Kraft Heinz will separate into two publicly traded companies through a tax-free spin-off to reduce complexity and improve financial performance after years of falling sales. One company, provisionally called Global Taste Elevation Co, will focus on sauces, spreads and seasonings including Heinz, Philadelphia and Kraft Mac & Cheese and is expected to generate more than $15bn in annual sales. The other, North American Grocery Co, will concentrate on grocery staples such as Oscar Mayer, Lunchables and Kraft Singles with over $10bn in annual sales and will be led by CEO Carlos Abrams-Rivera. Kraft Heinz is seeking a chief executive for the new Global Taste Elevation business. Executive chair Miguel Patricio said structural complexity has hindered effective capital allocation, prioritisation and scaling. The two legacy firms trace origins to 1869 and 1903, and the 2015 merger was engineered by Warren Buffett and 3G Capital; Buffett later acknowledged overpaying for Kraft.
The break-up will undo the 2015 merger of Kraft and Heinz, engineered by the veteran US investor Warren Buffett and the Brazilian private equity company 3G Capital, two years after the pair took Heinz private. The names of the two companies are yet to be determined. One of them provisionally called Global Taste Elevation Co will mostly focus on sauces, spreads and seasonings, with brands such as Heinz, Philadelphia and Kraft Mac & Cheese,
Miguel Patricio, the executive chair of Kraft Heinz, said: Kraft Heinz's brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritise initiatives and drive scale in our most promising areas. Heinz was founded by by Henry J Heinz in Pittsburgh in 1869 to specialise in sauces and condiments. Kraft grew out of a wholesale cheese delivery business set up in Chicago by James L Kraft in 1903.
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