Kraft Heinz Announces Divestment of North American Coffee Business, Including Maxwell House and Gevalia – CoffeeTalk

Kraft Heinz announced its decision to divest its North American coffee business for $650 million as CEO Steve Cahillane focuses on enhancing the company’s core offerings in packaged food and condiments. This move aligns with a broader trend among consumer goods conglomerates like Procter & Gamble and Nestle, who have been streamlining their product portfolios. After stepping into the CEO role in January, Cahillane opted to delay a planned split of Kraft Heinz to prioritize addressing current challenges within the company.

The divestiture, which includes brands such as Maxwell House and Gevalia, will be transferred to private equity firm One Rock Capital Partners, with an expected closing date set for mid-2027. Kraft Heinz will retain a 30% equity stake in the coffee unit, which is considered non-core and contributes around 3% of the company’s net sales, but has lower profit margins than its other products. Analysts from BNP Paribas noted difficulties in evaluating the financial merits of the deal without specific profit figures, indicating that the projected EV/EBITDA multiple may not be favorable for Kraft Heinz.

Furthermore, the decision to exit the coffee sector appears prudent amidst warnings from Keurig Dr Pepper about sluggish profit growth in the US coffee market, attributed to consumers shifting towards more affordable brands. Following this announcement, Kraft Heinz’s shares rose approximately 6%, while broader retail stocks in the US also experienced gains.

In terms of overall performance, Kraft Heinz reported a 1.1 percentage point drop in third-quarter volumes, with North America suffering the most significant decline at 2.4 percentage points. Rising input costs have prompted years of price increases, which have adversely affected sales volumes as consumers have shown resistance. For the first time in over five years, quarterly prices remained unchanged, although the company contends with increasing freight costs due to record high diesel prices, exacerbated by geopolitical tensions such as the US-Iran war.

Cahillane acknowledged the persistent inflationary pressures, attributing them largely to logistics and fuel costs, and predicted that more pricing adjustments would occur by 2027, reflecting similar concerns shared by other firms in the industry regarding the necessity of price hikes to address escalating costs.

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