Berkshire Faces Losses as Food Giant Splits Operations
Warren Buffett voiced rare public regret Tuesday over the 2015 Kraft Heinz merger, following the company’s decision to break itself apart into two separate entities. Buffett, whose Berkshire Hathaway owns 27.5% of Kraft Heinz, told CNBC he was “disappointed” with how the deal unfolded. Shares of the company fell more than 7% after his comments.
Buffett had engineered the high-profile merger alongside 3G Capital, betting on cost-cutting and consolidation to create long-term value. But the strategy backfired. Despite iconic brands like Oscar Mayer, Kraft Singles, and Velveeta, the company struggled with declining U.S. sales and shifting consumer preferences toward healthier, fresher food options.
Company Splits into Two Business Units
The announced breakup divides Kraft Heinz into two: one focused on global sauces, spreads, and shelf-stable products, and another centered on North American staples. This restructuring marks a sharp departure from the original vision of a unified food powerhouse. Greg Abel, Buffett’s successor at Berkshire, also reportedly expressed dissatisfaction with the situation.
Notably, 3G Capital exited its investment in 2023 after gradually reducing its position. Meanwhile, Berkshire Hathaway never sold a share—until now. Buffett said the firm would act in its own interest if approached but would reject any exclusive block deal not extended to other shareholders.
Years of Struggles Despite Brand Power
Since the merger closed, Kraft Heinz stock has plummeted nearly 70%, shrinking its market capitalization to $33 billion. Analysts blame the company’s overreliance on aggressive cost-cutting and underinvestment in brand innovation. While competitors adapted, Kraft Heinz fell behind in capturing modern consumer demand.
Efforts to revitalize the business have included the sale of assets like Planters and parts of the cheese division. Investments in Lunchables and Capri Sun were aimed at refreshing the brand’s appeal, but results have been mixed. Executives hinted in May that more strategic shifts were on the horizon.
Buffett’s Loyalty and Strategic Misstep
Despite acknowledging in 2019 that Berkshire “overpaid” for Kraft, Buffett remained publicly supportive until now. His latest remarks underscore a clear disappointment: the merger failed to deliver on its original promise, and even a breakup may not solve the core challenges. Kraft Heinz, once envisioned as a durable consumer staple titan, now finds itself in retrenchment mode.
