After 10 years together, the marriage of two snack food giants has gone bad, like a bottle of expired ketchup, or an unrefrigerated bowl of KD.
What happened: Kraft Heinz is splitting back into two companies after their blockbuster 2015 merger (a deal partially orchestrated by Warren Buffett). One of the new entities will house sauces, condiments, and other high-performing products, while the other company will be tasked with reviving struggling grocery brands like Oscar Mayer and Lunchables.
- The company is hoping the move will benefit from dedicated attention and create more value for investors.
- Things simply haven’t shaken out as planned, with shares in Kraft Heinz falling about 70% since the deal closed in July 2015.
Big picture: High-profile divorces are an emerging trend in the grocery aisle. In 2023, Kellogg's spun off its legacy cereal operations while holding on to its stronger snack biz. And just last week, Dr Pepper and Keurig announced they will unwind their seven-year-old tie-up.
Why it matters: The moves reflect changes in grocery shopping. Tighter budgets mean less room in carts for snacks, a proliferation of cheaper private-label brands has created more competition, and health awareness has led some shoppers to turn their backs on highly processed foods.
Zoom out: Conditions could get worse for Big Snack. As appetite-suppressing GLP-1 drugs have also led to reduced munchies, expanded access to them could do more damage for snack companies’ bottom lines.—QH