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This Buffett stock has been one of the worst performers over the past 10 years.
Kraft Heinz stock plummeted about 7% on Tuesday after the food company announced that it was splitting in two.
This comes 10 years after the two well-known brands – Heinz and Kraft – merged to form Kraft Heinz in 2015. Now, the marriage is ending in divorce — and neither investors nor Wall Street analysts are thrilled.
One of the largest investors in the stock is Berkshire Hathaway, which owns a 27% stake in the company. It has been a rare miss for Berkshire Hathaway CEO Warren Buffett, as Buffett, along with 3G Capital, helped engineer the merger back in 2015. 3G Capital got out of the investment in 2023, but Berkshire Hathaway has held on to it.
Kraft Heinz is the ninth largest position in the Berkshire Hathaway portfolio. Berkshire has a $9 billion stake in Kraft Heinz stock representing about 3% of the portfolio.
Kraft Heinz has been one of the worst performing stocks since the merger. It is down 15% year-to-date and has averaged a -9% annualized return over the past 10 years.
In an interview on CNBC, Buffett said he was disappointed with the split and doesn’t think it will solve its problems.
Two New Companies
On Tuesday, the company announced that it will split into two separate, independent, publicly traded companies. The idea is to maximize each company’s capabilities and brands. To that end, the merger is designed to reduce operational complexities and allow both companies to more effectively deploy resources toward their strategic priorities.
The names of the two companies have not been finalized yet, but for now they are categorized as such:
Global Taste Elevation Co., which is described as a “leader in Taste Elevation and shelf-stable meals” with approximately $15.4 billion in net sales and $4.0 billion in adjusted EBITDA in 2024. It will include the Heinz, Philadelphia Cream Cheese, Kraft Mac & Cheese, Master and ABC brands. The board is currently seeking candidates to lead this company.
North American Grocery Co., a portfolio of North America staples with approximately $10.4 billion in net sales and $2.3 billion adjusted EBITDA in 2024. This company will include the Oscar Mayer, Kraft Singles, Maxwell House, Ore-Ida, Capri Sun, and Lunchables brands. It will be led by Carlos Abrams-Rivera, the current CEO of Kraft Heinz.
“By separating into two companies, we can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance and the creation of long-term shareholder value,” Miguel Patricio, executive chair for Kraft Heinz, said.
It should come as no surprise that Kraft Heinz was one of the most shorted stocks in August.
The split is set to occur in the second half of 2026.