Kraft Heinz's Steadfast Commitment to Brand Investments Persists Even as Its Impending Split Looms

The merger of Kraft Heinz failed to generate a durable improvement in sales and profitability. As such, management now intends to separate the business into two independent, publicly traded companies: sauces, spreads, and seasonings ($15.4 billion in annual sales) and North American grocery ($10.4 billion). Despite the increased focus that management claims this affords, we fail to see how this enhances its competitive position or financial prospects. In our view, the motivation rests on unlocking a higher multiple for the faster-growing condiments business once it's unencumbered by the more mature North American grocery brands.