Kraft Heinz CEO Faces Tough Decision: Divide or Invest Further

• Cahillane is redirecting $600 million earmarked for marketing, sales and R&D toward brand investment, reversing years of cost-cutting that starved major brands of resources
• Major investor Berkshire Hathaway, holding a 27.5% stake, was not receptive to the original separation plan and may divest its position entirely
• The company's U.S. grocery division brands including Oscar Mayer, Maxwell House, and Lunchables require the most attention, with previous attempts to sell Oscar Mayer and Maxwell House unsuccessful

Summary

Kraft Heinz CEO Steve Cahillane has paused the company's planned separation into two publicly traded entities, originally announced in September, to focus on reviving struggling brands. The split would have divided the business into a North American grocery division and a global "taste elevation" business.

Key Decision Rationale:

Cahillane, who assumed the CEO role January 1, chose brand revival over separation, believing the process couldn't be executed effectively while core brands like Oscar Mayer, Kraft Mac & Cheese, and Maxwell House remain underinvested and weak. The separation was projected to take several months and require significant management attention.

Financial Performance:

• Stock has declined nearly 70% since the 2015 Berkshire Hathaway-backed merger
• Net sales fell 3% in 2024 and 3.5% in 2025
• Berkshire Hathaway, holding a 27.5% stake, may divest its position following disappointing returns
• Company has allocated $600 million for marketing, sales, and R&D investment

Market Reaction:

Analysts view the pause negatively, suggesting it signals the businesses aren't strong enough for standalone operations. TD Cowen analyst Robert Moskow noted uncertainty about when the businesses will be ready for separation. Investors had already responded poorly to the original separation plan, with confusion over brand categorization.

Historical Context:

The 2015 merger focused on cost-cutting and margin expansion rather than brand investment, pushing EBITDA margins to the high-20% range initially. However, this strategy backfired as the company failed to adapt to changing consumer preferences and competition from younger brands.

Cahillane, who previously led turnarounds at Kellogg and Kellanova, acknowledges that sustainable growth may require accepting lower margins temporarily.