The news: Kraft Heinz will put its breakup on hold to devote its full attention to restoring growth, CEO Steve Callihane said in a statement. The company will instead allocate $600 million toward marketing, sales, and research development, as well as product improvements and sharper pricing.

Why it matters: Callihane attempted to spin the pause positively, declaring that many of Kraft Heinz’s challenges are “fixable and within our control.” But the decision appears to be driven by market realities: The company reported its ninth-straight quarter of declining revenues in Q4, with signs of weakness across its portfolio.

• North America sales fell 5.4% YoY, despite flat pricing, showing that Kraft Heinz is struggling to win price-conscious consumers.
• Volumes declined in cold cuts, coffee, frozen meals and snacks, select condiments, bacon, and spoonables.

Kraft Heinz’s weak performance is unlikely to give investors confidence that its two proposed spinoffs—Global Taste Elevation, which is supposed to be home to faster-growing brands like Heinz and Philadelphia cream cheese, and North American Grocery, which will house underperformers like Oscar Mayer and Lunchables—are strong enough to stand on their own. That makes Callihane’s decision to focus on shoring up the business a necessary precursor to convincing the market—and major shareholders like Berkshire Hathaway—about the viability of a split.

The implications: With a finite amount of resources at its disposal, Kraft Heinz is choosing to work on repairing its operations rather than pursue a potentially lackluster breakup. While Callihane has outlined a plan to restore growth—including boosting marketing spending, investing in innovation, and launching more “better for you” and convenient products—years of price hikes and underinvestment in product development means the CPG giant has significant ground to make up.

Offering clearer value to customers will be key, especially since Kraft Heinz generates a higher proportion of sales from SNAP recipients, 13%, than the industry average of 11%. That means affordability must be an important component of the strategy.

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