Kraft Heinz Breaks Up Into Two Separate Companies After Struggling Sales

The Great Unbundling: How Kraft Heinz's Split Signals the Twilight of American Food Empires

The Kraft Heinz Company announced Monday morning that its Board of Directors has unanimously approved a plan to separate the company into two independent, publicly traded companies through a tax-free spin-off, marking the most significant restructuring in the food giant's corporate history.

The decision comes after months of strategic review that began in May 2025, when the company's Board of Directors and Executive Leadership Team announced they were evaluating potential strategic transactions to unlock shareholder value. The announcement confirms widespread speculation that intensified in late August, when reports emerged that Kraft Heinz was closing in on a plan to break itself up.

The separation, expected to close in the second half of 2026 subject to customary closing conditions and regulatory approvals, will create two distinct entities with dramatically different strategic profiles. "Global Taste Elevation Co." will command approximately $15.4 billion in 2024 net sales and $4.0 billion in adjusted EBITDA, while "North American Grocery Co." will anchor $10.4 billion in net sales and $2.3 billion in adjusted EBITDA.

"This move will unleash the power of our brands and unlock the potential of our business," stated CEO Carlos Abrams-Rivera. "This next step in our transformation is only possible because of the commitment of our 36,000 talented employees who deliver quality and value for consumers every day."

The Anatomy of Industrial Decline

The forces that brought Kraft Heinz to this inflection point began crystallizing long before Monday's announcement. Since the 2015 merger orchestrated by 3G Capital's aggressive cost-cutting philosophy, the company has struggled to reconcile two fundamentally incompatible imperatives: maintaining the margins that satisfied Wall Street while preserving the brand investments necessary for long-term consumer loyalty.

Zero-Based Budgeting (ZBB) is an approach where all expenses must be justified for each new period, starting from a "zero base," rather than adjusting from previous budgets. This method requires every activity and its associated costs to be re-evaluated and approved from scratch, famously employed by entities like 3G Capital to drive efficiency and cost savings.

The mathematics of this tension proved unforgiving. While zero-based budgeting delivered immediate profitability gains, it systematically eroded the innovation capabilities and marketing muscle that sustained premium pricing. "When you treat marketing as a cost center rather than a growth engine, you're essentially liquidating your future," observed one former company executive, speaking on condition of anonymity given ongoing industry relationships.

Kraft Heinz's stock performance since the 2015 merger, illustrating the long-term erosion in market capitalization.

Period	Kraft Heinz (KHC) Performance	S&P 500 Performance
Since Merger (approx. 10 years)	Lost 61% of value	Gained 237%
Last 12 Months (as of Aug 29, 2025)	-15.23% (total return)	+17.68% (total return)
Year-to-Date (2025)	-4.98%	+10.72%

The consequences manifested in ways both quantifiable and existential. Organic sales are projected to decline between 1% and 3% in fiscal 2025, extending a trajectory that has persisted despite repeated management promises of stabilization. More troubling for institutional investors, the company's market capitalization eroded so dramatically that it triggered the massive goodwill impairment—a stark acknowledgment that acquisition-era optimism had collided with market reality.

Two Americas, Two Business Models

The strategic architecture underlying Monday's announcement reflects a sophisticated understanding of how fundamentally different market dynamics require incompatible corporate responses.

Global Taste Elevation Co. emerges as the growth-oriented entity, built around approximately 75% revenue concentration in sauces, spreads, and seasonings—categories where pricing power remains intact and international expansion opportunities abound. With roughly 20% of sales flowing from emerging markets and an additional 20% from away-from-home channels, this entity positions itself to capitalize on global urbanization trends and the ongoing premiumization of food experiences worldwide.

Kraft Heinz 2026 Split Overview

Two independent companies will emerge to unlock value and sharpen strategic focus.

Aspect	Global Taste Elevation Co.	North American Grocery Co.
Focus	Premium, higher-growth flavor platforms	Foundational grocery staples
2024 Revenue	≈ $15.4B	≈ $10.4B
Key Brands	Heinz, Philadelphia, Kraft Mac & Cheese	Oscar Mayer, Kraft Singles, Lunchables
Positioning	Global, flavor-led, premium growth	North America-centric, classic categories
Strategy	Innovation, global expansion, premium margins	Stabilization, efficiency, portfolio right-sizing
Growth Profile	Faster-growth, higher-margin	Slower-growth, commoditized
Timeline	Tax-free separation targeted H2 2026	Same timeline

The portfolio includes three billion-dollar brands—Heinz, Philadelphia, and Kraft Mac & Cheese—that retain significant consumer recognition across multiple continents. Industry specialists suggest this configuration could unlock valuation multiples approaching those enjoyed by category leaders like McCormick & Company, potentially trading at 14-16 times forward earnings rather than the conglomerate discount currently applied to the combined entity.

