Kraft Heinz to sell natural cheese business to Lactalis for $3.2bn

US food company Kraft Heinz has agreed to offload its natural, grated, cultured, and specialty cheese businesses to a US affiliate of French dairy giant Groupe Lactalis for $3.2 billion.

The deal includes Kraft Heinz’s natural cheese businesses in the US, grated cheese business in Canada, and the complete international cheese business outside the two countries. These include brands such as Breakstone’s, Knudsen, Cracker Barrel, Polly-O, Athenos, Hoffman’s, and outside the US and Canada, the brand being sold is Cheez Whiz.

Miguel Patricio – Kraft Heinz CEO said: “We believe these cheese and dairy businesses will thrive in the hands of a global dairy company like Groupe Lactalis.

“At the same time, the transaction will enable us to build sustainable competitive advantage in businesses where we have stronger brand equity, greater growth prospects and can use our manufacturing scale and consumer-based platforms approach. This is a great example of agile portfolio management at work.”

Additionally, Kraft Heinz and Lactalis will partner on a perpetual license for Kraft in natural, grated and international cheeses and Velveeta in natural and international cheeses.

Kraft Heinz to sell natural cheese business to French dairy giant Lactalis for $3.2bn. Graphic courtesy of Business Wire.

The US food company will retain the Philadelphia Cream Cheese, Velveeta Processed Cheese, Kraft Singles, and Cheez Whiz Processed Cheese businesses in the US and Canada, the Kraft, Cracker Barrel Mac & Cheese, and Velveeta businesses across the world, and the Kraft Sauces business worldwide.

As per the terms of the deal, Kraft Heinz will transfer production facilities in Tulare in California, Walton in New York, and Wausau in Wisconsin, and a distribution center in Weyauwega in Wisconsin to the French dairy company. Nearly 750 employees will be transferred from the US food company to Groupe Lactalis as a result.

The cheese businesses being divested contributed nearly $1.8 billion to the net sales of Kraft Heinz for the twelve months ended 27 June 2020. Kraft Heinz would look to use post-tax proceeds from the transaction to mainly cut down its debt.

Thierry Clément – CEO of Lactalis North America said: “The people of Kraft Heinz have built an extraordinary portfolio of high-quality cheese products and brands that consumers love and trust – and we are honored to have been chosen by Kraft Heinz to help carry this legacy forward.

“This combination of complementary offerings is a clear strategic and cultural fit that will create important new opportunities for domestic and international expansion, product innovation, and positive community and employee impact. We look forward to working with and learning from our new colleagues, building on our proud histories together and continuing our collaborative strategy for expansion: to invest, to include, to support, and to grow.”

The deal, which is subject to regulatory review and approval, is likely to close in the first half of next year.