Kraft Heinz is planning to separate into two distinct companies. This move reverses the massive merger that occurred in 2015, spearheaded by Warren Buffett.
The food industry is undergoing significant changes. Companies are breaking apart or selling off brands as consumers shift away from heavily processed foods. Unilever recently spun off its ice cream division, while Kraft Heinz gears up for its own split. Similarly, Keurig Dr Pepper is also set to follow this trend.
A survey from Bain reveals that almost half of the mergers and acquisitions in the consumer sector will come from companies divesting assets. Over the next three years, 42% of M&A executives are preparing to sell parts of their businesses. This trend isn’t limited to food—industrial companies and media giants are also restructuring. For instance, Comcast has split its cable assets, while Warner Bros. Discovery aims to spin off its cable networks.
Emilie Feldman, an expert from The Wharton School, states that companies face intense competition, making operations more challenging. As demand for processed foods declines, these firms are shedding underperforming brands to revitalize their businesses. Recent regulatory pressures, fueled by initiatives like the “Make America Healthy Again” campaign, are also accelerating these changes.
In recent years, consumer preferences have shifted. People now favor fresh foods over processed ones, worsened by price hikes that have made snacks less appealing. Despite maintaining overall market share, major food companies are losing out to niche brands and private-label products. According to Bain’s Peter Horsley, many large companies have only 35% of their portfolios in high-growth categories, whereas more than half of private-label brands thrive in these areas.
The fallout for big food firms has been significant; slowing or declining sales have led to stock drops. Some investors are urging companies to streamline their offerings and divest non-core brands. Raj Konanahalli from AlixPartners highlights that size can complicate decision-making, making it harder to adapt to market changes.
Looking back, many divestitures seem to follow mergers that might have been misguided. For example, analysts were surprised by Keurig’s acquisition of Dr Pepper Snapple in 2018, which combined coffee with carbonated drinks—a mix that seemed puzzling.
The trend of offloading assets appears set to continue. General Mills has already announced plans to sell its Muir Glen organic tomato brand. Nestlé is reportedly exploring sales of its water unit and upscale coffee brands.
The current economic environment complicates big acquisitions. Smaller deals are becoming more common; for example, PepsiCo bought the prebiotic soda brand Poppi for $1.95 billion.
In summary, the landscape of the food industry is shifting. Companies must navigate fierce competition and changing consumer desires, often opting to simplify their operations. While breaking up might not guarantee success, it allows firms to concentrate on what they do best. This approach could very well reshape the future of food.
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