- Reuters
New York: Kraft Heinz Co is looking to spin off a large chunk of its grocery business, including many Kraft products, into a new entity that could be valued at as much as US$20bil on its own, the Wall Street Journal reports.
This would leave the company with products such as its namesake Heinz ketchup and Dijon mustard brand Grey Poupon, the report said, citing people familiar with the matter.
News of the potential move was the second effort last week by a storied US company looking to shore up shareholder value as shoppers ditch their pricey products in an uncertain economy.
Earlier last week, cereal maker WK Kellogg agreed to a US$3.1bil buyout deal from Italy’s Ferrero.
“As announced in May, Kraft Heinz has been evaluating potential strategic transactions to unlock shareholder value,” a company spokesperson said.
The company’s shares closed up 2.5%. It currently has a market value of US$31.33bil.
Kraft Heinz was formed in 2015 after Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital combined the former Kraft Foods with H.J. Heinz, which they bought in 2013. But it has been a challenging investment for Berkshire.
Inflationary pressures and a shift in focus toward fresher, less processed food have hurt demand for the company’s lunch combos and other products.
It lowered annual forecasts and reported a dour quarter in April, hurt by muted consumer spending.
Kraft Heinz also said last month it would stop the launch of new products with artificial colours in the United States after Health Secretary Robert F. Kennedy Jr outlined plans to remove synthetic food dyes from the US food supply to address chronic diseases and conditions.
According to the Wall Street Journal report last Friday, a split could be finalised in the coming weeks, but Kraft Heinz has discussed other scenarios with its advisers and its board has not signed off on a final decision.
The company is also working on which brands would be part of the spun-off entity, the report said.
“Kraft Heinz spinning off its grocery business echoes the 2023 Kellogg spin-off in which the company spun off its cereal business, which had been in volumetric decline for some time,” said Connor Rattigan, analyst at Consumer Edge.
“As consumer packaged goods makers (CPGs) contend with both changing consumer preferences and a challenging consumer environment, other CPGs may look to mergers and acquisitions and or similar corporate actions to improve their category exposures and improve their top-line trajectory,” Rattigan said. — Reuters
