Buffet and Berkshire Hathaway potentially planning to divest from Kraft Heinz shares?
Berkshire Hathaway Considering Exit from Kraft Heinz Amidst Financial Struggles and Strategic Shifts
The upcoming 13F reporting date on August 14 is generating anticipation, as Berkshire Hathaway's potential sale of Kraft Heinz shares could be a significant move in the market.
In May, Berkshire sold some 14 million shares of Citigroup, but this transaction did not hinder C stock's impressive rally, which has surged nearly 35% in 2025. However, the same cannot be said for Kraft Heinz (KHC), a company in which Berkshire still holds 325,634,818 shares, a position that has remained unchanged since 2013.
Berkshire's initial investment in Kraft in 2013 culminated in a stake in KHC following a megamerger with Heinz. However, the combined entity, Kraft Heinz, has faced numerous challenges. The company's stock has plummeted over 70% from its 2017 peak, closing at $28.78 on July 24, a loss of more than 37% from its post-merger price.
The financial underperformance and debt burden of KHC are significant factors in Berkshire's potential exit. Kraft Heinz remains saddled with $20 billion in remaining debt, a persistent drag on its finances. The company also faced a dividend cut in 2019 and has been criticised for its lack of investment in product development and long-term planning.
Moreover, Kraft Heinz has struggled due to changing consumer preferences, with consumers moving away from processed foods towards healthier options, undermining the firm's core brands. This shift has been further exacerbated by investor skepticism towards legacy packaged foods and a desire for exciting growth stories, causing Wall Street to give up on KHC.
Berkshire’s representatives have resigned from Kraft Heinz’s board, coinciding with the company exploring strategic options like breaking up its brand portfolio or spinning off large parts. This suggests Berkshire views a breakup or restructuring as a way to salvage value before possibly exiting.
Berkshire’s investment strategy favors strong income-generating, cash-flow-positive companies, a profile Kraft Heinz no longer fits well due to its financial pressures and shrinking revenue. With Warren Buffett planning to step down as Berkshire CEO at the end of 2025, the firm may be inclined to close this chapter and refocus on other investments.
The Kraft Heinz merger in 2015 resulted in a combined debt load of approximately $33 billion at the new entity. Despite this, Berkshire might be eager for an alternative arrangement alongside a merger, breakup, or other structural change. However, Berkshire's stake in KHC is more than a quarter of all shares, making it difficult to sell without making waves.
The potential reasons for Warren Buffett and Berkshire Hathaway to sell their Kraft Heinz shares include significant financial underperformance and strategic considerations. Berkshire took a large $3.8 billion writedown on its 27.5% stake in Kraft Heinz, signaling that the investment has been a disappointing deal that has deteriorated over time.
In summary, the main reasons for Berkshire potentially selling Kraft Heinz shares are the large writedown reflecting a bad investment, ongoing underperformance and debt burden of Kraft Heinz, shifts in consumer habits damaging the company’s core, and strategic reevaluation ahead of Buffett’s CEO exit.
- Berkshire Hathaway's potential sale of Kraft Heinz shares could signal a foray into decentralized finance (Defi) and digital trading, as the company might be looking to invest in more innovative business models.
- The financial struggles of Kraft Heinz have led Berkshire Hathaway to consider a shift in their investing strategy, moving away from traditional finance and towards more modern, profitable businesses.
- With Warren Buffett stepping down as Berkshire Hathaway CEO at the end of 2025, the company might be looking to liquidate its poorly performing assets, such as Kraft Heinz, and invest the proceeds in Initial Coin Offerings (ICO) and other digital businesses.
