Kraft Heinz to divest North America coffee unit amid Cahillane's turnaround effort

Kraft Heinz to Divest North America Coffee Business in $650 Million Deal

Key Developments and Financial Performance

Strategic Shift and Divestiture Details

Nov 4 (Reuters) - Kraft Heinz said on Wednesday it would divest its North American coffee business in a deal that values the unit at $650 million, as CEO Steve Cahillane sharpens focus on its core packaged food and condiments.

Cahillane put on hold a planned split of the company soon after he took over as CEO in January, saying Kraft Heinz's problems were fixable.

Focus on Core Business and Innovation

He has overseen a $700 million uptick in spending on marketing and innovation as the company leans into protein-heavy foods and electrolyte-infused drinks to attract health-conscious consumers.

Market Reaction and Sales Outlook

Kraft Heinz shares rose about 3% in premarket trading after the company raised the low end of its organic net sales target. It now expects a slightly smaller decline of 1.25% to 0.5% for fiscal 2026.

"Relative to last year, our market share, sales, and volume trends are improving in every region," Cahillane said in a statement.

Details of the Coffee Unit Sale

The divestiture of the coffee unit, which includes brands such as Maxwell House and Gevalia, to private equity firm One Rock Capital Partners is expected to close in mid-2027. Kraft Heinz will retain a 30% equity stake, the company said.

Industry Context and Competitive Landscape

Beverage company Keurig Dr Pepper warned on Tuesday of slower profit growth in US coffee in the fourth quarter as consumers traded down to cheaper brands.

Volume and Pricing Pressures

In the third quarter, overall volumes fell 1.1 percentage points for Kraft Heinz, with North America reporting the sharpest drop at 2.4 percentage points.

Several years of price hikes to offset input costs, including from tariffs and higher packaging and transportation costs from the US war with Iran, have eroded volumes for packaged goods companies as consumers pushed back.

Financial Results and Earnings Outlook

Adjusted operating income for the three months ended September 26 fell 15.2%, hurt by higher procurement and logistics costs, lower volumes and increased advertising spend, the company said.

Net sales declined nearly 2% to $6.12 billion but edged past estimates of $6.09 billion, according to data compiled by LSEG.

Lower interest expenses and lower taxes on earnings helped drive a profit beat and allowed the company to raise its annual adjusted earnings per share target to between $2.07 and $2.13.

Reporting Credits

(Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Joyjeet Das)