Kraft Heinz splitting into 2 brands, a decade after megafood merger

Kraft Heinz is splitting into two a decade after a merger of the brands created one of the biggest food companies on the planet.

One of the companies, currently called Global Taste Elevation Co., will include shelf-stable meals and include brands such as Heinz, Philadelphia cream cheese and Kraft Mac & Cheese, Kraft Heinz said Tuesday. The other, currently called North American Grocery Co., will focus on food and beverages and include brands such as Oscar Mayer, Kraft Singles and Lunchables.

These names are only placeholders — official names of the two companies will be released later.

Kraft Heinz said in May that it was conducting a strategic review of the company, signaling a potential split.

The company in 2015 wanted to capitalize on its massive scale but shifting tastes complicated those plans, with households seeking to introduce healthier options at the table. Kraft Heinz and other food producers have shifted offerings to follow that trend.

"Kraft Heinz's brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives and drive scale in our most promising areas," executive chair Miguel Patricio said in a statement.

The path to the merger of Kraft and Heinz began in 2013, when billionaire investor Warren Buffett teamed up with Brazilian investment firm 3G Capital to buy H.J. Heinz Co. At the time, the $23-billion US deal was the most expensive ever in the food industry.

3G was also behind the formation of Restaurant Brands International — a merger of Burger King, Tim Hortons and Popeyes — and Anheuser-Busch InBev. It's known for strict cost controls and so-called zero-based budgeting, which requires all expenses to be justified each quarter.

The deal was intended to help Heinz, which was founded in 1869 in Pittsburgh, expand sales of its condiments and sauces on grocery store shelves. Heinz's new owners also set about cutting costs, laying off hundreds of workers within months.

At the same time Kraft, based in Chicago, sought a partner after a 2011 split from its snack division, which became Mondelez International.

In 2015, Buffett and 3G decided to merge Heinz with Kraft. The merger created the fifth-largest food and beverage company in the world, with annual revenue of $28 billion. Buffett and 3G each contributed $5 billion for a special dividend for Kraft shareholders.

But the combined company struggled, despite layoffs of thousands of employees and other cost-cutting measures. Even at the time of the merger, many consumers were shifting away from the kinds of highly processed packaged foods that Kraft sells, like Velveeta cheese and Kool-Aid.

Kraft Heinz also had trouble distinguishing its products from cheaper store brands. At Walmart, a 14-ounce bottle of Heinz ketchup costs $2.98; the same size bottle of Walmart's Great Value brand is 98 cents.

In 2019, Kraft Heinz slashed the value of its Oscar Meyer and Kraft brands by $15.4 billion, citing operational costs and supply chain problems. But many investors blamed the company's leadership, saying its zeal for cost-cutting was hurting brand innovation.

In 2021, Kraft Heinz sold both its Planters nut business and its natural cheese business, vowing to reinvest the money in higher-growth brands like P3 protein snacks and Lunchables.

WATCH | The man who started the ketchup war:

When an Orillia, Ont. construction worker named Brian Fernandez saw a bottle of French’s ketchup at the grocery store, he made a Facebook post about his support for the made-in-Canada ketchup and went on with his day. He had no idea what he was about to kickstart with one simple post. Watch The Ketchup War on CBC Gem.

But the company's net revenue has fallen every year since 2020, when it saw a pandemic-related bump in sales. In April, Kraft Heinz lowered its full-year sales and earnings guidance, citing weaker customer spending in the U.S. and the impact of U.S. President Donald Trump's tariffs.

Carlos Abrams-Rivera will continue to serve as CEO of Kraft Heinz and will become CEO of North American Grocery Co. once the separation is complete. Kraft Heinz said that its board is working with an executive search firm to identify potential CEO candidates for Global Taste Elevation Co.

Kraft Heinz has no plans to change its current headquarters locations in Chicago and Pittsburgh. It currently expects the transaction to close in the second half of 2026.

The company makes a number of its products in Canada — including Heinz ketchup, which is made in a Montreal factory using Canadian produce. In a Canadian Super Bowl ad earlier this year, Kraft Heinz Canada president Simon Laroche said the company makes "70 per cent of what we sell in Canada, in Canada."

Mike von Massow, a professor of food, agricultural and resource economics at the University of Guelph, says he doesn't expect the shift to two separate companies to have an impact on Canadian operations.

"This is [just] Kraft looking to focus companies on specific product categories with separate companies," von Massow said in an email.

He doesn't foresee any significant price changes, either, though he says the move could bring about more innovation in the discount product space in the long run.

Kraft Heinz didn't directly answer questions from CBC News regarding whether the split could result in changes to the companies' Canadian operations.

Shares of the company fell three per cent on Tuesday.