Kraft Heinz's $46B merger reverses with two new firms by 2026

Kraft Heinz announced on Tuesday it will split into two independent public companies by late 2026, marking a clear reversal of its massive $46 billion merger nearly a decade ago. The decision comes as the company struggles with declining revenues and mounting pressure to unlock value for shareholders.

The breakup will create two firms: Global Taste Elevation Co., which will handle faster-growing brands like Heinz ketchup, Philadelphia cream cheese, and Kraft Mac & Cheese, and North American Grocery Co., which will oversee slower-growing grocery items such as Oscar Mayer, Kraft Singles, and Lunchables.

Strategic reasons behind the split

Executive Chair Miguel Patricio stated that the current company structure hinders effective capital allocation and growth prioritization. By forming two focused entities, each business can better concentrate on its strategic goals and brand potential.

This move reflects broader industry challenges as consumers shift to cheaper store brands and healthier options. Kraft Heinz’s sales have declined consecutively since 2020, and the company’s stock has fallen about 68% since the 2015 merger.

Did you know?
Kraft Heinz’s 2015 merger was the world’s fifth-largest food and beverage merger, but the company had to write down $15.4 billion in brand value by 2019.

The failed merger and investor impact

The merger in 2015 united H.J. Heinz and Kraft Foods, creating the world's fifth-largest food company. However, it faced consistent struggles despite significant cost-cutting, including layoffs and brand write-downs.

Warren Buffett, whose Berkshire Hathaway was a major investor, later admitted to overpaying for Kraft, leading 3G Capital to divest its shares by 2023. The split unwinds this costly bet, aiming to better position each new company amid market challenges.

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Market impact and timeline

Shares rose slightly on the news but remain down 21% over the past year. The spinoff is expected to cost up to $300 million, largely offset by near-term savings, and is planned to be completed by the second half of 2026, pending regulatory approval.

Similar splits have been seen recently in the food industry, such as Kellogg’s 2023 break into Kellanova and WK Kellogg Co., underlining a trend toward focused operational strategies.

The breakup sets the stage for a fresh start in this iconic food company’s journey, aiming to turn around performance and better serve distinct market segments in an evolving consumer landscape.