Berkshire Hathaway’s $8 billion stake in Kraft Heinz is on shaky ground after the company was split back into two.
According to CNBC, Warren Buffett, who led the merger that created the food giant in 2015, said on Tuesday that he’s “disappointed” in the breakup. He also said the merger itself was “not a brilliant idea” and that splitting Kraft Heinz apart won’t fix the real issues.
The new move divides Kraft Heinz into two separate businesses. One now handles sauces, spreads, and shelf-stable meals. The other is left with U.S. household brands like Kraft Singles, Lunchables, and Oscar Mayer.
The announcement was made early Tuesday, and Warren’s comments came later that day in an interview with Becky Quick. Shares dropped more than 7% after his interview aired.
Berkshire stays put as Kraft Heinz breaks apart
Warren has kept Berkshire Hathaway’s 27.5% stake untouched since the merger. The company hasn’t trimmed or added to the position at all since teaming up with 3G Capital a decade ago to form Kraft Heinz.
But now, with 3G already out, having quietly exited in 2023, Warren and his incoming successor, Greg Abel, are left holding the investment solo. Abel, who will take over from Warren at the end of this year, has also expressed his disappointment in how Kraft Heinz is being handled.
Since the merger, Kraft Heinz has lost serious ground. Its shares have collapsed nearly 70% since 2015, shrinking its market value to just $33 billion. The decline came after U.S. sales dropped and consumer behavior changed.
Shoppers started avoiding processed foods, opting instead for fresh items around the outer edges of grocery stores. The brands under Kraft Heinz, despite being household names like Velveeta and Oscar Mayer, started to lose relevance.
Analysts blame some of the collapse on 3G Capital’s aggressive cost-cutting, which prevented the company from investing in its brands at the time they needed it most. Kraft Heinz ended up selling off big pieces of its portfolio, including its Planters nuts and parts of its cheese business.
At the same time, it tried to revive a few brands like Capri Sun and Lunchables by investing more heavily in them. Back in May, executives at Kraft Heinz admitted they were thinking about strategic changes and even possible deals.
This split is the result of that process. The company didn’t say if more breakups or asset sales are coming, but it’s clear the structure from 2015 isn’t working anymore.
Despite the mess, Warren hasn’t walked away. He told CNBC that Berkshire Hathaway will do whatever is best for the firm. He also made one thing clear: if anyone comes forward to buy their stake, Berkshire won’t accept a private block deal unless every other shareholder is offered the same exact terms. That means no backroom discounts or side deals.
Warren also admitted during a rough quarter back in 2019 that Berkshire “overpaid” for Kraft. Still, unlike other investors who bailed out years ago, he hasn’t sold. Whether that patience pays off after this new split remains to be seen.
