Kraft Heinz is pausing its previously announced plans to split into two independent companies, a move signaling a shift in strategy under its new Chief Executive Officer, Steve Cahillane. The decision, announced on , reflects a reassessment of the company’s priorities, with a renewed focus on revitalizing its North American business.
Cahillane, who assumed the role of CEO on , indicated that the North American operations were not performing to expectations. “And, to execute a separation, you really need to have a healthier business,” he stated, justifying the decision to put the separation plan “on pause.” The original plan, unveiled in , aimed to reverse the 2015 merger of Kraft Foods and Heinz, creating two separately traded entities.
The proposed split was intended to be finalized in the second half of . However, Cahillane explained that pursuing both a complex separation and a turnaround of the North American business simultaneously would be challenging. He characterized the separation as a “possibility” for the future, contingent on improving the health of the core operations.
The company has committed to investing $600 million to fuel a turnaround of its U.S. Business, allocating funds to marketing, sales, and research and development. This investment is intended to address what Cahillane described as historically insufficient marketing expenditure, a key factor in the company’s recent market share losses.
North American revenue declined by nearly 5% in , reaching $18.49 billion (out of a total of $24.94 billion), with U.S. Sales being a primary driver of the decline. The United States accounts for 67% of Kraft Heinz’s overall business, producing iconic brands such as Heinz ketchup, Philadelphia cream cheese, CapriSun beverages, and Maxwell House coffee.
“I’m in favor of preserving the option [of a split] but, once we get the business back on track and growing again, we’ll have all sorts of opportunities, one of which will continue to be the separation,” Cahillane said. He emphasized that the company had been losing market share annually since the 2015 merger, largely due to underinvestment in marketing.
The shift in strategy is not expected to impact the company’s dividend, Cahillane assured investors. The announcement comes as Kraft Heinz navigates a challenging period, marked by declining sales and a need to revitalize its brand portfolio. The company’s stock had experienced a 14.8% decline over the past year, a 29.7% decline over three years, and a 19.6% decline over five years as of , reflecting investor concerns about its performance.
The decision to pause the split follows a period of extensive deliberation within the company, as Cahillane and his leadership team assessed the best path forward. Nicolas Amaya has been appointed President, North America, a key leadership change intended to drive the turnaround efforts. The company is betting that a renewed focus on brand building and a strengthened North American leadership team will deliver sustainable growth.
Kraft Heinz’s challenges reflect broader trends in the packaged food industry, where companies are facing increased competition from private label brands and changing consumer preferences. The company’s ability to adapt to these trends and revitalize its core brands will be crucial to its long-term success. The $600 million investment in marketing and R&D is a significant step in that direction, signaling a commitment to innovation and brand building.
As of , Kraft Heinz shares were trading steadily on the New York Stock Exchange.
