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Kraft Heinz's fate is tied to a possible breakup and shifts at Berkshire Hathaway
Jul. 28, 2025 12:33 PM ETThe Kraft Heinz Company (KHC) Stock, BRK.A Stock, BRK.B StockBy: Clark Schultz, SA News Editor
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Kraft Heinz (NASDAQ:KHC) is considering undertaking a landmark separation of its business by spinning off a substantial part of its grocery division into a new, independently traded entity. The food giant's move follows years of lackluster growth, changing consumer preferences, and shareholder pressure dating all the way back to the 2015 mega-merger of Kraft and Heinz.
The Kraft Heinz (NASDAQ:KHC) grocery division split, valued at up to $20 billion, could be the largest consumer goods transaction of the year and may be finalized as soon as late Q3 or Q4, according to reports.
The brands that could be included in the spinoff are among the most iconic in American supermarkets. The new grocery entity is expected to house legacy Kraft-branded grocery products such as Oscar Mayer meats, Velveeta cheese, Jell-O, Maxwell House coffee, Planters nuts, Lunchables, and Capri Sun. The products, which form the core of Kraft Heinz’s (KHC) shelf-stable, processed foods lineup, have deep roots in U.S. households but have struggled to keep pace with evolving consumer tastes that now favor fresher, healthier, and less processed options.
The post-spinoff "RemainCo" will retain high-growth and premium segments, notably the Heinz ketchup, Grey Poupon mustard, Philadelphia cream cheese, and a range of sauces and spreads, positioning itself to focus on innovation, clean-label reformulation, and international expansion. This division reflects the broader food sector trend where established giants are narrowing their focus to maximize the value of higher-margin brands with global appeal.
The largest investor in Kraft Heinz (KHC) is Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), which currently holds approximately 27% of the company's outstanding shares. Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) investment in Kraft Heinz (KHC) started with the partnership with Brazilian private equity firm 3G Capital. The initial involvement began in February 2013 when Berkshire Hathaway (BRK.A) (BRK.B) and 3G Capital acquired H.J. Heinz Company in a deal valued at approximately $28 billion, including debt. The deal was one of the largest-ever buyouts in the food industry at the time, with Berkshire providing both equity and a significant amount of preferred stock for the transaction.
In 2015, just two years after taking Heinz private, Berkshire Hathaway and 3G Capital merged Heinz with Kraft Foods Group, creating The Kraft Heinz Company (KHC). The move was driven by an ambition to combine two iconic American brands under one roof, taking advantage of synergies and cost-saving opportunities. At the time, Warren Buffett's involvement in the high-profile deal lent significant credibility and market confidence to the transaction.
However, over the years, Kraft Heinz (KHC) struggled with declining sales, goodwill impairment charges, and changing consumer tastes. Since the merger, Kraft Heinz's (KHC) share price has declined over 60%, significantly underperforming the broader market, resulting in a substantial paper loss on Berkshire's (BRK.A) (BRK.B) investment. By mid-2025, Berkshire’s 27% stake was marked at around $4.5 billion below its book value.
In recent developments, Berkshire (BRK.A) (BRK.B) has reduced its involvement on the company’s board and signaled a loss of strategic interest in day-to-day affairs. Of course, the company also has a new CEO on the way,. While Greg Abel is expected to largely maintain Warren Buffett’s investment philosophy, prioritizing careful, value-based decision making, it is unclear if he will want to keep the large stake in Kraft Heinz (KHC).
