Kraft Heinz has decided to pause its plans to divide the company, a surprising move attributed to challenging conditions in the food industry, according to CEO Steve Cahillane. While acknowledging the fixable nature of the issues within their control, Cahillane highlighted the necessity of this decision.
The packaged-foods manufacturer had initially announced intentions in September to split into two separate entities—one focusing on groceries and the other on sauces and spreads. This decision followed a decade after the merger that formed the company, orchestrated by Warren Buffett’s Berkshire Hathaway and 3G Capital, which did not yield the expected growth.
Cahillane mentioned that recent price increases had deterred consumers who were already transitioning towards healthier and more cost-effective alternatives from rival brands. This swift escalation in pricing levels left consumers dissatisfied, contributing to the company’s struggles.
Despite a slight drop in shares initially, Kraft Heinz’s stock remained relatively stable on Wednesday. Cahillane explained in an interview with Reuters that redirecting resources towards business growth and early opportunities prompted the decision to halt the planned split, emphasizing the need to focus on the company’s current challenges.
The pause on the separation process, aimed at saving $300 million US in costs for 2026, does not have a specified end date. Although not ruling out a potential split in the future, Cahillane emphasized the importance of addressing deeper issues within the company before considering such a move.
Industry analysts, including Steve Powers from Deutsche Bank, viewed the decision to postpone the separation as an indication of more significant underlying problems at Kraft Heinz. The reversal of the split plan is relatively uncommon, with KPMG reporting that only about one in 10 corporate spinoffs are canceled on average.
In January, Kraft Heinz faced a setback when Berkshire Hathaway hinted at selling its 27.5% stake in the company, prompting a drop in the company’s shares. Warren Buffett, expressing his disapproval of the split, supported the decision to pause the separation under Cahillane’s leadership, aiming to strengthen the company’s competitiveness and customer service.
Cahillane outlined a strategy to revive the company’s growth, emphasizing increased investment in marketing, research, and development. This $600-million US investment aims to drive recovery in the U.S. market, which has deteriorated since the initial decision to split last year.
Struggling with weakening demand for premium condiments and staples, Kraft Heinz, like its peers in the industry, faces challenges from consumers seeking more affordable options and innovative products. The company reported fourth-quarter results below expectations and forecasted 2026 earnings that fell short of estimates, prompting a focus on R&D investments and product innovation to enhance value for consumers.
Cahillane acknowledged the lack of additional benefits provided to consumers to justify the higher price tags on Kraft Heinz products, emphasizing the need to invest in the brand’s potential growth and stability before considering any future separations.
