- Kraft Heinz is shedding coffee. The company will divest its North American coffee business, including Maxwell House and Gevalia, to private equity firm One Rock Capital Partners in a deal valuing the unit at $650 million, while retaining a 30% equity stake. The deal is expected to close in mid-2027.
- The outlook improved. Kraft Heinz raised the low end of its organic net sales target and now expects a decline of 1.25% to 0.5% for fiscal 2026, and lifted its annual adjusted EPS target to $2.07 to $2.13. Shares rose about 3% in premarket trading.
- The quarter itself was mixed. Net sales fell nearly 2% to $6.12 billion but edged past the $6.09 billion LSEG estimate, while adjusted operating income dropped 15.2% on higher procurement and logistics costs, lower volumes and higher advertising. Overall volumes fell 1.1 percentage points, with North America down 2.4 points.
- Coffee is a tough category. Keurig Dr Pepper warned on Tuesday of slower profit growth in US coffee in the fourth quarter as consumers trade down to cheaper brands.
What Happened?
Kraft Heinz announced on Wednesday it would divest its North American coffee business as CEO Steve Cahillane sharpens focus on core packaged food and condiments. Cahillane put a planned split of the company on hold soon after taking over in January, saying the problems were fixable. He has overseen a $700 million increase in marketing and innovation spending as the company leans into protein-heavy foods and electrolyte-infused drinks. “Relative to last year, our market share, sales, and volume trends are improving in every region,” Cahillane said.
Why It Matters?
The sale is a sign Cahillane is reshaping the portfolio through targeted divestitures instead of a full breakup. Selling coffee removes a business facing consumer trade-down, as Keurig Dr Pepper’s warning shows, while the 30% stake keeps some upside. The bigger problem is volume: years of price increases to offset input costs, including tariffs and higher packaging and transportation costs from the US war with Iran, have pushed consumers away from packaged goods. The profit beat relied on lower interest expense and taxes rather than operations, with operating income down 15.2%.
What’s Next?
Investors will watch whether the higher marketing spend stabilizes volumes, especially in North America, and whether more divestitures follow. The coffee deal’s mid-2027 close and its use of proceeds are also in focus. With the outlook for fiscal 2026 still pointing to an organic sales decline, the turnaround needs volume growth to show up in coming quarters.
Affected Tickers and Coins: KHC, KDP, XLP
Source: CNBC
