Kraft Foods Group and H.J. Heinz will merge to create the third largest food company in North America. Heinz, owned by Warren Buffett’s Berkshire Hathaway, bought mega food giant Kraft Foods, bringing the two famous names together. The company is working with investment firm 3G Capital on the deal.
"By bringing together these two iconic companies through this transaction, we are creating a strong platform for both U.S. and international growth," Heinz chairman and 3G managing partner Alex Behring said to CNN Money.
Kraft’s brands include Capri Sun, Cheez Whiz, Cool Whip, Jell-O, Kool Aid, Lunchables, Oscar Mayer, and Velveeta. But these processed food favorites have suffered a huge hit in recent years as Americans become more concerned about what’s in the food they’re eating.
According to The Washington Post:
Increasingly health-conscious American shoppers, particularly younger eaters, have boosted sales for foods offering organic or local ingredients, but Kraft has grown only more dependent on its processed staples: The largest part of its revenue last year, at more than $4 billion, was cheese.
Kraft’s iconic macaroni and cheese made the news last week with a distracting recall. The company voluntarily recalled 6 million boxes or over 200,000 cases of its original flavored macaroni and cheese because of customer complaints the boxes contained metal.
To boost sales in the processed food market, which as a whole has suffered, the company's brand images will need to be reshaped. The same may be true for Kellogg's, another mega-processed food brand: It reported $293 million in losses in the fourth quarter last year, as a result of under-performing brands like Special K and Kashi. Grab and go foods seem to be on their way out as consumers reach for less processed breakfast foods like Greek yogurt and breakfast sandwiches.
It remains to be seen how these companies will change their brands to reflect the needs of the modern, health conscious consumer. Consumers are more interested in ingredients they can read and understand, as well as organics and GMOS, rather than ease of use and shelf life as in years past.
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Image: Mike Mozart