In 2015, Warren Buffett (Trades, Portfolio) hailed the creation of Kraft Heinz (KHC, Financial) as a landmark opportunity to unite iconic brands. However, nearly a decade later, the company is considering splitting its brands, marking a rare setback for the renowned investor. Since Berkshire Hathaway and 3G Capital merged Kraft and Heinz, Kraft Heinz's stock has plummeted over 60%, even as the broader market surged. Berkshire's 27% stake has lost approximately $4.5 billion in market value compared to its book value.
For Buffett, now 94, this investment is one of his few missteps as he prepares to retire from Berkshire Hathaway at the end of the year. Despite stable dividend income and profits from Heinz's acquisition, Berkshire could have earned nearly $10 billion more by investing in the broader market. Analyst Matthew Palazzola noted that Buffett might not have anticipated the market's shift towards healthier options, impacting Kraft Heinz, a key player in processed foods.
Kraft Heinz, known for brands like Oscar Mayer and Kraft Mac & Cheese, has faced challenges from inflation and declining demand for packaged foods. The company is reportedly considering spinning off parts of its business. Despite past admissions from Buffett about overpaying for Kraft, Berkshire has profited from Heinz preferred stock dividends and redemptions, as well as over $6 billion in dividends from Kraft Heinz common stock.
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