Kraft Heinz (KHC, Financials) is considering spinning off a large portion of its grocery business into a separate entity; the transaction could be valued at up to $20 billion, according to a person familiar with the matter; while no final decision has been made, the potential deal reflects mounting pressure on consumer goods giants to boost shareholder returns amid weakening consumer demand.
The possible split—first reported by The Wall Street Journal—would likely leave Kraft Heinz with brands like Heinz ketchup and Grey Poupon mustard, while legacy Kraft-branded items would go to the new company. A spokesperson confirmed that the company has been evaluating “strategic transactions” since May to unlock shareholder value.
Kraft Heinz stock closed up 2.5% on the day; the company currently holds a market capitalization of $31.3 billion. A final decision on the spinoff could emerge in the coming weeks, though plans may still change.
The proposed move echoes Kellogg's (KLG, Financials) 2023 decision to spin off its cereal business—which had suffered volume declines—into WK Kellogg, which was recently acquired by Ferrero for $3.1 billion. Analysts say other packaged food makers could follow suit; the industry faces a tough mix of inflationary headwinds, cost-conscious consumers, and demand for healthier, fresher alternatives.
Kraft Heinz, backed by Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway and Brazil's 3G Capital, has struggled in recent years. In April, the company slashed its full-year forecast after a weak quarter; last month, it also halted U.S. product launches involving artificial food dyes after U.S. Health Secretary Robert F. Kennedy Jr. pushed for regulatory action.
Connor Rattigan of Consumer Edge said the move is part of a larger trend in which consumer packaged goods companies are reevaluating their category exposure; “M&A or corporate restructurings may offer a way out,” he said; but investors will be watching closely to see whether this is a quick fix—or the start of something more strategic.
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