The company will split into two new entities to streamline operations and unlock shareholder value.
The Kraft Heinz Co. has announced a strategic plan to split into two separate, publicly traded companies. This separation will be achieved through a tax-free spin-off, with the core objective of reducing organizational complexity and allowing each new company to focus on its distinct strategic priorities. By doing so, the company aims to more effectively allocate resources and maximize the potential of its diverse portfolio of brands.
The new entities, which are yet to be named, will each have a clear mandate. One company, the “Global Taste Elevation Co.,” will concentrate on taste elevation and shelf-stable meals. This business will include a number of prominent brands like Heinz, Philadelphia, and Kraft Mac & Cheese. With approximately $15.4 billion in 2024 net sales, this company will primarily focus on sauces, spreads, and seasonings, which account for about 75% of its sales.
The second new company, the “North American Grocery Co.,” will focus on a portfolio of North American staples. Led by CEO Carlos Abrams-Rivera, this entity will have approximately $10.4 billion in 2024 net sales and will include iconic brands such as Oscar Meyer, Kraft Singles, and Lunchables. This strategic division aims to provide a more streamlined focus on the large-scale grocery business in the North American market, an important segment of the agribusiness landscape.
According to Miguel Patricio, executive chair of the board for Kraft Heinz, the company’s current structure makes it challenging to effectively allocate capital and drive scale in its most promising areas. By creating two companies, the leadership believes they can dedicate the right level of attention and resources to each brand portfolio, ultimately driving better performance and creating long-term shareholder value for investors in the dairy industry and beyond.
This move is a bold step in corporate strategy, reflecting a trend towards specialization to unlock value. Both resulting companies are expected to benefit from reduced operational complexity, leading to greater efficiencies and improved margins. This structural change will enable each entity to customize its capital allocation based on its unique strategic ambitions, thereby accelerating performance and maintaining crucial financial flexibility in a competitive global market.
Source: Dairy Foods, “Kraft Heinz to split into two companies”
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