Why big food is breaking up: From Kellogg and Mondelez to Kraft Heinz

In the golden age of the food conglomerate, size was everything. But in 2025, scale is starting to show its age. From Kraft Heinz’s blockbuster breakup announcement to Kellogg’s WK Kellogg spin-off and Danone’s serial portfolio shedding, a powerful new thesis is reshaping the consumer packaged goods (CPG) industry: when growth stalls, break up the brand empire.

For legacy food manufacturers facing slower category expansion, shrinking margins, and pressure from activist shareholders, breakups are no longer a defensive tactic. They’re an offensive strategy—a way to reclaim relevance, simplify capital deployment, and give underloved brands a new lease on life.

The playbook is repeating across the aisle: disentangle, focus, streamline. And in almost every case, the aim is the same—unlock value from bloated, overstretched portfolios that no longer reflect modern consumer demand.

What triggered the Kraft Heinz split—and how does it compare to past breakups?

The Kraft Heinz Company (NASDAQ: KHC) announced in September 2025 that it would separate into two publicly traded entities: “Global Taste Elevation Co.” and “North American Grocery Co.” The move, expected to close by the second half of 2026, reflects a broader reassessment of the company’s structure, brand complexity, and investment agility.

The first business—Global Taste Elevation—will house higher-growth, international-facing brands like Heinz, Philadelphia, and Kraft Mac & Cheese. It will be geared toward sauces, spreads, and seasonings, with approximately 20% of revenue coming from emerging markets and another 20% from Away From Home channels. The second, North American Grocery Co., will handle the slower-growth but cash-rich staples like Oscar Mayer, Kraft Singles, and Lunchables—brands that dominate their categories but face margin pressure in domestic grocery.

This is far from Kraft Heinz’s first transformation. Back in 2012, Kraft Foods split into two parts: Mondelēz International for snacks, and Kraft Foods Group for grocery. That separation set the stage for the Heinz merger in 2015, orchestrated by 3G Capital and Berkshire Hathaway. But the cost-cutting playbook that followed gutted R&D, alienated retail partners, and left the company struggling to maintain pricing power in a rapidly changing market.

Kellogg took a similar path in 2023 when it spun off WK Kellogg Co. to focus on higher-growth snacking brands through the renamed Kellanova. The idea was simple: let cereal stand on its own as a stable cash engine, while snacking gets the freedom to innovate and expand internationally.

Danone, meanwhile, has pursued a “breakup by a thousand divestitures.” It sold off biscuit brands, dairy assets, and even parts of its organic portfolio to concentrate on high-margin health and wellness products. J.M. Smucker has been strategically pruning too—exiting baking in favor of coffee, pet food, and snacking.

Each breakup is different, but the core logic is the same: the once-revered food conglomerate structure has become a drag, not a driver.

Why portfolio complexity and margin stacking are hurting big food

The modern food consumer is fragmenting. In place of one-size-fits-all offerings, shoppers are choosing functional beverages, plant-based snacks, international flavors, and lower-sugar formulations. Big Food isn’t just competing with each other anymore—it’s battling private labels, challenger brands, direct-to-consumer disruptors, and dietary tribes from keto to gluten-free.

These shifts strain multi-category giants. Managing dozens of brands across meal occasions, formats, and regions creates coordination overhead. It dilutes strategic focus. It slows down R&D. And it muddles investor messaging.

A more granular issue is margin stacking. High-margin categories like condiments or beverages often subsidize low-margin staples like processed meat or ready-to-eat cereals. But that averaging effect obscures where true growth lies—and leaves brands without the capital they need to win.

Spinning off underperformers or separating business models allows each unit to pursue a distinct financial and operational strategy. It also lets management teams customize capital allocation, incentive structures, and go-to-market approaches in ways that are nearly impossible inside sprawling conglomerates.

As Miguel Patricio, Executive Chair of Kraft Heinz, put it: the current structure makes it challenging to allocate capital effectively and scale what’s working. The breakup, he said, will “unlock the potential of each brand to drive better performance and long-term shareholder value.”

Why investor pressure and analyst sentiment are driving food conglomerates to break up

Capital markets have played a major role in this breakup boom. Activist shareholders, institutional investors, and even long-only funds are pushing companies to break apart—arguing that simplicity, transparency, and focus outperform generalized scale.

It’s a sentiment reflected in the commentary around Kraft Heinz’s split. TD Cowen analysts noted that “narrower portfolios often perform better in the long run,” especially in categories where consumer tastes evolve quickly. Barclays framed the move as a recognition that “complexity has become a competitive disadvantage.”

And the market reaction is telling. While Kraft Heinz shares dropped on the day of the announcement—down over 7% as investors braced for near-term disruption—many analysts expect a long-term re-rating once the new entities are operational.

That’s exactly what happened with Mondelez, which has consistently outperformed its former grocery sibling since the 2012 split. Mondelēz has grown into a global snacking powerhouse, while Kraft Foods Group (later merged into Kraft Heinz) struggled with declining relevance.

The lesson for investors is simple: breakups create optionality. They offer a choice between growth and income, innovation and consistency, risk and reward. And in a high-rate, low-growth world, that choice matters more than ever.

What’s next: could more food giants follow the breakup trend?

With Kraft Heinz now joining the likes of Kellogg and Mondelez, the food industry may be entering a new normal where conglomerate structures are not just passé—but penalized.

Potential candidates for future separations include Conagra Brands, which straddles both frozen meals and snack categories. Nestlé, while more diversified and global, has faced pressure to divest slower-growth units. Even General Mills, with its mix of pet food, cereals, and yogurt, could see pressure to rationalize.

At the same time, not all restructuring takes the form of outright spin-offs. Some firms are simplifying from within—creating autonomous operating units, consolidating back-end systems, or selling off lagging brands in piecemeal fashion.

Others, like J.M. Smucker, are moving in the opposite direction—using portfolio consolidation to deepen focus in high-margin categories like pet nutrition and single-serve beverages. The key isn’t necessarily to break up—but to align portfolio strategy with consumer behavior and capital efficiency.

What are the strategic implications for brands and category leadership?

For brand teams, separation can be both liberating and challenging. On one hand, it frees them from the shadow of larger corporate parents, giving more autonomy and targeted investment. On the other, it requires rebuilding retail relationships, IT infrastructure, and sometimes even supply chains from scratch.

For retailers, breakups may mean renegotiated terms, revised marketing calendars, and split category reviews. Retail buyers will be watching closely to see how the new companies support innovation, manage inventory, and fund promotional activity.

The bigger question is whether consumers will notice—or care. Most shoppers don’t follow corporate reorganizations. But they do respond to faster product rollouts, cleaner packaging, more relevant flavors, and better value. If breakups allow brands to deliver on those fronts, the separation narrative could go from financial engineering to consumer delight.