. 2 in their respective categories. The company said it’s working with an executive search firm to identify CEO candidates.

Kraft Heinz has no plans to change its current, twin headquarter locations: Pittsburgh, the forever home of Heinz, and Chicago, Kraft’s birthplace.

As for strategic rationale, the separation will provide both companies with more strategic and operational focus, enabling them to:

* Dedicate the right level of attention and resources to all areas of the business, allowing each respective brand portfolio to reach its full potential.

* Reduce operational complexity, driving further efficiencies and industry-leading margins.

* Customize capital allocation based on the strategic ambition of each company, accelerating performance and retaining financial flexibility.