This is a deal that will cause some far-reaching ripples in the American food industry. Two of the most iconic food industry players in the U.S. – Kraft Foods Group and H.J. Heinz – have announced a merger to form what will be among the biggest food empires in the world. But it’s not just the business landscape that will change; it now remains to be seen how this merger will affect the way America eats.
The new entity, The Kraft Heinz Co. will be headquartered out of two locations – Chicago area and Pittsburgh. This deal catapults the two companies into the third place among top American food behemoths. The company will have to its credit over eight different food brands collectively boasting annual sales of at least US$ 1 billion.
Kraft’s classic namesake cheese, mayonnaise and dressing brands are household staples, whereas its other brands – Lunchables, Capri Sun, Jello-O, Cool Whip and others are among the top selling items in the North American food market. Heinz, on the other hand, is best known for its ketchups, Classico pasta sauce and Bagel Bites. Kraft said that about 98% of North American households purchase its products.
But, somewhere down the line, the company’s stellar growth seems to have lost its sheen with cracks appearing in its profits. The heavily-processed food items that Kraft is best known for, are taking a beating as Americans are increasingly moving toward fresher, natural foods. Last year alone, the earnings of Kraft plunged by over 60%. Other factors such as product recalls have hurt the company further.
Investor Warren Buffet’s company Berkshire Hathaway, along with Brazil-based 3G Capital Partners, engineered this deal. In 2013, the two companies had come together to purchase Heinz in a $23 billion deal.