Warren Buffett told CNBC on Tuesday that he is disappointed in the Kraft Heinz split that unwinds much of the blockbuster merger he masterminded a decade ago.
With a 27.5% stake in the company, Berkshire Hathaway is Kraft Heinz’s largest shareholder. The firm has not touched its shares since the 2015 merger that formed the food conglomerate.
Shares of the company fell more than 5% following Buffett’s comments.
Buffett told CNBC’s Becky Quick on Tuesday that the merger didn’t turn out to be a brilliant idea, but he does not think that taking the company apart will fix its problems.
Greg Abel, who will take reins at Berkshire Hathaway from Buffett at the end of the year, expressed disappointment to Kraft Heinz, according to Buffett.
Heinz ketchup bottles on display at the 2018 Berkshire Hathaway Annual Shareholder’s Meeting.
David A. Grogan | CNBC
Kraft Heinz did not immediately respond to a request for comment on Buffett’s stance on the deal.
The split announced earlier Tuesday once again separates Kraft Heinz into two companies: one focused on sauces, spreads and shelf-stable meals and a second that includes North American staples like Oscar Mayer, Kraft singles and Lunchables.
Berkshire Hathaway teamed up with private equity firm 3G Capital in 2015 to merge Kraft Foods with H.J. Heinz. 3G Capital quietly exited its Kraft Heinz investment in 2023, after years of periodically trimming its stake as the company struggled.
Though it holds a roster of iconic brands like Oscar Mayer and Velveeta, Kraft Heinz saw its U.S. sales slip just a few years after the merger. Health-conscious consumers were buying less packaged food and shopping more around the perimeter of the grocery store. Some analysts also blamed the company’s slump on cost-cutting measures that kept Kraft Heinz from investing in its brands at a time when they needed it most.
In an effort to turn around the business, Kraft Heinz sold off some of its portfolio, like Planters nuts and some of its cheese division. The company has also been investing in some of its brands, like Lunchables and Capri Sun. In May, Kraft Heinz executives said the company was weighing strategic changes and potential transactions.
Since the deal closed in 2015, Kraft Heinz shares had tumbled nearly 70% as of Friday’s close, dragging the company’s market value down to $33 billion.
Even as other investors have lost faith in Kraft Heinz, Buffett has stood by the company, although he did tell CNBC after a disastrous quarter in 2019 that Berkshire overpaid for Kraft.
Regarding Berkshire’s future as a Kraft Heinz investor, Buffett told CNBC on Tuesday that Berkshire will do whatever is in the best interest of the firm. If Berkshire is approached to sell its shares, the firm will not accept a block bid unless other shareholders receive the same offer, according to Buffett.
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