Remember when your parents told you that even the smartest people make mistakes? Well, Warren Buffett just got a very expensive reminder of that life lesson.
Kraft Heinz (NASDAQ: KHC) decided to pull a conscious uncoupling this week, announcing they’re splitting into two separate companies. The market’s reaction? A collective “oof” that sent the stock tumbling 7% faster than you can say “mac and cheese.”
Here’s the tea: Back in 2015, Buffett and his buddy 3G Capital played matchmaker and merged Heinz with Kraft, thinking they’d create some beautiful food empire synergy. Plot twist – it’s been more like a bad reality TV marriage that everyone knew wouldn’t last.
The Divorce Details
The split creates two new companies (names TBD, because apparently naming things is hard):
Global Taste Elevation Co. – The fancy one with $15.4 billion in sales, keeping Heinz ketchup, Philadelphia cream cheese, and Kraft Mac & Cheese. Basically, the brands your college self survived on.
North American Grocery Co. – The hometown hero with $10.4 billion in sales, snagging Oscar Mayer, Kraft Singles, Maxwell House, and Lunchables. Yes, Lunchables – the pinnacle of 90s lunch sophistication.
Why Buffett’s Not Happy
The Oracle of Omaha isn’t exactly throwing a celebration party. In a rare moment of public disappointment, Buffett told CNBC he doesn’t think the split will magically fix the company’s problems. Ouch.
And honestly? The numbers back up his skepticism. This stock has been about as popular as pineapple on pizza – it’s down 15% this year and has averaged a brutal -9% annual return over the past decade. For context, that’s worse performance than most people’s fantasy football teams.
Berkshire Hathaway still owns 27% of Kraft Heinz (worth about $9 billion), making it their ninth-largest holding. That’s a lot of money tied up in what’s essentially become a very expensive lesson in “sometimes mergers don’t work out.”
The Reality Check
The company’s betting that splitting up will let each business focus on what they do best, kind of like how divorced parents can finally stop arguing about whose turn it is to pick up the kids. Miguel Patricio, the executive chair, is optimistic about “unlocking potential” – corporate speak for “maybe this time it’ll work.”
Wall Street analysts are giving it the financial equivalent of a shrug. Mizuho’s John Baumgartner thinks it “likely strengthens the floor under the stock,” which is analyst-speak for “well, at least it probably won’t get much worse.”
The split won’t happen until late 2026, so we’ve got plenty of time to see if this corporate divorce therapy actually works. Until then, Kraft Heinz remains a reminder that even Warren Buffett occasionally picks a stock that ages about as well as milk left in the sun.