Kraft Heinz shelves split plans after missing growth expectations, CEO Cahillane says challenges ‘within our control’
Kraft Heinz has paused its spin-off efforts, with new CEO Steve Cahillane saying most challenges are “fixable and within our control.” This unexpected decision caused its shares to fall 6% before the market opened, according to the AP report.
The packaged food company announced in September that it planned to split into two groups, one specializing in groceries and the other specializing in sauces and spreads. The move comes after the company failed to meet growth expectations set a decade ago when it was founded through a merger led by Warren Buffett’s Berkshire Hathaway and 3G Capital.
Kraft Heinz has underperformed peers in the U.S. food industry, where sales have slowed as consumers cut spending after years of price increases. The decision to leave comes after years of cost-cutting and underinvestment by the company.
“My number one priority is to return the business to profitable growth, which will require all resources to be fully focused on the execution of our operating plan,” Cahillane, who took over in January, said in the report.
“As a result, we believe it is prudent to pause work on the separation.”
The company stated that it will not incur $300 million in synergies or additional costs due to the spin-off in 2026.
“We certainly view the plan to reinvest more meaningfully and pause the planned separation as the right first steps, but we recognize that reversing the long-term trend of market share decline will likely take some time,” Barclays analyst Andrew Lazard wrote in a note in the report.
Strategy to ensure profitable growth
Cahillane explained his plan to bring the company back to ensure profitability.
Kraft Heinz will focus on marketing and research with a $600 million investment to accelerate the recovery in its U.S. business, where market conditions have deteriorated since the split decision last summer, he said.
Kraft Heinz, like other packaged food companies, is struggling with weak demand for more expensive condiments and staples as consumers look for cheaper alternatives, but it is also losing ground to rivals due to a lack of innovation.
“To reverse this, we are increasing R&D investments by approximately 20% in 2026 compared to 2025,” the report stated, adding that product innovation also revolves around nutrition and value.
Cahillane admitted that the company had increased prices in recent quarters to offset inflation but did not provide any extra benefit to consumers. They now plan to offer the products at more affordable prices.
Kraft Heinz is one of the few companies to reverse a significant separation, considering that typically only 1 in 10 corporate mergers are canceled, Kraft Heinz said, citing a 2022 KPMG report.
The company planned to complete the split by the end of 2026 and appointed industry veteran and former Kellogg CEO Cahillane to oversee the process.
Shares of Kraft Heinz fell significantly in January after the company said it might sell a 27.5% stake in Berkshire Hathaway and exit a long-held investment that did not pan out for Buffett.
Cahillane’s new plan marks a departure from former CEO Miguel Patricio’s logic of splitting the company. Patricio has previously stated that the complexity of Kraft Heinz’s “current structure” hinders effective capital allocation.
harsh environment
The company on Wednesday reported fourth-quarter results that beat expectations and undershot 2026 earnings, mainly due to losing market share to more affordable rivals.
The organization estimates that 2026 organic net sales will range between 1.5% and 3.5%, compared to the 0.17% increase forecast, and stated that the forecast includes an impact of approximately 100 basis points from pressures related to the postponement of food stamp aid in the United States.
