Kraft Heinz’s Split Highlights Both Promise and Risk

September 2nd, 2025 by Trefis Team
KHC: Kraft Heinz logo
KHC
Kraft Heinz

Kraft Heinz (NASDAQ: KHC) is splitting into two publicly traded companies by the second half of 2026. The move effectively unwinds the 2015 Kraft–Heinz merger, a deal once sold on scale and efficiency but now remembered for underperformance.

The spin-off reflects the sector’s harsh realities: sluggish packaged food demand, shifting consumer tastes, and intensifying pressure from private labels. Management is pitching the breakup as a value unlock, but investors should see the risks: muted growth, brand fatigue, and an uncertain market re-rating. Shares barely budged on the announcement, rising just 1% pre-market. Over the past year, the stock has still been down 21% — a signal that Wall Street remains unconvinced.

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Two Companies, Two Mandates

Global Taste Elevation Co. will encompass higher-growth, global brands such as Heinz, Philadelphia, and Kraft Mac & Cheese. North American Grocery Co. will hold the U.S.-oriented staples portfolio, including Oscar Mayer, Kraft Singles, and Lunchables.

Heading into the breakup, KHC (pre-split) traded at about 1.3× sales. That’s well below Mondelez (2.3×) and Kellanova (2.2×), though slightly above Conagra (1.0×) and Campbell Soup (1.1×). The discount is consistent with the company’s slower top-line growth, mixed brand quality, prior FY 2019 write-down that eroded investor trust, and ongoing leverage concerns.

The “Value Unlock” Looks Fragile

Kraft Heinz has not disclosed detailed financials for the new entities, but management commentary and analyst models point to a 60/40 revenue split. On a 2024 run rate of roughly $27 billion, Global Taste could account for about $16 billion, while North American Grocery may generate around $11 billion. More precise disclosures will be available once Kraft Heinz files its spin-off documentation.

The separation aims to allow each business to be valued on its own merits. Global Taste, with an estimated $16 billion in sales, could attract Mondelez-style multiples of 2.0–2.3× revenue, implying a market cap value of $32–$36.8 billion. North American Grocery, at roughly $11 billion in sales, is more likely to trade in line with Conagra or Campbell at 1.0–1.1×, or $11–$12.1 billion. Combined, that implies $43–$49 billion in value versus Kraft Heinz’s current $33 billion. The math is straightforward: a 30–50% upside if the market re-rates both pieces like their peers.

But here’s the catch: the market rarely gives both sides of a breakup best-in-class multiples. If Global Taste trades closer to 1.6–1.8× sales and North America slips toward 1.0×, combined value falls into the $37–$40 billion range. Adjust for execution risk, $300 million in separation costs, and ongoing leverage, and the upside narrows while downside risk grows.

Why It Matters

For investors, the split creates a choice. Growth and international exposure versus stability in U.S. staples from both businesses. Bulls see a chance for each business to be valued on its merits, while bears worry it will only expose structural weaknesses. Success will hinge less on the separation itself and more on whether both companies can deliver consistent growth and rebuild confidence.

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