Welcome back builders!

I hope everyone has had a great weekend and are easing into the week re-energized. I always appreciate you taking a few minutes out of your day to dig into these stories with me. With that said, let’s hop in. This week we are covering the Ketchup King, Kraft Heinz.

Kraft Heinz has been a staple of American pantries for over a century. Think mac and cheese, Velveeta, Oscar Mayer, and the ubiquitous ketchup bottle on every table. Yet in 2025, even the most familiar brands felt under pressure. Consumers are gravitating toward fresher, healthier options and direct-to-consumer models, leaving legacy processed foods struggling to keep pace.

In a move that surprised many, Kraft Heinz began evaluating a major spinoff, creating a separate company focused on grocery stalwarts like Kraft and Oscar Mayer potentially valued at $20 billion. That’s nearly two-thirds of Kraft Heinz’s current market capitalization. At its core, the strategy signals a powerful business principle: sometimes the best way forward is scaling down. For entrepreneurs, this serves as a vital lesson in managing legacy through discipline, not just expansion.

Founding / Background

The story of Kraft Heinz begins long before the 2015 mega-merger, with two companies that each carved out massive influence on American eating habits.

H.J. Heinz Company traces its origins back to 1869 in Sharpsburg, Pennsylvania, when Henry John Heinz launched his first product: horseradish, sold in glass bottles so customers could see its quality. He soon expanded into condiments, with his iconic tomato ketchup becoming a pantry staple by the late 1800s. Heinz built his business on trust and consistency, famously coining the “57 Varieties” slogan even when the company offered far more products creating a marketing hook that endured for generations. By the mid-20th century, Heinz was a global name, expanding into baby food, frozen meals, and international markets. Its ketchup wasn’t just a condiment; it was a cultural symbol of Americana exported worldwide.

Kraft Foods emerged decades later with its own story of innovation. Founded in 1903 by James L. Kraft as a cheese wholesaler in Chicago, the company grew by focusing on processed cheese products that could be stored longer and shipped further, perfect for the industrializing food economy. Kraft’s development of pasteurized processed cheese in the 1910s was a breakthrough, earning government contracts during World War I and setting the stage for mass consumer adoption. By mid-century, Kraft was synonymous with convenience: Kraft Macaroni & Cheese, Jell-O, and eventually Oscar Mayer meats defined the American kitchen.

Through the 20th century, both Kraft and Heinz became dominant players in packaged food, thriving on scale, distribution, and brand loyalty. Yet by the 2000s, both companies faced slowing growth. Consumer preferences were shifting toward fresher and healthier options, while private-label competitors gained traction. Investors pushed for bolder strategies to reignite momentum.

That set the stage for 2015, when Berkshire Hathaway and 3G Capital engineered the merger of Kraft and Heinz. The deal created the fifth-largest food and beverage company in the world, with over $28 billion in annual revenue. It was hailed as a new chapter pairing two household-name giants into one powerhouse. But while the logic looked strong on paper, the execution revealed deeper challenges in adapting legacy brands to a rapidly changing food industry.

Current News

By mid-2025, Kraft Heinz's leadership has found itself at a strategic crossroads. According to Reuters, the company was exploring a spinoff of its grocery business. Legacy brands including Velveeta, Maxwell House, and Lunchables would be spun into a standalone entity potentially worth $20 billion. Most of the conversation centers on the split: grocery staples would be spun off, while the parent entity would retain sauces, condiments, and spreads. That would be things like Heinz ketchup and Grey Poupon mustard that continue to resonate. The Wall Street Journal reported the stock market responded positively, with shares jumping nearly 4% on the news. The company confirmed earlier in May 2025 that it was exploring “strategic transactions to unlock shareholder value,” though stopped short of confirming the spinoff.

Meanwhile, Kraft Heinz announced a confirmed divestiture: it would sell its Italian baby and specialty food business (brands like Plasmon and Dieterba) to NewPrinces Group, expected to close by the end of 2025. This signals the company is serious about shedding non-core assets in favor of investing in growth platforms. Financially, the pressure is real. Kraft Heinz posted a $9.3 billion impairment charge in Q2 (mostly due to stock decline and intangible asset write-downs), and although they beat expectations on adjusted earnings, net losses reached $7.82 billion. Meanwhile, its stock remains down about 69% since the 2015 merger, another red flag for investors. Bond markets are already positioning for a breakup, with spreads widening on Kraft Heinz notes suggesting instability may be priced in. Making matters more complex, legacy consumer shifts, everyone from private labels to health-conscious food continue to erode brand equity. Management is pressed for bold action or risk further stagnation.

Core Lesson (Big Idea)

There’s a paradox in business: sometimes growth means letting go. Kraft Heinz’s spinoff strategy illustrates a profound leadership instinct, pruning underperformance to revive logic and relevance.

That discipline isn't unique to Kraft. Procter & Gamble, for example, undertook a massive overhaul, divesting over 100 underperforming brands and trimming 7,000 jobs to focus on its core powerhouses like Tide and Pampers, aiming to save $1 billion annually and sharpen execution.

IBM made a similar pivot, selling its PC division to Lenovo and later refocusing on cloud and enterprise AI ultimately shaping what we now see as a future-facing business. These stories share a common theme: unwieldy portfolios dilute agility. Strategic focus allows a company to invest in what truly matters whether that's condiments or cloud infrastructure.

Kraft Heinz's pivot is not an admission of failure, it’s a demonstration of maturity. M&A shouldn’t be about creating sprawling empires; it should be about building resilient businesses. If a merger or a legacy asset doesn't serve the future, bold leaders must act. This kind of clarity, even when reversing past commitments, is what defines longevity.

Takeaway

Ask yourself, what in your business feels like dead weight? What brands, services, or products hold you back, strain resources, or dilute your focus? The default drive for growth isn't always progressive. Sometimes, pruning unleashes innovation.

Before adding another line or launching a new campaign, consider simplifying. What can you cut to invest in what works? Growth doesn't always lie in scaling up. Sometimes, it's found in scaling back.

This is tough to do, but Kraft Heinz is showing that it might just be the most important move you never considered.

Feedback

What’s your take? Does Kraft Heinz’s breakup strategy feel like a fresh reset, or a red flag signaling deeper fractures? When is getting smaller the right path forward for growth?

Let us know your thoughts on this. Also let us know what you think of the new format! We are currently trying to slim down our weekly newsletter so you get the most out of our latest editions in the best amount of time possible.

We appreciate you all of you taking the time to read this, until next week. Cheers!

— The Built To Last Team

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