Buffett's bet ten years ago encountered setbacks? The $46 billion merger comes to an end, Kraft Heinz decides to split and restructure

Kraft Heinz announced on Tuesday that it will split into two independent publicly traded companies, marking the official conclusion of the $46 billion merger led by Warren Buffett ten years ago. The split aims to simplify the business structure, enhance brand resource allocation and profitability, and respond to ongoing performance pressures and industry changes. Kraft Heinz's stock price fluctuated little after the announcement, but it has fallen 21% over the past year, reflecting market concerns about its growth prospects. The restructuring will divide Kraft Heinz into a "Global Flavor Enhancements Company" focused on sauces, condiments, and ready-to-eat meals, and a North American grocery company primarily featuring grocery brands like Oscar Mayer and Lunchables. The transaction is expected to be completed in the second half of 2026, pending regulatory approval. This decision not only ends the 2015 merger of Kraft and Heinz but also highlights the transformation challenges faced by traditional food giants amid changing consumer trends, rising health demands, and inflationary pressures. Buffett himself has admitted that his investment in Kraft Heinz "misjudged in multiple aspects," while another major shareholder, 3G Capital, exited its stake in 2023. Details of the Split Plan: Two Major Business Segments to Go Public Independently According to the company's announcement, Kraft Heinz will establish two independent publicly traded companies through a tax-free spin-off. The first company will focus on sauces, condiments, and ready-to-eat meals, including core brands like Heinz Ketchup and Kraft Macaroni & Cheese, with annual sales of approximately $15.4 billion. The second company will focus on North American grocery business, covering brands like Oscar Mayer hot dogs and Lunchables, with annual sales of approximately $10.4 billion. Company CEO Carlos Abrams-Rivera will serve as the CEO of the new grocery company, while the CEO of the other company is being sought globally. The names of the two new companies will be announced later. Kraft Heinz stated that the split will help each company focus on its core markets and brands, enhancing operational efficiency. The company expects the split to incur about $300 million in additional operating costs but promises to maintain the current dividend level and strive to retain an investment-grade credit rating. The market is generally focused on the independent performance of the two companies post-split and potential merger opportunities. Analysts point out that as industry consolidation accelerates, the newly established companies may become acquisition targets in the future. Ten Years After the Merger, Is Everything Back to Square One? In 2015, Berkshire Hathaway, led by Warren Buffett, and 3G Capital facilitated the merger of Kraft and Heinz, creating one of the largest packaged food companies in the world. At that time, aggressive cost-cutting and economies of scale were highly anticipated. However, as consumer demand for healthy, natural foods has risen, along with the impact of new weight-loss drugs and inflationary pressures on consumption habits, Kraft Heinz's traditional product lines have gradually lost their appeal Kraft Heinz's market value has shrunk by about 70% since its peak in 2017. In 2019, Buffett publicly admitted that he had "misjudged in multiple ways" regarding his investment in Kraft Heinz, and Berkshire Hathaway recorded a $3 billion impairment for that investment that year. 3G Capital has completely exited Kraft Heinz in 2023. The Rise of Health-Conscious Consumption Drives Food Giants to Accelerate Restructuring Kraft Heinz's split is not an isolated case; in recent years, the global packaged food industry has been undergoing deep restructuring. In 2023, Kellogg spun off its cereal and snack businesses into WK Kellogg Co. and Kellanova, respectively. In 2024, Mars announced its acquisition of Kellanova for nearly $36 billion, while Italian candy giant Ferrero acquired WK Kellogg for $3.1 billion. Industry analysts believe that as health awareness increases and consumption upgrades, traditional food giants have no choice but to respond to market pressures through asset restructuring and focusing on high-growth categories. U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. has also called for a reduction in the consumption of ultra-processed foods, urging companies to adjust their product structures