Kraft Heinz undoes blockbuster merger due to changing consumer tastes

Kraft Heinz is splitting back into two companies a decade after a merger of the brands created one of the biggest food manufacturers on the planet.

One of the companies, currently called Global Taste Elevation Co., will include brands such as Heinz, Philadelphia cream cheese and Kraft Mac & Cheese, Kraft Heinz said Tuesday. The other, currently called North American Grocery Co., will include slower-selling brands like Maxwell House, Oscar Mayer, Kraft Singles and Lunchables. The official names of the two companies will be released later.

Kraft Heinz said in May that it was conducting a strategic review of the company, signaling a potential split. It expects the transaction to close in the second half of 2026.

When the company formed in 2015, it wanted to capitalize on its massive scale. But shifting tastes complicated those plans, with households seeking out healthier options.

Kraft Heinz and other food producers have tried to follow those trends. In 2021, Kraft Heinz sold both its Planters nut business and its natural cheese business, vowing to reinvest the money into higher-growth brands like P3 protein snacks. But the company continued to struggle.

Kraft Heinz’s net revenue has fallen every year since 2020, when it saw a pandemic-related bump in sales. 

The path to the merger of Kraft and Heinz began in 2013, when billionaire investor Warren Buffett teamed up with Brazilian investment firm 3G Capital to buy H.J. Heinz Co. At the time, the $23 billion deal was the most expensive ever in the food industry.

3G was also behind the formation of Restaurant Brands International — a merger of Burger King, Tim Hortons and Popeyes — and Anheuser-Busch InBev. It’s known for strict cost controls and so-called zero-based budgeting, which requires all expenses to be justified each quarter.

The deal was intended to help Heinz, which was founded in 1869 in Pittsburgh, expand sales of its condiments and sauces on grocery store shelves. Heinz’s new owners also set about cutting costs, laying off hundreds of workers within months.

At the same time Kraft, based in Chicago, sought for a partner after a 2011 split from its snack division, which became Mondelez International.

In 2015, Buffett and 3G decided to merge Heinz with Kraft. The merger created the 5th largest food and beverage company in the world, with annual revenue of $28 billion. Buffett and 3G each contributed $5 billion for a special dividend for Kraft shareholders.

At the time, the prevailing attitude was that the bigger the conglomerate, the more companies would save through sharing services like accounting, said Russell Zwanka, an associate professor of food marketing at Western Michigan University.

But even at the time of the merger, many consumers were shifting away from the kinds of highly processed packaged foods that Kraft sells, like Velveeta cheese and Kool-Aid. The push to remove artificial flavors and dyes added further costs.

“The customer has become much more diligent in what they’re buying, and so it’s making it more difficult to allocate your resources properly,” Zwanka said.

Kraft Heinz also had trouble distinguishing its products from cheaper store brands. At Walmart, a 14-ounce bottle of Heinz ketchup costs $2.98; the same size bottle of Walmart’s Great Value brand is 98 cents.

Kraft Heinz has no plans to change its current headquarter locations in Chicago and Pittsburgh.

Kraft Heinz shares fell nearly 7% Tuesday to close at $26.02 per share.


(AP Photo Gene J. Puskar)