Kraft Heinz Breaks Up, Bumming Out Billionaire Buffett

Breaking up is hard to do. Even for Warren Buffett.

After Kraft Heinz announced Tuesday that it’d be splitting into two companies, confirming reports from earlier this summer, the Oracle of Omaha told CNBC that he was disappointed that the conglomerate he helped piece together couldn’t make it work. Buffett may be on the way out, but his word still has weight: Shares of Kraft Heinz fell 7% Tuesday.

Snack Attack

The 2015 merger, a $46 billion marriage arranged by Buffett and Brazilian private-equity firm 3G Capital Partners, was supposed to be a match made in supermarket heaven: Kraft’s hot dogs and Heinz’s ketchup, feeding the combined company’s bottom line. What happened next was more like a ketchup splatter on a white T-shirt. While “disappointed,” Buffett conceded to CNBC the merger wasn’t exactly a success but added that a breakup wouldn’t solve its problems. In August, Berkshire Hathaway, the largest Kraft Heinz shareholder, wrote down the value of its stake to $8.4 billion, way below the $17 billion valuation it reported at the end of 2017.

So what happened? The scale of the conglomerate largely added complexity rather than delivering the value that Buffett and co-conspirators envisioned when the two sides first came together. And now, the company faces a triple whammy of headwinds: inflation, which has deterred consumer spending on non-essential snack items, as well as this year’s new tariffs and a years-long trend toward health-conscious diets in the US that has culminated in the Make America Healthy Again movement.

Split in two, Kraft and Heinz may have better luck against the headwinds:

• On one side of the breakup will be a company focused on condiments, headlined by Heinz ketchup and also including boxed meals. It has been the faster-growing side of the Kraft Heinz empire, generating some $15.4 billion in annual sales. 
• On the other side will be a company composed of the conglomerate’s slower-growing grocery brands, such as Lunchables and Oscar Mayer, which currently generate around $10 billion in annual sales. CEO Carlos Abrams-Rivera said Tuesday the company is focused on making the grocery items healthier.

Pep In Their Step: Food conglomerate breakups are a Wall Street staple. In 2023, Kellogg split its cereal business from its snacking business, and earlier this summer, Keurig Dr Pepper said it would separate its coffee and soft drink units. Tuesday also delivered the news that activist investor Elliott Global Management has secured a $4 billion stake in PepsiCo and given Pepsi’s board an action plan that recommended divesting underperforming assets in its snacks business. In 2025, that’s just the way the cookie crumbles for packaged food giants.