Ten years after the brands merged to form one of the largest food corporations in the world, Kraft Heinz is dividing into two.
Kraft Heinz announced on Tuesday that one of the businesses, presently known as Global Taste Elevation Co., will offer shelf-stable meals under names like Heinz, Kraft Mac & Cheese, and Philadelphia cream cheese.
The other, presently known as North American Grocery Co., will feature lunchables, Kraft Singles, and Oscar Mayer, among other brands.
Later on, the two companies’ formal names would be made public.
In May, Kraft Heinz hinted at a possible split by announcing that it was undertaking a strategic evaluation of the business.
With homes looking to put healthier options at the table, the company’s 2015 intentions to profit on its enormous size were challenged by changing tastes.
To keep up with that trend, Kraft Heinz and other food manufacturers have changed their products.
In a statement, Executive Chair Miguel Patricio said, “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.”
The 2013 acquisition of H.J. Heinz Co. by billionaire investor Warren Buffett and Brazilian investment firm 3G Capitals marked the beginning of the Kraft and Heinz merger.
The $23 billion purchase was the most costly in the food industry’s history at the time.
Additionally, 3G was responsible for the creation of Restaurant Brands International, which was a combination of Anheuser-Busch InBev, Tim Hortons, Popeyes, and Burger King.
It is renowned for its stringent cost controls and “zero-based budgeting,” which demands that every expense be justified on a quarterly basis.
The goal of the agreement was to increase the number of grocery store shelves carrying Heinz’s sauces and condiments.
Heinz was founded in Pittsburgh in 1869. Within months, the new owners of Heinz laid off hundreds of employees as part of their cost-cutting efforts.
After splitting from its snack division in 2011, which formed Mondelez International, Chicago-based Kraft was looking for a partner at the same time.
Buffett and 3G made the decision to combine Kraft and Heinz in 2015.
With $28 billion in yearly sales, the combined firm is now the fifth largest food and beverage corporation globally.
To provide Kraft stockholders with a special dividend, Buffett and 3G each contributed $5 billion.
Thousands of workers were laid off, and other cost-cutting measures were implemented, yet the combined firm still had difficulties.
Many consumers were moving away from Kraft’s highly processed packaged foods, such as Kool-Aid and Velveeta cheese, even at the time of the acquisition.
Kraft Additionally, Heinz struggled to set itself apart from less expensive retail brands.
Heinz ketchup costs $2.98 for a 14-ounce bottle at Walmart, but Walmart’s Great Value brand is only 98 cents for the same size bottle.
Due to supply chain issues and operating expenses, Kraft Heinz reduced the value of its Oscar Meyer and Kraft brands by $15.4 billion in 2019.
However, investors criticized the company’s leadership, claiming that their obsession with cost-cutting was impeding brand innovation.
Kraft Heinz promised to spend the proceeds from the sale of its Planters nut and natural cheese businesses in 2021 on higher-growth brands like Lunchables and P3 protein snacks.
Since 2020, when sales increased because of the pandemic, the company’s net revenue has decreased annually.
Kraft Heinz reduced its full-year sales and earnings forecast in April, citing the effects of President Donald Trump’s tariffs and declining U.S. consumer spending.
After the separation is finalized, Carlos Abrams-Rivera will take over as CEO of North American Grocery Co. and continue to serve as CEO of Kraft Heinz.
To find possible CEO candidates for Global Taste Elevation Co., Kraft Heinz stated that its board is collaborating with an executive search consultancy.
Kraft Heinz has no intention of moving its headquarters from Pittsburgh and Chicago. The deal is expected to close in the second half of 2026.
Before the market opened, the company’s shares increased somewhat.
