Podcast Summary: Kraft Heinz's Big Breakup

The Journal. – September 3, 2025
Hosts: Ryan Knutson & Jessica Mendoza
Guest: Jessie Newman (WSJ food industry reporter)

Overview of the Episode

This episode explores the recent decision by Kraft Heinz, one of America’s most iconic food conglomerates, to split into two separate companies—a reversal of their highly publicized 2015 merger. Hosts Ryan Knutson and Jessica Mendoza, joined by reporter Jessie Newman, break down why this split is happening, what led to the merger’s unraveling, and how it reflects broader trends and challenges in the food industry today—rising consumer price sensitivity, changing tastes, and the pressure to offer healthier products.

Key Discussion Points & Insights

1. The Symbolic "Breakup" of Ketchup and Hot Dogs

• Jessica opens with a lighthearted metaphor about ketchup and hot dogs splitting up—a nod to the fact that Kraft Heinz owns both Heinz ketchup and Oscar Mayer hot dogs.
• Memorable Quote:
  • "Does ketchup belong on a hot dog?" - Jessica Mendoza [01:06]
  • Jessie reveals she doesn't eat hot dogs, being vegetarian, but prefers mustard to ketchup.
    • "I don't really have a hot dog in this fight, personally." – Jessie Newman [01:34]

2. Origins and Context of the Kraft Heinz Merger

• Background on Kraft (cheese, mac and cheese, hot dogs) and Heinz (condiments).
• In 2015, Kraft and Heinz merged in a massive deal, creating one of the world's largest food and beverage companies, but the union was "not shelf stable."
• Why Merge?
  • The industry was struggling post-Great Recession: growth was slow, consumers were becoming more cost-conscious, and shifting to healthier, fresher foods.
  • Memorable Quote:
    • "The Kraft Heinz deal is just viewed as a historically bad deal." – Jessie Newman [02:39]
    • "It just brought together all of these really iconic American brands...And a decade later, that deal is effectively being undone." [02:39]

3. The 3G Capital Playbook: Efficiency at All Costs

• 3G Capital, with Warren Buffett's Berkshire Hathaway, led the merger with a track record of deep cost-cutting.
• Zero-Based Budgeting: Kraft Heinz slashed costs dramatically—job cuts, rationing office supplies, even restricting color photocopies.
  • "They turned quick profits, they closed factories, they cut thousands of jobs, they did things like banning flying in corporate owned jets..." [07:59]
• While this approach improved short-term profit margins, it crippled investment in product innovation and marketing.

4. The Downfall: Cost-Cutting’s Limits

• By 2019, Kraft Heinz's value was down $15 billion from its post-merger peak.
• 3G realized that aggressive efficiency wasn't enough—a business must also invest in "new trendy products" to survive.
  • "3G was very good at...squeezing out all the costs, but it just knew less about building sales." – Jessie Newman [08:44]

5. The Pandemic Bump—and Backlash

• The COVID-19 pandemic briefly revived Kraft Heinz and similar packaged food brands—people stocked up on shelf-stable foods amid restaurant shutdowns.
• Executives hoped this renewed interest would last: "They thought that this would give them a new lease on life..." [10:21]
• But this was short-lived; as society reopened, consumer habits resumed shifting away from processed foods.

6. The Current Struggles: Inflation and Changing Consumer Preferences

• Post-pandemic inflation drove up grocery prices by as much as 30% over four years.
  • "It’s hard to overstate just how important cost is for many consumers." – Jessie Newman [12:04]
• Price sensitivity drove shoppers to favor cheaper store brands over Kraft Heinz staples.
• Ongoing backlash against "junk food"—from Lunchables and Capri Sun to Kraft Singles.
• A "Make America Healthy Again" movement, led by Health Secretary Robert F. Kennedy Jr., further stigmatizes additives and processed foods.
  • "We're going to get rid of every ingredient and additive to school food that we can legally address." – Robert F. Kennedy Jr. [13:57]

7. Attempts at Healthier Products—And Their Challenges

• Kraft Heinz tried to reformulate products (e.g., less sugar in Capri Sun, removing artificial dyes), but results were mixed:
  • "They lowered the sugar content of their Capri sun drinks and that basically backfired..." [14:20]
• The balance between healthier ingredients, cost, and consumer taste remains elusive.

8. The Big Breakup: Details and Industry Trends

• As of July 2025, Kraft Heinz stock had lost over 60% of its value since the merger, erasing $57 billion.

• The company announced a split into two:

  • One will focus on Heinz-type products (sauces, condiments),
  • The other on Kraft-type brands (desserts, cheese, meats).
    • Curiously, Kraft Mac and Cheese will belong to the Heinz side [16:14].

• CEO Carlos Abrams Rivera: The company's complexity made it impossible to properly innovate and nurture all their brands.

  • "They just couldn't give all the brands all the love." – Jessie Newman [16:29]

• This is part of a larger industry trend: other giants like Kellogg and Keurig Dr. Pepper are also breaking up for a more "narrow focus."

  • "There seems to be this feeling in the industry that depth is preferable to breadth..." – Jessie Newman [17:25]

Notable Quotes & Memorable Moments

• "I don't really have a hot dog in this fight, personally." – Jessie Newman [01:34]
• "The Kraft Heinz deal is just viewed as a historically bad deal." – Jessie Newman [02:39]
• "They turned quick profits, they closed factories, they cut thousands of jobs... they took this really extreme approach to cost cutting." – Jessie Newman [07:59]
• "3G was very good at...squeezing out all the costs, but it just knew less about building sales." – Jessie Newman [08:44]
• "We're going to get rid of every ingredient and additive to school food that we can legally address." – Robert F. Kennedy Jr. [13:57]
• "They just couldn't give all the brands all the love." – Jessie Newman [16:29]
• "There seems to be this feeling in the industry that depth is preferable to breadth..." – Jessie Newman [17:25]

Timestamps for Key Segments

• [01:06]: Does ketchup belong on a hot dog? (opening metaphor for the Kraft Heinz breakup)
• [02:03]: The Kraft Heinz merger and its "bad deal" reputation
• [05:40]: The 3G private equity strategy of radical cost-cutting
• [07:10]: On the implementation and effects of zero-based budgeting at Kraft Heinz
• [09:31]: Kraft Heinz's valuation declines and realization that cost-cutting alone isn't sustainable
• [10:21]: Pandemic boom for Kraft Heinz and expectations of a revived brand
• [12:04]: Impact of post-pandemic inflation and consumer price sensitivity
• [13:57]: Make America Healthy Again movement and regulatory pressures
• [14:20]: Attempts at healthier product formulations and their consumer backlash
• [15:14]: Kraft Heinz’s major stock decline and industry context for the breakup
• [16:14]: Structure of the post-breakup Kraft Heinz and rationale for the split
• [17:25]: Industry-wide trend toward specialization and breakup of other conglomerates
• [18:02]: Reflections on current industry challenges—costs, regulation, changing consumer taste

Tone and Style

Friendly, explanatory, sometimes wry—in classic The Journal. fashion. Jessie Newman's commentary mixes factual analysis with conversational asides.

Conclusion

The Kraft Heinz breakup isn't just a corporate split—it's emblematic of the seismic forces reshaping the U.S. food industry. Big conglomerates assembled in the pursuit of "scale" are now being dismantled, as consumer skepticism about processed foods, demands for healthier options, and relentless price sensitivity upend old business models. Kraft Heinz’s story is a cautionary tale for the sector: relentless efficiency can hollow out even the most iconic brands, and adapting to changing appetites is not only about what’s in the product, but about abandoning the idea that bigger is always better.