Kraft Heinz Co. (NASDAQ:KHC) is reportedly exploring a significant corporate restructuring, potentially splitting into two distinct entities: a grocery division and a “Taste Elevation” segment focused on sauces and spreads.
The potential breakup, if realized, would mark a pivotal moment for the food giant, formed by the high-profile 2015 merger of Kraft and Heinz. While the company has not confirmed the rumors, the move aligns with recent strategic announcements to enhance shareholder value.
However, the prospect of a split has drawn a mixed reaction, with some observers questioning whether it will fundamentally address Kraft Heinz’s underlying business challenges.
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Bank of America Securities analyst Peter T. Galbo shared his perspective on the reportedly possible split, maintaining an Underperform rating and a $29 price forecast.
He cited the company’s soft fundamentals and valued the stock at 11x estimated 2026 earnings, adding that a breakup alone is unlikely to resolve Kraft Heinz’s core challenges.
On Friday, The Wall Street Journal reported that Kraft Heinz is considering separating into two businesses: one focused on its grocery division and the other on its sauces and spreads segment, known as Taste Elevation.
While the company has not confirmed the report, the move would align with recent board changes and a May announcement to unlock shareholder value.
The analyst estimates that the Taste Elevation segment, including Heinz and Philadelphia, accounts for about 45% of trailing 12-month sales, or $11 billion, and would likely remain with the parent company.
The Grocery segment, with the remaining 55% of sales (roughly $14 billion), includes brands like Kraft, Oscar Mayer, Lunchables, Velveeta, Ore-Ida, and Capri Sun, and would likely be spun off.
Galbo sees only modest upside from a potential Kraft Heinz breakup, estimating just 6.9% upside to its $29 price forecast. Even with favorable valuations, 12x for Taste Elevation and 8x for Grocery, the analyst believes a split alone won’t significantly boost shareholder value without broader operational improvements.
The analyst also flagged Oscar Mayer as a strategic uncertainty, with reports suggesting Kraft Heinz may sell the brand to suitors like JBS or Alfa. However, KHC could also retain it within the Grocery segment to avoid de-synergies. The brand is currently part of its lower-priority “Balance” platform.
If true, this marks the end of a decade-long saga for Kraft Heinz, formed in the high-profile 2015 merger of Kraft and Heinz.
Other Analyst Updates:
Wells Fargo analyst Chris Carey maintained an Equal-Weight rating and raised the price forecast from $27 to $29.
Price Action: At Monday’s last check, KHC shares were trading higher by 2.23% to $27.75.
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