Is Kraft Heinz split a warning?
- Kraft Heinz reportedly planning major business split
- Rumoured split follows trend of big food restructures including Unilever and The Kellogg Company
- Experts warn M&A needs better brand and culture strategy
- Health trends hurt ultra-processed brands
July brought with it the news that food giant Kraft Heinz is reportedly preparing to spin off a huge portion of its business, which includes Kraft products. What’s more, industry insiders believe the deal, which would leave the company comprised of sauces, condiments and spreads, could be finalised in a matter of weeks.
Kraft Heinz became a single entity back in 2015, when Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital combined the former Kraft Foods with H J Heinz.
But problems began to emerge just four years later (2019), when Kraft Heinz reduced the value of Kraft and Oscar Mayer meat products by $15bn. Despite this, The Kraft Heinz Company remains hugely profitable, with a value of $31bn.
Rumours of the split follow a pattern set by several multinationals, including Unilever which is offloading its ice cream business along with other big-name food brands. The Kellogg Company also recently split, creating Kellanova and WK Kellogg.
However, Kellanova and WK Kellogg didn’t stay single for long, as Kellanova is currently in the process of merging with Mars, Inc., and WK Kellogg with Ferrero.
And just this week, rumours that the long-talked about Hovis-Kingsmill merger is imminent, have started to swirl.
In other words, manufactures remain unafraid of these big money mergers, in spite of the recent high-profile failures.
But should manufacturers take the collapse of major mergers, such as Kraft Heinz, as a warning?
Also read → Kraft Heinz reportedly preparing to split
Are mergers always the solution?
“The main takeaway from the potential Kraft Heinz split is that companies can no longer use the tried and tested M&A playbook when it comes to food brands,” says Jenn Szekely, president of branding agency Coley Porter Bell. “Short-term capital and the promise of efficiency are not enough, there needs to be a proper strategy to establish the new brand post M&A.”
Szekely goes on to say that the potential split should not just serve as a warning to food manufacturers, but to any companies considering an M&A without proper consideration of the future brand strategy.
“Just because an acquisition fills a void in a portfolio, does not automatically mean an M&A is the best move,” she says. “Too much diversification can cause a lack of focus. Businesses also need to explore the growth strategies for the brands that fit within their own portfolios prior to committing to a close.”
Another factor often overlooked in the merger process, but absolutely vital, is company culture.
“Heinz and Kraft had very different cultures, creating obstacles from the start,” explains Szekely. “Kraft Heinz failures should serve as a warning not to overlook culture compatibility in M&A.”
Also read → Kraft Heinz split rumours intensify
Why did the Kraft Heinz merger fail?
One of the biggest struggles Kraft Heinz has experienced, which arguably could not have been predicted, is the rise of the health and wellness trend.
“Consumers are increasingly health-focused and wary of ultra-processed foods,” says Szekely. “While they were not seen as favourable in the past, today people know they can have a big impact on their health.”
And it’s this understanding which has led to a drop in sales for Kraft Heinz – a company with a portfolio comprised almost entirely of ultra-processed foods.
“The heritage brands in the Kraft portfolio are not resonating with consumers today,” says Szekely.
Also read → Kraft Heinz CEO responds to split rumours
What could Kraft Heinz have done differently?
“We saw Kraft Heinz refresh several of its brands since the merger, like Jello, Kraft Singles and Ore-Ida, but that was not enough,” says Szekely. “What’s required is a deeper examination of its products.”
Many of the brands in the Kraft Heinz portfolio, and in the broader portfolios of CPG food companies, have spent years evolving their ingredients, so much so that the products are now shadows of their former selves.
Ingredient lists have drastically increased over the years, and the types of ingredients have changed significantly.
“Take Velveeta,” says Szekely. “It was originally made with real cheese and had an ingredient list of 4-5 core products. Today, it has over 30 distinct ingredients, meaning it cannot even be called cheese, instead being labelled a ‘cheese product’.”
The modern consumer has grown wise to these types of careful differentiations, seeing it to be an admission that the product lacks any real cheese.
Though Kraft Heinz is not the only culprit of this type of product change. Major brands, including Nestlé and Pladis, have had to drop the word ‘chocolate’ from some products as cocoa content has fallen below the legal threshold.
The future of M&A in big food
The Kraft Heinz split may be the latest in a string of food industry shakeups, but it’s also a wake-up call.
Mergers driven by short-term gains and portfolio gaps are no longer enough. As consumer expectations evolve and health-conscious choices dominate, food manufacturers must rethink their strategies – prioritising brand clarity, cultural alignment, and long-term vision over quick wins. The future of food isn’t just about scale, it’s about relevance.
