Kraft Heinz Was The Greatest Thing Since Sliced Bread… Until It Wasn’t–Now It’s Getting Divorced…

If you listened closely yesterday, you could almost hear Warren Buffett sigh and whisper “well, that was a disaster” into his Cherry Coke. Kraft Heinz, the $32B “everything” that’s dumped on every American kids lunch tray (birthed by Buffett and the Brazilian efficiency cult at 3G Capital), is officially prepping to reverse the mega-merger that was supposed to be the greatest thing since sliced bread, but ended up more like a soggy panini nobody ordered.

(Source: Giphy) 

In short, according to the Wall Street Journal, Kraft Heinz wants to break itself in two. One company gets all the “hey, remember when this was food?” legacy brands… think: Lunchables, Capri Sun, Oscar Mayer, literally anything that’s advertised to elementary schools and midwestern aunts. The other, still called Kraft Heinz, hitches its bets to “hot” products (read: spicy condiments and all those Grey Poupon ads pretending Dijon is a personality trait). As for the price tag, the spun-off Kraft chunk could clock in at $20B on IPO day, while the parent lumbers on with $12B in market cap and the world’s most chaotic brand portfolio.

(Source: Yahoo Finance) 

Now for the big question… Why now? Well, it appears that Americans are eating less like 1985 suburban kids and more like TikTok nutritionists who break out in hives at the word “processed.” Ozempic, Mounjaro, millennials with IBS, and RFK are all creating havoc as the playbook has flipped where legacy snack brands are now poison, not profit.  For instance, since the big merger, Kraft Heinz stock has underperformed the S&P 500 by a soul-crushing 120% since the merger. The stock is down 60% from peak. That’s a staggering $57B in market cap yeeted into the abyss. 

(Source: New York Post) 

Translation: While the changing of the guard of America’s health initiatives are shifting, this is a full-scale white towel toss. Sales have basically flatlined, and the only people still putting Kraft singles on their grocery list are prepping for a coming recession, not planning a dinner party. With that said though, this is not just a Kraft thing. Big Food as a whole is scrambling to avoid becoming the next Blockbuster. 

Kellogg’s already spun out its limp cereal business before Ferrero showed up last week to buy it for $3.1B (because nothing says “breakfast of champions” like Nutella on your Frosted Flakes). Everyone from General Mills to Nestlé is sweating as packaged food is getting dumped for flavor-of-the-month startups selling gluten-free air and probiotic cardboard.

(Source: Giphy) 

For investors, many are hoping this breakup somehow “unlocks value” (especially Berkshire, who is currently still grasping its 28% stake and probably regretting ever answering that call from a Brazilian private equity guy). But alas, two Krafts maybe… just maybe, may be worth more than one, but don’t expect miracles. Splitting a sinking ship in two doesn’t necessarily make either half more seaworthy. It just gives you more places to watch the water pour in. 

Of course, only time will tell, but for now, keep your eyes on this story and place your bets accordingly. Until next time, friends… 

At the time of publishing, Stocks.News does not hold positions in companies mentioned in the article.