The Kraft Heinz Company announced that its board of directors has unanimously approved a plan to separate the company into two independent, publicly traded companies through a tax-free spinoff. The separation is designed to maximize Kraft Heinz’s capabilities and brands while reducing complexity, allowing both new companies to more effectively deploy resources toward their distinct strategic priorities.
The two resulting companies, whose names will be determined at a later date, will be:
- “Global Taste Elevation Co.” – will manufacture and sell shelf-stable meals with approximately $15.4 billion in 2024 net sales(1) and approximately $4.0 billion in 2024 Adjusted EBITDA.(1) This company will include three billion-dollar brands—Heinz, Philadelphia and Kraft Mac & Cheese—with approximately 75% of net sales coming from sauces, spreads, and seasonings. Approximately 20% of 2024 net sales are in emerging markets and approximately 20% are in away from home.
- “North American Grocery Co.” – a scaled portfolio of North America staples with approximately $10.4 billion in 2024 net sales(1) and approximately $2.3 billion in 2024 Adjusted EBITDA.(1) This company, which will be led by Carlos Abrams-Rivera, will include a portfolio of brands, including three billion-dollar brands—Oscar Mayer, Kraft Singles and Lunchables.
“Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives, and drive scale in our most promising areas,” says Miguel Patricio, Executive Chair of the Board for 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. I look forward to working closely with Carlos and the Kraft Heinz team in the months ahead to prepare the organization for the separation.”
Kraft Heinz
Strategic rationale
The separation is expected to provide both companies with more strategic and operational focus, enabling them to:
- Dedicate the right level of attention and resources to all areas of the business, allowing each respective brand portfolio to reach its full potential.
- Reduce operational complexity, driving further efficiencies and industry-leading margins.
- Customize capital allocation based on the strategic ambition of each company, accelerating performance and retaining financial flexibility.
The companies are expected to have ample discretionary cash flow to invest in organic growth, return capital to shareholders and consider strategic transactions. In aggregate, the current dividend level is expected to be maintained. Management is targeting capital structures to maintain investment-grade ratings for both companies.
Carlos Abrams-Rivera, Kraft Heinz CEO, says, “This move will unleash the power of our brands and unlock the potential of our business. This next step in our transformation is only possible because of the commitment of our 36,000 talented employees who deliver quality and value for consumers every day. We will continue to operate as ‘one Kraft Heinz’ throughout the separation process.”
“The board’s unanimous decision to separate into two independent companies came after careful consideration and a comprehensive evaluation of our options. We strongly believe that increased focus will translate into better performance and value creation for shareholders,” says Jack Pope, Lead Director of the Kraft Heinz Board.
Leadership & headquarters
Abrams-Rivera will continue to serve as CEO of Kraft Heinz and will become CEO of “North American Grocery Co.” upon completion of the separation. The board has been working with a nationally recognized global executive search firm to identify potential CEO candidates for “Global Taste Elevation Co.” Kraft Heinz has no plans to change its current headquarter locations.