North American Grocery Co., which will be led by current CEO Carlos Abrams-Rivera, represents an entirely different investment proposition. This entity encompasses beloved but mature brands including Oscar Mayer, Kraft Singles, and Lunchables, with approximately 75% maintaining number-one or number-two market positions within their respective categories.

The Industry's Great Unwinding

Kraft Heinz's decision emerges from a broader industry recognition that the conglomerate model in packaged foods has exhausted its productive potential. The transformation follows Kellogg's successful 2023 separation into Kellanova and WK Kellogg Co., where the snack-focused Kellanova commanded a $30 billion acquisition by Mars, while WK Kellogg established itself as a pure-play cereals operation.

This pattern reflects fundamental shifts in investor psychology toward focused, category-leading companies that can articulate clear strategic narratives. Complex portfolios that facilitated acquisition-driven growth in previous decades now create analytical challenges for institutional investors attempting to model distinct growth trajectories across disparate food categories.

Market share of private label food and beverage products in the U.S. over the past decade, showing the increasing pressure on established national brands.

Year	Private Label Dollar Market Share (%)	Private Label Unit Market Share (%)
2013	17% (of total grocery spending)	N/A
2023	19% (of total grocery spending)	25.5%
2024	20.7%	23.1%
2025 (H1)	21.2%	23.2%

The industry transformation accelerated as consumer preferences migrated toward fresh, health-conscious, and locally-sourced alternatives, applying sustained pressure to traditional center-store processed foods. Simultaneously, private label alternatives from major retailers have compressed margins across multiple categories, forcing brand owners to justify premium pricing through innovation excellence rather than distribution muscle alone.

Financial Architecture and Structural Implications

The separation's financial framework reveals management's nuanced approach to capital allocation challenges that have constrained both businesses under unified ownership. Company guidance indicates expectations to maintain aggregate dividend levels while targeting investment-grade credit ratings for both entities—a delicate equilibrium requiring precise debt allocation and operational efficiency improvements.

Dis-synergies in a corporate spin-off are the unexpected negative consequences or increased costs that emerge after a company separates into independent entities. Unlike expected synergies, these manifest as a loss of value or operational inefficiencies, making the sum of the individual parts less effective or more expensive than when they were combined.

Financial projections suggest up to $300 million in dis-synergies could initially pressure margins as shared procurement advantages and operational efficiencies unwind. However, company leadership argues these transitional costs will be offset by enhanced strategic focus and customized capital allocation that better aligns resources with each business's competitive requirements.

The spin-off structure creates particularly intriguing dynamics for institutional asset management, as the resulting entities will likely attract fundamentally different investor constituencies. Global Taste Elevation's international exposure and growth orientation may appeal to growth-focused mandates, while North American Grocery's stable cash generation and dominant market positions could attract yield-seeking and value-oriented strategies.

Market Arithmetic and Investment Calculus

Sophisticated sum-of-parts analysis suggests the separated entities could command combined valuations exceeding current market pricing by 25-35%, assuming successful execution and appropriate multiple expansion. This mathematical opportunity reflects market inefficiency in pricing a global sauces asset alongside mature domestic grocery brands within a single equity structure.

The EV/EBITDA multiple is a key valuation metric, explained by dividing a company's Enterprise Value (EV) by its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). This ratio helps investors assess a company's total value relative to its operating cash flow, with a "good" multiple often varying significantly across different industries, such as the food sector.

Investment professionals examining the separation arithmetic note that Global Taste Elevation could reasonably trade at 12-14 times enterprise value to EBITDA, reflecting its international diversification and category leadership, while North American Grocery might settle into an 8-10 times multiple range consistent with mature domestic food companies.

However, realizing this valuation uplift requires sustained execution excellence during an 18-month separation process while maintaining competitive positioning in rapidly evolving categories. The ambitious timeline through late 2026 provides limited tolerance for execution delays or unexpected market disruption.

Strategic Risks and Structural Headwinds

Beneath the strategic optimism lies unforgiving market arithmetic that organizational separation alone cannot overcome. Both entities will compete in environments where consumer loyalty has weakened and private label alternatives continue expanding market share.

The North American grocery segment faces particularly acute structural challenges, as health-conscious consumers increasingly avoid processed foods while retail consolidation strengthens private label capabilities. Oscar Mayer and Kraft Singles confront secular headwinds that transcend corporate organizational charts.

