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Kraft Heinz's (KHC) Agile Portfolio Management Fuels Growth

·4-min read

The Kraft Heinz Company KHC is on track with agile portfolio management as part of its transformation effort. In this regard, the company concluded the sale of certain assets in the global cheese business along with the license of specific trademarks to an affiliate of Groupe Lactalis. The deal was priced at nearly $3.3 billion, which includes cash consideration of almost $3.2 billion.

Per the deal, Kraft Heinz divested its natural, grated, cultured and specialty cheese businesses in the United States, grated cheese business in Canada along with grated, processed and natural cheese businesses outside the United States and Canada. The transaction also includes Kraft Heinz’s global intellectual property rights to various brands like Cracker Barrel, Breakstone’s, Knudsen, Athenos, Polly-O, Hoffman’s and Cheez Whiz brand in most of the countries outside the United States and Canada, among other names. Apart from these, the company offloaded perpetual licenses for the Kraft and Velveeta brands.

Kraft Heinz will retain Kraft Singles, Velveeta processed cheese and Cheez Whiz processed cheese businesses in the United States and Canada. The company is keeping its Kraft, Velveeta and Cracker Barrel macaroni and cheese, Kraft sauces as well as cream cheese, including Philadelphia cream cheese, businesses globally.

All said, the move to divest the aforementioned businesses will help Kraft Heinz enhance its overall growth profile, strategic focus and financial flexibility.

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Zacks Investment Research

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What Else Should You Know?

Kraft Heinz is committed to expand the International Taste Elevation product platform and its footprint across emerging markets as part of its focus on the operating model. To this end, management acquired a sauces-focused business — Assan Foods — from privately-held Turkish conglomerate, Kibar Holding, in October 2021. Through this buyout, the company is accelerating its retail and foodservice growth across Europe, Middle East and Africa. In September 2021, Kraft Heinz signed an agreement to buy the Brazil-based condiments and sauces company — Companhia Hemmer Indústria e Comércio ("Hemmer"). The move will widen consumers’ taste options in Brazil and diversify Kraft Heinz’s product portfolio. The buyout will further accelerate growth in the company’s condiments and sauces category. Shares of this Zacks Rank #3 (Hold) company have increased 4.9% in the past year against the industry’s decline of 1.6%.

Other Food Players Gaining on Buyouts

Several other companies in the food space like Post Holdings, Inc. POST, Hormel Foods Corporation HRL and McCormick & Company, Incorporated MKC are benefiting from acquisitions.

In fourth-quarter fiscal 2021, Post Holdings’ top line included $99.8 million in net sales from acquisitions made through fiscal 2021. The buyouts include Private label ready-to-eat cereal business Egg Beaters liquid egg brand, Almark Foods business and related assets and Peter Pan nut butter brand.

Hormel Foods is strengthening its business through strategic acquisitions. In June, HRL acquired the Planters snacking portfolio from The Kraft Heinz Company. Prior to this, the company acquired Texas-based pit-smoked meats company Sadler's Smokehouse in March 2020. The buyout is in sync with Hormel Foods’ initiatives to strengthen its position in the foodservice space.

McCormick has strategically increased its presence through acquisitions, which have been strengthening its portfolio. In December 2020, McCormick bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. In November 2020, McCormick acquired the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand.

HRL and MKC have declined 10% and 7%, respectively, in the past year. POST has moved up 6.5% during this time.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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