Kraft Heinz's Breakup Could Unlock 50% Upside?

Core Viewpoint - Kraft Heinz is planning to split into two publicly traded entities by the latter half of 2026, reversing the 2015 merger, which has been criticized for its poor performance [2][3] Group 1: Industry Context - The spin-off reflects challenges in the packaged food industry, including stagnant demand, changing consumer preferences, and increased competition from private labels [3] - The stock price saw minimal change, increasing by only 1% in pre-market trading, while shares have decreased by 21% over the past year, indicating skepticism from investors [3] Group 2: Company Structure Post-Split - The new structure will consist of Global Taste Elevation Co., which includes higher-growth brands like Heinz and Kraft Mac & Cheese, and North American Grocery Co., focusing on U.S. staples like Oscar Mayer and Kraft Singles [4] - Pre-split, Kraft Heinz was trading at approximately 1.3× sales, lower than competitors like Mondelez (2.3×) and Kellanova (2.2×), but slightly above Conagra (1.0×) and Campbell Soup (1.1×) [5] Group 3: Financial Projections - Management anticipates a 60/40 revenue split between the two new entities, projecting Global Taste to generate around $16 billion and North American Grocery about $11 billion based on a 2024 run rate of $27 billion [6][7] - If Global Taste achieves Mondelez-like multiples of 2.0–2.3× revenue, its market cap could reach $32–$36.8 billion, while North American Grocery might trade at 1.0–1.1×, resulting in a combined value of $43–$49 billion, compared to Kraft Heinz's current valuation of $33 billion [7] Group 4: Market Considerations - The market typically does not assign top-tier multiples to both halves of a breakup; if Global Taste trades at 1.6–1.8× and North American Grocery at 1.0×, the total value could drop to $37–$40 billion [8] - The success of the split hinges on the ability of both companies to achieve consistent growth and restore investor confidence, with proponents viewing it as a chance for independent valuation and skeptics fearing it may expose deeper structural issues [9]