Kraft Heinz (KHC 0.44%) is back in the spotlight after announcing plans to split into two stand-alone companies. Bulls see it as a long-overdue move to unlock value and sharpen focus. But not everyone's buying the optimism.
For a growing group of investors, the Kraft Heinz story looks less like a comeback -- and more like a rerun.
Beneath the spinoff headlines, bears point to three persistent issues: weak growth, brand fatigue, and execution risk. Here's why they're skeptical.
Image source: Getty Images.
A structural problem, not a temporary one
The heart of the bearish case is simple: Kraft Heinz isn't suffering from a bad quarter -- it's suffering from a bad decade.
Since the 2015 merger of Kraft Foods and H.J. Heinz, sales have stagnated while consumer preferences have evolved. Americans are eating less processed food, choosing fresher, healthier, and private-label alternatives instead. Globally, competition from local brands is fierce.
In the latest quarterly earnings report, following the announced split, Kraft Heinz's organic revenue was down around 2% year over year. Management's full-year forecast calls for another slight decline -- not a promising sign for a company supposedly on the cusp of a turnaround.
To the bears, that's not cyclical weakness -- it's structural decline. And until Kraft Heinz can prove that its brands can grow again in real terms, no amount of financial engineering will change that trajectory.
NASDAQ: KHC
Key Data Points
Kraft Heinz's brand power has weakened
For generations, Kraft and Heinz were household names -- symbols of American reliability and convenience. But times have changed.
Younger consumers are increasingly indifferent to traditional, or legacy, brands. They're willing to try private-label products, plant-based alternatives, or boutique upstarts that better align with health and sustainability trends. The shift is evident in the data: Private-label sales are growing faster than branded packaged foods in nearly every major grocery channel, including Costco and Walmart.
Kraft Heinz's response has been incremental -- cleaner labels, packaging refreshes, and new flavors -- but critics argue it's not enough. The company's cost-conscious approach suggests that it has likely underspent on R&D and marketing compared to its global peers, thereby limiting its ability to drive innovation and shape consumer trends.
That leaves a lingering question: Can a more than 100-year-old food conglomerate truly behave like a growth company again? Bears aren't convinced.
The breakup brings new risks
Even those who support the idea of a breakup worry about the execution risk. The planned separation -- expected to be completed in the second half of 2026 -- will create two public companies:
- Global Taste Elevation Co., focused on sauces, spreads, and international growth.
- North American Grocery Co., managing slower-growth staples and ready-to-eat products.
In theory, the split will improve focus. In practice, it could introduce chaos due to "dis-synergies" from duplicated functions and restructuring costs. That's a heavy bill for a company already under pressure to grow.
There's also the issue of investor perception. Spinoffs can unlock value, but they can also expose weaknesses. The market may end up assigning low multiples to both entities if it believes neither has the growth or pricing power to justify premium valuations.
Bears argue that instead of creating agility, Kraft Heinz might be shrinking its way to simplicity.
A value trap in disguise
At a price-to-book (P/B) ratio of 0.7 times and a 6.6% dividend yield, Kraft Heinz looks cheap. However, value investors have a saying: "Cheap doesn't always mean undervalued."
Bulls point to cost savings and stable cash flow as reasons to hold. Bears counter that these same arguments have been made for years -- and yet, the stock has delivered little total return over the past decade.
Without real top-line growth or sustained margin expansion, the dividend could become more of a ceiling than a cushion. Bears worry that investors chasing yield today could find themselves holding a value trap -- a mature business that pays you to wait, but never truly recovers.
What does it mean for investors?
Kraft Heinz isn't broken because it's inefficient; it's broken because its playbook is likely to be outdated.
The breakup may buy management time and goodwill. Still, without genuine innovation and a recovery of market share, the long-term story remains the same -- declining relevance in a changing world.
There's a lot of work to be done, and the breakout could be just the beginning of a long journey ahead. Investors buying the stock expecting to make a quick buck from value reversion must understand the headwinds that they are going against.
