Steve Cahillane, a food industry CEO with a track record of splitting companies, now faces an unexpected challenge: keeping this one intact.
Key Takeaways: The Kraft Heinz Company (KHC) has abandoned its plan to split into two separate companies, with CEO Steve Cahillane recommending against proceeding with the separation.
Just weeks after being appointed CEO of Kraft Heinz, Steve Cahillane flew to Omaha, Nebraska, to meet with a major shareholder: Berkshire Hathaway (BRK.B). It was January, and Cahillane requested an initial meeting with Berkshire's new CEO, Greg Abel. At the time, Kraft Heinz was struggling, and the $25 billion company was planning a split into two entities—a plan Berkshire had publicly opposed.
Cahillane, originally tasked with executing the split, conveyed a message to Abel: shareholder returns were the top priority. While he initially saw merit in the separation, he was still delving into the details. At Berkshire's headquarters, Abel reiterated the firm's concerns: Kraft Heinz had numerous problems, but a breakup wouldn't solve them.
The meeting seemed to do little to alleviate Berkshire's worries. On January 20th, Kraft Heinz announced that Berkshire might sell nearly all of its roughly 28% stake in the food company, causing the stock price to plummet. Within weeks, Cahillane and Abel reached an agreement: a split was not the right choice.
Over the past decade, this global food giant has struggled. Kraft Heinz hired Cahillane last December to lead a strategic turnaround. Over the last five years, the company's market value has shrunk by nearly a third, and sales have declined quarter-over-quarter for two consecutive years.
This meeting was Cahillane's first step in mending relations with Berkshire and getting Kraft Heinz back on track. Berkshire, one of the creators of Kraft Heinz, no longer agreed with the company's direction. Warren Buffett of Berkshire had stated that splitting the maker of Heinz ketchup and Kraft macaroni & cheese would be costly, disruptive, and shareholders deserved a vote.
"This doesn't create value, it incurs significant expenses," Buffett said in September. "It doesn't change the taste of the ketchup. Frankly, it makes no sense."
A Split Specialist Since its formation over a decade ago, Kraft Heinz has been deeply intertwined with its largest shareholder, Berkshire. The long-time Berkshire CEO, Buffett, partnered with Brazilian private equity firm 3G to acquire Heinz in 2013; two years later, they orchestrated the merger of Heinz with Kraft.
In the following years, Kraft Heinz management aggressively cut costs and underinvested in its aging brands, leading to a steady decline. Buffett, who served on the Kraft Heinz board until 2018, initially defended the company against criticism but eventually lost confidence in the merger. In 2019, Buffett admitted he overpaid for the Kraft Heinz deal. Berkshire also gradually reduced its board seats at Kraft Heinz: Abel stepped down in 2024, and the remaining two Berkshire executives left last year.
While many large food companies face challenges, Kraft Heinz's problems are particularly acute. In recent years, demand has slumped for many core products, from Capri Sun lunchbox drinks to fruit beverages, as consumers shift to trendier premium items or cheaper supermarket private-label alternatives.
Last summer, former Kraft Heinz CEO Carlos Abrams-Rivera and the board concluded the best path forward was to split the company, separating the global condiments business from the North American grocery business. By fall, however, Kraft Heinz was secretly searching for a new CEO. John Cahill, then vice chairman of the board and head of the separation committee, contacted Steve Cahillane.
Cries of Being Resource-Starved Cahillane, 60, is a marathon runner with a notable head of white hair and a calm, stoic demeanor. He is an experienced food industry executive, having just successfully completed the split of another food giant, Kellogg, and previously overseeing the separation of a vitamin business.
He was planning his next career move and had received offers from several companies, including Constellation Brands. He and John Cahill had previously served together on the board of Colgate-Palmolive. Leading this iconic American company appealed to Cahillane. Despite the difficult road ahead, he was familiar with the products: as a child at Yankees games, he ate hot dogs smothered in Heinz ketchup.
Born in the Bronx, New York, to a New York City firefighter father and an Irish immigrant mother, Cahillane's food career began with a $5-an-hour job at a New York pizzeria and stocking fruit drink mixes in a supermarket. After college, he spent decades at food and beverage companies like Coca-Cola and AB InBev.
Cahillane officially became CEO of Kraft Heinz on New Year's Day. The company had stated that after the split, he would lead the faster-growing condiments business, home to brands like Heinz ketchup and Grey Poupon mustard.
The new CEO began a deep dive into Kraft Heinz's finances and toured its production facilities. He visited the innovation center in Glenview, Illinois, and an 88-acre plant in Champaign that produces over a billion pounds annually of Heinz ketchup, Kraft macaroni & cheese, and Kraft mayonnaise. He met with the company's top 100 managers, a group called the "Kitchen Cabinet," asking them what was wrong, why growth had stalled, what was needed to get back on track, and if a turnaround was even possible.
In interviews, Cahillane said one message was clear: the company was too lean, with investments in areas like product development and advertising lagging far behind other food companies. "I heard countless times, 'This brand has one junior person on it, I can't get anything done,'" he said. "It was essentially a cry for resources."
Facing the Board The more Cahillane learned, the more concerned he became: preparing for a split while simultaneously trying to improve Kraft Heinz's operations would be extremely difficult, if not impossible. The challenge of creating two healthy, separate companies began to seem insurmountable.
By the end of January, Cahillane needed to report to the board. The night before the meeting, he resolved to recommend a strategic shift. He only shared his plan with his wife; half an hour before the meeting, he informed Chairman John Cahill. Entering the 75th-floor conference room with just a few notes, Cahillane acknowledged the work done on the separation over recent months before presenting his new idea: abandon the split, at least for now.
In his view, Kraft Heinz's business would still be declining by the end of 2025. The separation would cost $300 million and consume significant manpower that should be dedicated to reviving the brands. "I just didn't think it was realistic to try and do both things well," he said.
Instead of splitting, Cahillane is betting his and Kraft Heinz's future on first turning around the nearly 200-brand behemoth. He said the board posed a series of questions but was quickly persuaded by his optimism about revitalizing Kraft Heinz and backed the new plan. He proposed investing $500 million to revive the business; the board added another $100 million to that figure.
After the meeting, Cahillane called Abel to inform him of the change in plans. After Kraft Heinz announced the suspension of the split in February, Abel issued a statement supporting the decision. According to people familiar with the matter, Cahillane continues to explore various strategic options for the company's businesses.
Recently, Kraft Heinz held talks with Hellmann's mayonnaise maker Unilever about a potential food business transaction. However, according to reports, Unilever is currently in discussions with spice company McCormick & Company. Kraft Heinz plans significant investments in marketing, sales, and research & development. Cahillane stated the company will focus on delivering higher value to consumers, including healthier options like the new Kraft "PowerMac" with 17 grams of protein and 6 grams of fiber.
"I've said many times, this is a 'show me' plan," Cahillane said. "Now we have to go prove it."
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