The news: Kraft Heinz is planning to break itself up, The Wall Street Journal reported, a move that would allow it to focus on faster-growing segments without the burden of underperforming brands like Oscar Mayer and Maxwell House.

While the company has yet to decide exactly how the brands will be divided, the current plan is to spin off most of its grocery business (excluding its sauces and spreads) into an entity worth as much as $20 billion.

Bigger isn’t always better: Despite bringing together a wide array of beloved grocery brands, the Kraft Heinz mega-merger has delivered lackluster results.

• Some of that is due to shifting tastes: Consumers’ growing aversion for ultra-processed foods and artificial dyes is curbing demand for Lunchables and Kraft Singles, making both brands significantly less valuable than they once were.
• At the same time, Kraft Heinz—like other CPGs—is struggling to keep private labels from encroaching on its business as shoppers seek value.

The hope is that, freed from the millstone of its weaker brands, the new company will have more room to focus on faster-growing product lines like hot sauces, condiments, and dressings. The two streamlined companies would also—in theory—be able to respond more quickly to emerging trends, such as the current demand for healthier, protein-filled products.

Our take: Kraft Heinz’s unwinding is a warning sign to the growing number of food companies that see large-scale acquisitions as their ticket to success. While such deals can unlock efficiencies, they also risk creating bloated organizations that fail to keep up with the needs of consumers.

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