Journal says Kraft Heinz may break up business

CHICAGO ­— In what would mark the end of a notoriously unsuccessful business combination, The Kraft Heinz Co. is considering spinning off a large part of the grocery foods business acquired a decade ago with the merger of The H.J. Heinz Co. and Kraft Foods. News of the potentially impeding breakup was reported July 11 by The Wall Street Journal.

Under the plan, several Kraft products would be spun off into a new entity, and the remaining company would produce and market a portfolio focused on condiments and sauces, including the Heinz brand, the Journal said.

In response to an inquiry from the publication, a Kraft Heinz spokesperson said, “As announced in May, Kraft Heinz has been evaluating potential strategic transactions to unlock shareholder value.”

The May remarks by Carlos Abrams-Rivera, chief executive officer, prompted speculation Kraft Heinz would shed businesses. Robert Moskow, an analyst with TD Cowen, wrote at the time the announcement meant some businesses would be divested, adding, “We, too, believe KHC should slim down its portfolio.”

In November 2021, the company sold portions of its cheese business to the Lactalis Group and Emmit Roth USA Inc.

The July 2015 merger of Heinz and Kraft was accompanied by considerable investor enthusiasm. Heinz had been acquired two years earlier by 3G Capital and Berkshire Hathaway in a $28 billion deal, a transaction that appeared highly successful before the Kraft merger. Meanwhile, the Kraft grocery business had been separated in 2012 from its snack foods brands (mostly Nabisco), a business that was renamed Mondelez International.

While the Kraft Heinz combination appeared to go well briefly, sales and profits began flagging within a couple of years. Numerous efforts since then have failed to reignite growth. The company’s share price (adjusted for subsequent dividends) recorded its highest monthly close in May 2017 at $63.44 and has not returned to that level since. On July 10, a day before the Journal’s article, Kraft Heinz shares closed at $26.47, down 58% from the May 2017 adjusted close. Shares closed July 11 at $27.14, up 67¢, or 2.5%, for the day.

Kraft grocery brands include Mac & Cheese, Ore-Ida, Philadelphia cream cheese, Oscar Mayer, Capri Sun, Velveeta, Lunchables and Jell-O.