Kraft Heinz Co. is selling a chunk of its cheese businesses, according to The Wall Street Journal (WSJ). Its U.S. natural-cheese business, as well as a mix of other cheese brands both in North America and internationally, will be going to France-based Groupe Lactalis SA for $3.2 billion.
The brands sold include Kraft shredded and blocks of cheese, the Cracker Barrel brand, and Breakstone’s cottage cheese and sour cream. Kraft Heinz will keep Kraft Singles, Philadelphia cream cheese, Velveeta, Cheez Whiz, and its macaroni-and-cheese business.
WSJ reports that, over the course of the pandemic, Kraft Heinz struggled to meet demand, and competitors gained ground. It notes that this is part of a larger trend of consumers “defecting” to foods that seem trendier or healthier, or just to lower-priced store brands. As a result, its stock is less than half of what it was in the early days of the Kraft-Heinz merger.
Some of the proceeds from the sale in question, WSJ says, will be used to pay down debt. Kraft Heinz is also planning to cut $2 billion in costs over five years.
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The Chicago Tribune reports that about $1.2 billion of the cost savings will come from tightening procurement processes, and the rest from supply chain efficiencies. There are no plans to reduce employee count.
WSJ quotes Kraft-Heinz Chief Executive Miguel Patricio as saying that the company was too focused on cutting costs under prior ownership: “We are changing that mind-set… Do we need to reduce margins to grow brands? The answer is no.” He intends to be more strategic about cutting costs, and to invest more savings into marketing its brands, rather than passing it all onto the bottom line, according to WSJ.
The Tribune explains that the company has plans to prioritize high-growth products including Heinz ketchup, Oscar Mayer Lunchables, and macaroni and cheese. The company will be spending more on new lines, packaging renovations, and expansion in emerging markets.
Part of how it will drive new sales: new marketing. The Tribune quotes Carlos Abrams-Rivera, President of the U.S. business, as saying: “This idea of consumers eating more at home, that is something I don’t think is going away anytime soon. We know consumers will be spending more time at home. We will continue to serve the consumers knowing that’s the reality of where they are.”