Kraft Heinz split: Cold cheeses are a burden for its hot sauces

Hiving off the weak unit could well result in greater value overall

- ANDREA FELSTED

When schools returned to in-person learning in the fall of 2021 after the pandemic, parents scrambled to find Lunchables to put in their children's backpacks. Today, the meal kit of processed meats and cheese may be off the menu amid the desire for healthier food, but its manufacturer, Kraft Heinz, is firmly on it.

The company is exploring spinning off the division that makes Lunchables, alongside Kraft cheese and Oscar Mayer hot dogs from its faster-growing arm that makes ketchup. A split could deliver modest value for shareholders. The biggest upside, though, would come from tempting bidders to pay up for each of the individual companies.

To recap: Warren Buffett's Berkshire Hathaway and private equity firm 3G Capital acquired J.H. Heinz for $28 billion, including debt, in 2013. Two years later, they merged it with Kraft Foods, the US grocery business that had been spun out of what would become Mondelez International (more on that later).

But Kraft Heinz has grappled with changing consumer tastes and, most recently, the rise of GLP-1 weight-loss drugs. As sales have come under pressure, its shares have lost 70% since 2017. Little wonder then that the company said in May that it was "evaluating potential strategic transactions" to boost its stock price.