Kraft Heinz shelves split plans after missing growth expectations, CEO Cahillane says challenges ‘within our control’

Kraft Heinz has paused its efforts for a split, with new CEO Steve Cahillane saying that most challenges are "fixable and within our control." This unexpected decision caused its shares to drop 6% before the market opened, according to an AP report.

The packaged foods company announced in September that it plans to divide into two entities, one specialising in groceries and the other in sauces and spreads. This move comes after the company did not meet the growth expectations set when it was formed a decade ago through a merger led by Warren Buffett's Berkshire Hathaway and 3G Capital.

Kraft Heinz has underperformed its peers in the US food sector, where sales have decelerated as consumers tighten their spending after years of price increases. The decision to split came after years of cost-cutting and underinvestment by the company.

"My number one priority is returning the business to profitable growth, which will require ensuring all resources are fully focused on the execution of our operating plan," the report quoted Cahillane, who took charge in January.

"As a result, we believe it is prudent to pause work related to the separation."

The company stated that it would not incur $300 million in dis-synergies or additional costs from a 2026 split.

"We definitely view the plan to reinvest more significantly and pause the planned separation as the right set of first steps, but realise bending the trend on longer-term market share declines will likely take some time," the report quoted Andrew Lazard, analyst at Barclays, in a note.

Strategy to ensure profitable growth

Cahillane described his plan to bring the company back to ensure profitability.

He said Kraft Heinz would concentrate on marketing and research with a $600 million investment to boost recovery in its US business, where market conditions have deteriorated since the decision to split last summer.

Kraft Heinz, like other packaged foods companies, has been struggling with weak demand for its more expensive condiments and pantry staples as consumers seek cheaper alternatives, but has also lost ground to rivals due to a lack of innovation.

"To turn this around, we are increasing investments in R&D by approximately 20% in 2026 compared to 2025," the report quoted Cahillane, who added that the product innovation would also revolve around nutrition and value.

Cahillane acknowledged that in recent quarters, the company increased prices to counter inflation but did not give consumers extra benefits. Now, they plan to offer products at more affordable price points.

Kraft Heinz is one of the few companies to reverse a significant breakup, considering that only about 1 in 10 corporate spinoffs are typically cancelled, it said, citing a 2022 KPMG report.

The company planned to complete the spinoff by the end of 2026 and appointed industry veteran and former Kellogg CEO Cahillane to oversee the process.

In January, Kraft Heinz's shares dropped significantly after the company revealed that Berkshire Hathaway might sell its 27.5% stake and exit a long-standing investment that had not been successful for Buffett.

Cahillane's new plan marks a departure from the rationale of former CEO Miguel Patricio to split the company. Patricio had previously stated that the complexity of Kraft Heinz's "current structure" hampered effective capital allocation.

Challenging environment

On Wednesday, the company announced fourth-quarter results that missed expectations and projected 2026 earnings below forecasts, mainly due to losing market share to more affordable competitors.

It forecasts that 2026 organic net sales will range between 1.5% and 3.5%, compared with estimates of a 0.17% increase, and mentioned that the forecast includes an impact of about 100 basis points from pressures related to the delay of food-stamp benefits in the US.