Kraft Heinz to Divide into Two Companies Following Unsuccessful Mega-Merger Attempt

U.S. food giant Kraft Heinz has announced plans to sell its natural cheese business, including brands such as Cracker Barrel and Cabot, for approximately $3.8 billion. This move is part of the company's strategy to focus on its core brands and improve its financial performance.

The sale is the latest in a series of changes at Kraft Heinz, including the planned split into two distinct companies by 2026. The company is working with investment bank JPMorgan Chase to find a buyer for its natural cheese business.

Kraft Heinz has faced financial struggles in recent years, with its stock price falling significantly and its debt levels rising. The sale of the natural cheese business is expected to help the company reduce its debt and improve its balance sheet.

The tie-up between Kraft Foods and H.J. Heinz, orchestrated by Warren Buffett's Berkshire Hathaway and Brazil's 3G Capital in 2015, has faltered under sustained inflationary pressure and a shift in consumer preferences. Budget-conscious U.S. shoppers have increasingly turned to private-label alternatives, while smaller food startups have captured market share with innovative offerings.

The sale of the natural cheese business is an effort by Kraft Heinz to address these financial challenges and position itself for long-term success. The first company, which will focus on shelf-stable foods, will house popular brands such as Heinz sauces, Philadelphia cream cheese, and Kraft Mac & Cheese. The second entity will house a broader assortment of products, including Oscar Mayer deli meats, Maxwell House coffee, Capri Sun beverages, and Lunchables.

Carlos Abrams-Rivera, CEO of Kraft Heinz, will be CEO of the North American Grocery Co., while the CEO for the Global Taste Elevation Co. (the sauces and prepared foods company) has not yet been found. Executives hope the demerger will lead to greater investor confidence.

The decision to sell the natural cheese business comes after a strategic shift earlier this year, where CEO Carlos Abrams-Rivera said the company was focusing its efforts on high-growth, high-margin categories, positioning itself as a "sauces and meals powerhouse." By mid-2025, Kraft Heinz's shares had fallen by nearly two-thirds from their post-merger peak, underlining the urgency of the split.

The sale of the natural cheese business is expected to be completed in the second half of 2023, subject to customary closing conditions and regulatory approvals. The combined value of the two independent companies is expected to exceed the firm's current market valuation.