In fact, Warren Buffett has been vocal about his dismay at the very decision to divide Kraft Heinz into two independent companies. The announcement, still shocking investors, triggered a fall of over 5% in the company’s share value. This strategic merger separates the two companies. One of those will be devoted to sauces, spreads, and shelf-stable meals, while the other will devote itself to North American staples with brands like Oscar Mayer, Kraft Singles, and Lunchables.
Buffett was appointed president of the newly organized Berkshire Hathaway. In 2015, he jointly orchestrated with 3G Capital the merger that created Kraft Heinz. He even looked back on that merger, conceding that it was not a “well thought out plan.” He then pointed to the missteps Kraft Heinz took in the early years after its merger. U.S. sales have continued to fall for the company. That begs the question of whether separating it out can adequately fix its persistent problems.
To this day, Berkshire says that it remains bullish on Kraft Heinz. With a huge 27.5% stake it continues to be the biggest shareholder. Since the merger, the 14 member firm has resisted on selling or otherwise changing their position in Kraft Heinz. This uncommon commitment is very timely given that 3G Capital apparently snuck out the door on its investment in Kraft Heinz just the other month.
Kraft Heinz executives suggested in May the company would explore dramatic strategic shifts and possible divestitures to jump-start slowing sales. Instead, Buffett signaled unequivocally that Berkshire Hathaway would oppose any block bid to buy its shares. In exchange, they promised to guarantee that all other common shareholders get the same terms at minimum, before anyone else. This position further highlights Buffett’s fiduciary responsibility and belief in fairness between all stakeholders.
Greg Abel, who’s due to replace Buffett when he finally kicks the bucket at Berkshire Hathaway, also gave a similar downbeat signal with the Kraft Heinz divorce. Strong feelings expressed by both Buffett and Abel express a broader concern about the company’s future direction.
After Buffett’s comments, Kraft Heinz’s stock saw a significant drop, showing investor concern about the company’s survival after the split. Yet, even so, Kraft Heinz has the portfolio of brands one would expect from a company whose brands should be worth so much to the market.