Warren Buffett teamed up with Brazilian private equity powerhouse 3G Capital in 2015 to merge Kraft and Heinz together.
The plan was simple
create a global food titan, cut cost of operations and keep selling the products that have dominated American kitchens for years bright red ketchup, neon orange mac and cheese, tangy pickles, and iconic cold cuts.
But a decade later, the dream has soured. Kraft Heinz is worth just $32 billion today, down more than 60% since the merger.
Instead of serving up steady profits the company is facing reduceed sales, falling margins, and even a rumored break-up.
These struggles are also part of a much larger crisis hitting Big Food.
Because For decades, American food giants thrived on scale. They controlled supermarket shelves, poured money into advertising, and churned out products that were cheap, convenient, & consistent. But the recipe that worked in the 20th century is not working anymore.
Because Shoppers today care more about health, transparency, and freshness. And the Rise of Small Challenger Brands, Social media and e-commerce have leveled the playing field. Startups can market protein bars, organic chips, or vegan cheese alternatives to audiences ASAP without needing billions in ad budgets.
Previously the shelf space in Walmart decided who won. Now, TikTok and Instagram do.
Also Regulation Governments are tightening rules on sugar, salt, and labeling.
According to reports Kraft Heinz’s operating profit is expected to fall 5-10% this year.
Shares of the 12 big packaged-food companies in the S&P 500 names like General Mills, Hershey, and Kellogg’s are down nearly 10% on average in the past year.
The summary is that Big Food is shrinking in relevance just as quickly as shoppers’ tastes are evolving.
Some companies are also trying to adapt like General Mills is buying up pet food brands.
Nestlé is also investing heavily in health and wellness.
PepsiCo is pouring money into snacks and non-soda beverages.
Will they survive.