Meanwhile, the global sauces and condiments market, despite superior growth prospects, remains vulnerable to trade disruption and currency volatility that could pressure international revenue streams. The away-from-home channel, representing 20% of Global Taste Elevation's projected business, continues navigating post-pandemic recovery while confronting persistent labor cost inflation.

The Path Through Transformation

As Kraft Heinz prepares for this fundamental transformation, the implications extend far beyond shareholder value creation to encompass broader questions about American food industry evolution. The separation acknowledges that sustainable competitive advantage in modern food markets requires surgical focus rather than diversified scale.

For investment professionals, the transaction creates opportunities to access pure-play exposure to distinct food industry dynamics while potentially capturing operational improvements that focused management teams historically deliver. The immediate challenge involves accurately assessing which entity will successfully navigate its respective market challenges while delivering sustained shareholder returns.

The ultimate measure of success will not be found in separation mechanics, but in whether two smaller, focused companies can collectively generate the growth and profitability that eluded their combined predecessor. In an industry where brand equity battles private label economics and global reach competes with local authenticity, Kraft Heinz's strategic unbundling may well define the future architecture of American food enterprises.

The company's stock closed Monday at $27.97, up $0.34, as investors began the complex calculus of valuing transformation over continuity in one of America's most tradition-bound industries.

House Investment Thesis

Aspect	Details
Company & Current Data	Kraft Heinz Co. (KHC) - USA equity. Price: $27.97 USD. Change: +$0.34 USD. Last Trade: Tuesday, September 2, 12:21:19 +0200.
The Event	Separation into two tax-free, publicly listed companies targeted for the second half of 2026. Aggregate dividend will be maintained.
New Entity: Global Taste Elevation Co.	Profile: Sauces, Spreads, Seasonings, shelf-stable meals. 2024 Sales: ~$15.4B. 2024 Adj. EBITDA: ~$4.0B (~26% margin). Mix: ~75% sauces/spreads/seasonings, ~20% Emerging Markets, ~20% Away-From-Home. Leader: To be announced. Comps: MKC, ULVR Foods, MDLZ. Post-Spin View: Growthier multiple, global pricing power.
New Entity: North American Grocery Co.	Profile: Oscar Mayer, Kraft Singles, Lunchables. 2024 Sales: ~$10.4B. 2024 Adj. EBITDA: ~$2.3B (~22% margin). Market Position: ~75% #1 or #2 category shares. Leader: Carlos Abrams-Rivera. Comps: CPB, CAG, GIS, HRL. Post-Spin View: High-yield cash compounder, potential M&A target.
Context & Rationale	Response to six quarters of sales declines and a Q2'25 $9.3B non-cash impairment due to market-cap decline. Undoes complexity of the 2015 merger. Part of a broader Big Food de-conglomeration trend (e.g., Kellogg, Unilever).
Sum-of-the-Parts (SOTP) Valuation	Base Case (Author's View): ~30% upside. Taste (12x EV/EBITDA): $39.1B equity. Grocery (8x EV/EBITDA): $5.5B equity. Combined: ~$44.6B vs. current ~$34B market cap. Bear Case: ~$30Bs (near current value). Bull Case: $55-60B (50-75% upside).
Key Financial Assumptions	Dis-synergies: Up to $300M (allocated 60% to Grocery, 40% to Taste). Net Debt: ~$18-19B total (allocated more to Grocery for strategic flexibility). Credit: Both entities target investment-grade (IG) ratings.
Risks & Challenges	Volume erosion continues. Tax-free opinion fails. Dis-synergies exceed $300M. Input cost shock hurts Grocery margins. Rating agencies assign unfavorable debt levels.
Catalysts & Timeline	Near-term (Sep-Dec '25): Analyst Q&A, 10-Q/8-K details, rating agency feedback. 2026: Form 10 filings, CEO announcement for Taste, index changes leading to forced selling of Grocery.
Positioning & Trading Strategy	Pre-Spin: Long KHC vs. short basket of U.S. staples (e.g., CPB, CAG). Post-Spin: Barbell strategy— Long Taste for quality, accumulate Grocery after technical selling. Pairs: Long Taste vs. MKC; Long Grocery vs. CPB/CAG.
M&A Optionality	>50% odds one entity is involved in strategic M&A within 24-36 months. Taste: Bolt-ons or strategic buyer. Grocery: PE or strategic protein player (similar to Ferrero's acquisition of WK Kellogg).
Key Takeaway	The whole trades like a slow grocer; the parts include a global asset. SOTP value exceeds current market value. Strategy is to own the SOTP pre-spin and capitalize on post-spin mispricings.

NOT INVESTMENT ADVICE