Kraft Heinz after 10 years "breeds" ketchup and hot dogs. Buffett's "disappointed" about it.

American producer of sauces and canned food Kraft Heinz has announced that it will split its business into two separate businesses after several years of weak sales and falling capitalization. Management expects that simplifying the structure will allow for more efficient allocation of resources, strengthen the positions of key brands and accelerate growth in promising segments. The company was created in 2015 with the help of Berkshire Hathaway by legendary investor Warren Buffett. He said he was "disappointed" by the decision to split it up again. Kraft Heinz shares collapsed about 6%.

Kraft Heinz said it will split into two publicly traded companies, with one focusing on its sauces business and the other on its product line. The move is being made by the company to return to growth after several years of sluggish sales, Reuters notes.

The first company has been given the temporary name North American Grocery Co. It will combine the Oscar Mayer (sausage and hot dogs), Kraft Singles (processed cheese slices) and Lunchables (ready-to-eat snack kits) brands. This division, with annual revenues of about $10 billion, will be led by Kraft Heinz CEO Carlos Abrams-Rivera, the company said.

The second division, which generates approximately $15 billion in annual sales, is designated as Global Taste Elevation Co. It will focus on the global sauces and prepared foods market, combining brands such as Heinz (ketchup and sauces), Philadelphia (cream cheese) and Kraft Mac & Cheese (macaroni and cheese).

"Our brands are iconic and beloved, but our complex company structure makes it difficult to effectively allocate capital, prioritize and grow in the most promising areas," said Kraft Heinz Executive Chairman Miguel Patriciu.

The Company expects the separation process to be completed in the second half of 2026.

Shares of Kraft Heinz were down about 6% to $26.21 in trading on Sept. 2. This is the minimum since mid-July. Relative to the beginning of 2025, the securities are down by more than 14%.

Billionaire Warren Buffett, who heads Berkshire Hathaway, told CNBC that he is "disappointed" by the Kraft Heinz announcement. The company's decision will undo much of what Buffett was seeking in 2015 by orchestrating the merger between Kraft and Heinz, the network writes. Berkshire Hathaway is the largest shareholder in Kraft Heinz, owning 27.5% of the company.

Merging the two businesses after a decade doesn't seem like a brilliant idea, but splitting up won't solve the company's problems, Buffett told CNBC. According to him, his future successor at the head of Berkshire, Greg Abel, expressed to Kraft Heinz his disappointment with its decision.

Regarding Berkshire's future as an investor in Kraft Heinz, Buffett said Berkshire will act in accordance with its interests. If it receives an offer to sell shares, it will not agree to a major transaction unless other shareholders receive the same offer, he added.

Kraft Heinz did not respond to CNBC's request for comment on Buffett's position.

The conglomerate now manages nearly 200 brands in 55 categories and more than 150 countries, making it impossible to fully invest in each of them, the CEO said. The split will allow management of the North American basic products division to focus on a narrower market and develop sales channels, such as convenience stores, that were not previously prioritized, the WSJ writes.

The companies are expected to have sufficient free cash flow to invest in organic growth, return capital to shareholders and consider strategic transactions. In aggregate, current dividend levels are expected to be maintained. Management intends to build capital structures that will ensure an investment grade rating for both companies, the company said in a press release.

"We will be able to allocate the right amount of attention and resources to unlock the potential of each brand and increase efficiency," said Patriciu.

The deal largely negates the outcome of the failed 2015 merger between Kraft and Heinz, orchestrated by Buffett and Brazilian investment firm 3G Capital Partners, The Wall Street Journal reported.

Mega-mergers in grocery are rarely successful, TD Cowen analyst Robert Moskow noted in the paper's presentation. The skills and investments needed to succeed in different segments of food retailing vary widely, he said, and companies with narrower portfolios are more likely to succeed in the long run than diversified players.

"Food manufacturers have seen that their large presence in supermarkets does not always deliver the expected benefits," Moskow said.

That said, splitting Kraft Heinz into two companies could prove difficult. Moskow recalled that the company has built a unified operating model and entered into partnerships with Microsoft and Google, which will now have to be broken up. In addition, 3G Capital closed manufacturing facilities and consolidated distribution centers a few years ago, which will also complicate the process.

In July, Kraft Heinz reported a second-quarter loss, largely due to a $9.3 billion non-cash write-down of asset values, which was attributed to a sustained decline in share price and capitalization.

To shore up sales, Kraft Heinz has recently taken steps like releasing a larger box of macaroni and cheese designed for a family of five at less than $2, and improving the composition of cookies and crackers in Lunchables. In July, the company said it expects costs to rise 5-7% this year, but is passing only a portion of that increase on to consumers.

Kraft Heinz reported in May that it was considering mergers and acquisitions to increase value for shareholders. Like other packaged food makers, the company is under pressure as consumers increasingly opt for healthier and more affordable sauces and snacks, Reuters noted.

The split is in line with the trend in the food and beverage industry. For example, in 2023, Kellogg split into two companies - snack giant Kellanova and North American breakfast business WK Kellogg. In addition, Keurig Dr Pepper began the process of "divesting" a 2018 deal that combined a coffee maker and a beverage company under one roof.

This article was AI-translated and verified by a human editor