Berkshire Hathaway’s $8 billion investment in Kraft Heinz is presently on shaky ground after the company announced a split. According to a CNBC report, Warren Buffett, who was the brainchild of the merger back in 2015, said he was disappointed by the breakup.
Warren Buffett added that the merger was not the most brilliant idea, and splitting the company won’t fix the real issues. With the new move, Kraft Heinz will be divided into two separate businesses. One is expected to now handle sauces, spreads, and shelf-stable meals, while the other is left with US household brands like Kraft Singles, Lunchables, and Oscar Mayer. The announcement was made early Tuesday, and Warren’s comments came later that day in an interview with Becky Quick. Shares dropped more than 7% after his interview aired.
Berkshire stays amid Kraft Heinz split
According to reports, Warren Buffett has kept Berkshire Hathaway’s 27.5% stake untouched since the merger. The company hasn’t trimmed or added to the position at all since teaming up with 3G Capital a decade ago to form Kraft Heinz. But now, with 3G already out, having quietly exited in 2023, Warren and his incoming successor, Greg Abel, are left holding the investment solo. Abel, who is in line to take over from Warren at the end of this year, has also expressed his disappointment in how Kraft Heinz is being handled.
Since both companies merged in 2015, Kraft Heinz has lost serious ground. Its shares have dropped nearly 70% since then, shrinking its market value to just $33 billion. The decline came after US sales dropped and consumer behavior changed. Shoppers have opted to avoid processed foods, opting instead for fresh items around the outer edges of grocery stores.
The brands under Kraft Heinz, despite being household names like Velveeta and Oscar Mayer, were losing relevance. Analysts blame some of the collapse on 3G Capital’s aggressive cost-cutting, which prevented the company from investing in its brands at the time they needed it most. Kraft Heinz ended up selling off big pieces of its portfolio, including its Planters nuts and parts of its cheese business.
At the same time, the company tried to revive a few brands like Capri Sun and Lunchables by investing heavily in them. Last May, executives at Kraft Heinz admitted they were thinking about strategic changes and even possible deals. This split is the result of that process, but the company didn’t say if more breakups or asset sales are coming; however, it is clear that the structure from 2015 is no longer working.
Despite the mess, Warren has chosen to remain, telling CNBC that Berkshire Hathaway will do whatever is best for the firm. He also mentioned that if anyone comes forward to buy their stake, Berkshire won’t accept a private block deal unless every other shareholder is offered the same terms. That means no backroom discounts or side deals.
