Kraft Heinz Splits into Two Companies Amid Declining Value and Changing Consumer Tastes – A Look at the Food Giant’s History and Future Plans
Global food conglomerate Kraft Heinz, one of the world’s largest in its sector, announces plans to split into two distinct companies as part of a strategic restructuring. This move comes over a decade after the company’s mega-merger, a deal that has been widely acknowledged as a significant challenge for billionaire investor Warren Buffett.
Recent financial reports indicate that both Kraft Heinz and Berkshire Hathaway, Buffett’s investment firm, have incurred multibillion-dollar impairment charges due to the declining value of the food giant. The company’s cost-cutting strategies during a period of shifting consumer preferences have left it struggling to keep pace with competitors investing in innovative product offerings.
The separation aims to capitalize on the potential synergy of two separate entities, with the first focusing on shelf-stable foods such as Heinz, Philadelphia, and Kraft Mac & Cheese. The second company will encompass more grocery-related brands including Oscar Mayer, Maxwell House, Capri Sun, and Lunchables. The latter will be spearheaded by current CEO Carlos Abrams-Rivera.
The merger of Kraft Foods and H.J. Heinz took place in 2015 under the guidance of Berkshire Hathaway and Brazilian private-equity firm 3G Capital. While 3G’s cost-cutting approach had previously reinvigorated Burger King and beverage giant Anheuser-Busch, it failed to drive significant growth at Kraft Heinz.
In 2019, following extensive layoffs and declining sales, the company faced criticism after writing down the value of marquee brands Oscar Mayer and Kraft by $15 billion. This move was followed by shareholder lawsuits and an investigation by U.S. financial regulators.
In July 2022, Kraft Heinz reported another drop in sales and a net loss of nearly $8 billion, primarily due to a $9.3 billion impairment charge attributed to the declining share price. Subsequently, Berkshire Hathaway also wrote down the value of its investment in Kraft Heinz with a $3.8 billion impairment charge.
Buffett, who maintained his financial stake despite 3G Capital’s exit from Kraft Heinz last year, has admitted that he “was wrong in a couple of ways on Kraft Heinz” and overpaid during the deal, but praised the historic strength of the brands.
Founded in Pittsburgh in 1869, Heinz began with grated horseradish packaged in a clear jar to highlight its quality. However, it was Heinz’s ketchup, or “catsup” as it was initially known, that brought the company fame, followed by baked beans.
Illinois-based Kraft brothers started their business selling cheese by horse and wagon in the early 1900s. During World War I, they supplied the U.S. Army with cheese designed to resist spoilage. The Great Depression saw Kraft introducing the mayo-like Miracle Whip and the iconic mac and cheese mix, one of the first pre-packaged, shelf-stable dinners. The company also acquired Philadelphia – the cream cheese – and Velveeta. In 1935, hot liquid cheese poured onto cold stainless steel and cut into squares set the stage for Kraft Singles cheese slices.
In the 1980s, Kraft was bought by tobacco giant Philip Morris during a food-company buying spree. This period saw Kraft expand to include Nabisco, Jell-O, Maxwell House, and hot-dog maker Oscar Mayer.
Kraft again became its own publicly traded company in the early 2000s. Later, it spun off a separate snacking company, Mondelez, which produces Oreo cookies and Ritz crackers.
Post the 2015 merger, Kraft Heinz attempted to stimulate growth by pursuing a deal with rival Unilever, maker of Hellmann’s mayonnaise and Ben & Jerry’s ice cream. However, the European conglomerate declined the offer.
In an effort to refresh its food offerings and address growing health concerns among consumers, Kraft Heinz reduced the sugar level in its Capri Sun juices, launched cheese-stuffed hot dogs, hot honey, plant-based cheese and mayo, and began making mac and cheese with natural food coloring. The company also discontinued Lunchables for school lunch programs due to reports about their sodium and heavy metals content, and recently committed to removing artificial food dyes from all U.S. products.
However, consumers are increasingly opting for private-label packaged foods due to high inflation, with brands facing fierce competition from smaller startups offering new takes on familiar snacks and meals. The company is focusing its resources on faster-growing and more profitable products to position itself as a “sauces and meals powerhouse.”
Kraft Heinz’s shares have lost two-thirds of their value from the post-merger peak by mid-2025, but saw a rise on Tuesday following the announcement of the breakup.