Warren Buffett‘s Berkshire Hathaway Inc. (NYSE:BRK) has reported a $3.8 billion impairment on its stake in Kraft Heinz Co. (NASDAQ:KHC), marking a significant setback for the billionaire investor.
What Happened: Berkshire Hathaway has reduced the carrying value of its Kraft Heinz investment to $8.4 billion, a significant drop from over $17 billion at the end of 2017.
This marks a rare disappointment for Buffett, who played a key role in the merger of Kraft and Heinz about a decade ago, reports Bloomberg.
The stock of the packaged foods giant has plummeted 62% since the merger, while the S&P 500 has surged 202%.
Berkshire’s Kraft Heinz stake is now marked at its fair value as of the end of June. The writedown was “overdue,” Kyle Sanders, an analyst at Edward Jones, told the outlet.
Kraft Heinz is currently considering a spinoff of part of its business as it grapples with challenges such as inflation and a shift in consumer preference towards healthier alternatives.
Last month, the company reported a decline in sales that wasn’t as bad as analysts had predicted, thanks in part to higher prices.
Why It Matters: The recent developments indicate a shift in Berkshire’s relationship with Kraft Heinz. In May, Kraft Heinz announced that Berkshire gave up seats on the packaged foods company's board.
The writedown, disclosed Saturday in a regulatory filing, was driven in part by the sustained decline in fair value.
This could potentially signal a strategic move by Berkshire to distance itself from the underperforming packaged foods company.
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