A decade since they tied the knot, the Kraft Heinz union may be headed for splitsville. The packaged food conglomerate, which has been underperforming for years, is mulling a spinoff of a large portion of its grocery business, according to a report by Wall Street Journal today.
The new entity could be valued at as much as $20 billion and could include many Kraft products, per people familiar with the matter. The separation could occur in the coming weeks, but the board has not signed off and Kraft Heinz has discussed other potential options.
The deal, forged in 2015, brought together two businesses with combined revenue of $28 billion and a stable of legacy brands including Jell-O, Maxwell House, Philadelphia and Oscar Mayer, plus Kraft and Heinz namesake products. Over time, higher costs, waning consumer sentiment and poor operational execution eroded the value of the megamerger significantly, sending its stock down by more than 60%, according to WSJ.
During its first quarter earnings in April, Kraft said it would “play offense with discipline” as it posted a quarterly net sales drop 6.4% year-over-year to $6 billion as North America sales – its largest division – slid 7% to $4.5 billion. On Thursday, the company announced it would offload its Italian infant and specialty food business to NewPrinces S.p.A. (formerly Newlat Foods).
Kraft’s news comes amid a larger realignment among leading CPG food and beverage companies that has been heating up in recent weeks.
In 2023, Kellogg’s divided its business into two standalone segments: WK Kellogg, which rolled up the company’s legacy cereal brands into a separate entity and sold to Ferrero earlier this week for $3.1 billion and Kellanova, which is on track to be bought by Mars Inc for $36 billion, and tucked remainder of the CPG’s business including snacks, plant-based products, international cereal and noodles and frozen breakfast under one house.
Conagra said this week it will likely continue its streak of divestment, which has included Chef Boyardee, Van de Kamp’s and Mrs. Paul’s, as it works to retool its portfolio to meet modern consumer demands. General Mills officially offloaded its yogurt business earlier this month and legacy canned good producer Del Monte entered Chapter 11 bankruptcy protections just last week and is seeking a buyer of its own.