In a recent announcement, Kraft Heinz is set to split into two different companies as economic struggles make the company rethink the merger. The announcement comes after the company has not seen any economic growth for a decade since the merger. The goal is that one of the companies will focus on groceries, and the others will focus on producing sauces.
Back in 2015, when the merger happened, the company expected the merger would cut costs and boost sales using the iconic brand. However, since the merger, the value of the companies’ stocks has dropped by around 60%. This is in part because of the COVID-19 pandemic, which caused consumers to spend less on products. After this hit to their value, the company began looking for ways to raise its value once again.
In a Wall Street report, it is expected that after the company splits a part, they will begin looking for opportunities to boost shareholder value. The split-up is expected to cost the company a total of $300 million, but they expect to make up the cost quickly.
An eMarketer analyst named Suzy Davidkhanian said in a statement, “For investors, the move could unlock value in the near-term, but the execution risks are clear: unless both entities invest in innovation and defend against private-label encroachment, the breakup may not achieve more than a temporary financial lift,”.
Based on the information collected, it is expected that the decision to split should open new opportunities for the companies to reclaim lost profits and enter into new projects.
