Episode summary
Kraft Heinz to Separate Into Two Publicly Traded Companies | Bloomberg Intelligence
Bloomberg Intelligence
· · 19 min · Hosts: Paul Sweeney, Scarlet Fu · Guests: Jennifer Bartashus, Kenneth Shea, Sam Fazeli
Summary
Kraft Heinz’s planned split into two public companies is being framed as an attempt to revive growth in a packaged-food portfolio that has struggled as consumers shift away from shelf-stable staples. A guest said the merger promised synergies a decade ago, but changing tastes, more demand for fresh and healthier food, and weaker scanner data have made the business less compelling. The company expects about $300 million in dis-synergies, and the split could eventually open the door to separate takeouts, similar to Kellogg’s breakup and subsequent deals.
The discussion then turned to PepsiCo, where Elliott Investment Management has built a roughly $4 billion stake and is pressing for change. A guest said Elliott is not yet calling for a full breakup, but wants Pepsi’s beverage arm to refranchise bottling operations and wants food-line simplification, especially around Quaker. The argument was that Pepsi’s capital-heavy structure and sluggish performance have weighed on returns, while Coca-Cola’s concentrate model shows a higher-margin alternative.
The final segment focused on biotech and vaccines, where a guest argued that upheaval at the CDC and FDA is reshaping U.S. vaccine access and could raise out-of-pocket costs. He said the U.S. is moving closer to European rules on COVID shots, but the bigger risk is reduced consumer confidence and more confusion around vaccine policy, even as September brings another ACIP meeting and more debate over autism research.
Key takeaways
- A guest said Kraft Heinz’s split is meant to restart growth after years of shrinking demand for shelf-stable packaged food.
- The company expects about $300 million in dis-synergies, though most manufacturing is already fairly separate.
- A guest said Elliott wants PepsiCo to refranchise bottling operations and simplify food SKUs rather than demand an outright breakup.
- The PepsiCo critique is that keeping bottling in-house ties up capital and keeps margins below Coca-Cola’s concentrate model.
- A guest said CDC and FDA turmoil could push more vaccine costs onto consumers and reduce willingness to get shots.
Notable quotes
“the consumer has changed and demand for shelf stable packaged food products is just less than it was”
“the company expects about $300 million in dynies”
“there will likely be some uh some some effort to take market share”
“In plain English, what that means is to divest those capital intensive operations, manufacturing operations that create the finished product”
How the episode opens
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Craft Hinds to separate into two publicly traded companies. Jen Bartashis joins a senior retail stables and package food analyst at Bloomberg Intelligence. Uh Jen, what is Craft Hind doing? It wasn't just like 10 years ago they put the companies together.
Uh hi Paul. Yes, it was it was just about a decade ago that they put the companies together um with the plans that it would become kind of a a package food powerhouse. Um but trends have changed and consumers have changed and it just hasn't materialized the way they originally thought it would. So what did the two companies get out of this merger then?
So you know when they when when we're looking at what they brought together um they brought together some products where they were able to recognize some synergies. They were able to do some co-branding some uh you know product development that sort of thing. Um but the as I said the consumer has changed and demand for shelf stable packaged food products is just less than it was.
And so we've seen multiple years where scanner data shows that craft times brands have sort of been shrinking a little bit. And I think this separation is an attempt to kind of reinvigorate growth in different parts of their portfolio.
Help split the two companies. They ended up selling each of those those each of those two companies ended up selling to private owners. Could something similar happen here? — Uh there is that possibility.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- kraft heinz split
- activist investing
- pepsico stake
- biotech developments
- cdc fda covid boosters
Companies and tickers mentioned
- KHC
- PEP
- Kraft Heinz
- Elliott Investment Management
- PepsiCo
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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