Kraft Heinz Merger

The Kraft Heinz Company (KHC), also referred to as Kraft Heinz, is an American global food
corporation with co-headquarters in Chicago and Pittsburgh created by merging Kraft Foods and
the H.J. Heinz Company. With about $26.0 billion in yearly sales as of 2021, Kraft Heinz is
North America's third-largest food and beverage corporation and the fifth-largest in the world.

At the beginning of 2015, the boards of both businesses approved the merger of Kraft Foods and
H.J. Heinz, which also received shareholder and regulatory approval. The new Kraft Heinz firm
rose to become the third-largest food and beverage firm in the world and the fifth-largest in the
country. With additional offices in the United States, Canada, South America, Europe, Asia, and
Australia, the Kraft Heinz co-headquarters are located in Chicago at the Aon Centre and in
Pittsburgh at PPG Place.

A merger between H.J. Heinz Co. and Kraft Foods Group created a new organization (The
Kraft Heinz Company) in 2016 that was expected to enter the world's top 10 largest food
companies.

The deal between Heinz and Kraft cost approximately $100 billion and stakeholder
expectations were high. However, the reality has been disappointing. The company has run
out of steam and experts put the problems down to missed opportunities due to changing
consumer preferences.

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Benefits

Bigger Scale: Following the merger, the business changed its name to Kraft Heinz (KHC),
rising to the third-largest position in North America's food and beverage industry and fifth place
globally. The value of the Kraft Heinz Company surpassed $46 billion.

Cost Savings: Since the merger of the two US food giants faced sales challenges due to shifting
consumer tastes, the company started by eliminating about 2,500 jobs as part of its plan to save
$1.5 billion in annual costs by 2017. The employment losses, according to company spokesman
Michael Mullen, were necessary for combining the two companies and creating the new
structure.

The organization anticipates that by removing duplication, the new structure will facilitate
quicker decision-making, increased accountability, and rapid growth.

International Expansion: The majority of Kraft's earnings come from within the US. Heinz is
arguably the most internationally recognized American-based packaged food company. Thus,
that aided Kraft in promoting some of its brands internationally.

Brand Powerhouse: Heinz, Kraft, Oscar Mayer, Ore Ida, and Philadelphia are just a few of the
beloved names that are combined by these venerable food firms. Together, the new business will
include five brands with sales between $500 million and $1 billion and eight brands worth $1
billion or more. The two brand portfolios' complimentary nature offers a significant chance for
synergies, which will lead to higher marketing and innovation spending.

Ride Both Horses: Intake of healthy foods has increased over the past 20 years, according to the
Lancet Report (as reported in the FT), but it also notes that in most parts of the world,
consumption of unhealthy foods, such as processed meats and sweetened beverages, has
outpaced this growth. So how does the newly combined company's portfolio of goods and
brands fare?

Although the company's portfolio undoubtedly includes several processed goods and related
brands, Heinz has made strides in the natural direction by emphasizing ketchup made from real
tomatoes, expanding its baked beans to include five different bean varieties, and highlighting its

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"close to homemade" approach to baby food. Despite having American roots, the brand has
wholesome family associations that place it at the center of British culture.

As a result, the newly amalgamated business may be well-positioned to ride both horses by
assigning future products to the right master brand because it has both the Kraft brand and a
"healthy" brand like Heinz.

Challenges

While short-term changes to individual brands are unlikely to have a significant impact, many
have discussed risks to consumer perceptions and brand identity because customers are
constantly nostalgic for the old brand and its products, which is a problem for the combined
company.

In any case, they are not required to prominently display the combined corporate mark; they
have the option of hiding it, as “Mondelez” does with “Cadbury”, on the back of the pack. Given
how well-known Heinz is, we don't anticipate seeing a rebrand to Kraft Heinz Tomato Ketchup
anytime soon. As a result, most customers aren't likely to notice that Kraft Heinz is the parent
firm listed on the back of the package.

It’s also the merger between Kraft and Heinz that pulls together two makers of exactly the sort
of heavily processed and generally unhealthy food that many consumers are moving away from
(or trying to).

Most people perceive corporate restructuring activities as a threat, which activates a powerful
"survive" reaction in the brain. There is little room for creative ideation when there is a lack of
trust in management due to feelings of fear, uncertainty, and wrath. That was a problem Kraft
Heinz had to deal with.

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How to develop

As Kraft Heinz focused on aggressive cost cutting, they significantly impaired their ability to
innovate to keep up with the changing landscape. So, we suggest that they should focus on
innovation to develop.

The brand value must be engineered over the long run if the newly combined firm is to produce
long-term shareholder value. It will be necessary to create a unified vision for the newly
combined corporate brand to support and direct internal confidence, communicate the company's
future orientation to the outside world, and direct decision-making in the future, particularly
about portfolio development.

There are numerous services that the union of these two substantial food corporations ought to
offer. Heinz has an international presence. 60% of their revenue comes from markets outside of
North America. 25 percent of their sales come from emerging markets. Conversely, Kraft
receives 98% of its revenue from North America. Therefore, we advise the newly combined
company to concentrate on selling Kraft's goods in foreign markets.

References

The Kraft Heinz Merger and Its Benefits. Sue Miller. November 12, 2015. finance.yahoo.com

https://finance.yahoo.com/news/kraft-heinz-merger-benefits-050553113.html

https://www.quora.com/Why-are-Heinz-and-Kraft-merging-Which-benefits-will-this-operation-
bring

What's the Brand Impact of the Kraft and Heinz Merger. Vicky Bullen. May 06, 2015.
lbbonline.com, https://www.lbbonline.com/news/whats-the-brand-impact-of-the-kraft-and-
heinz-merger

MEGA MERGER: Kraft and Heinz combine to form the world's 5th-biggest food company.
Pamela Engel. March 25, 2015. businessinsider.com, https://www.businessinsider.com/warren-

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buffett-and-a-private-equity-firm-are-combining-heinz-and-kraft-in-a-food-industry-mega-
merger-2015-3

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