Kraft Heinz (KHC.US) halts spinoff and seeks new growth avenues: launching a series of healthy new products to boost underperforming brands

CNBC Finance APP has learned that Kraft Heinz (KHC.US) is launching a series of healthier products to boost some underperforming brands; this is the first phase of measures after the company paused its split plans to revive growth. In March and April this year, the company will officially introduce a high-protein Kraft macaroni and cheese, a small-pack lunch box, and a low-sugar electrolyte-enhanced Capri Sun hydration drink.

CEO Steve Cahillane said in an interview that these product launches are part of the company’s strategy to revive growth for three previously underperforming brands that have recently shown good performance after investment. He stated that the company aims to provide “evidence” to customers and investors that Kraft Heinz can turn around its business by replicating similar initiatives across other brands.

The new foods will test Cahillane’s gamble that investing in product development and heavily promoting high-protein, healthier foods can help boost sales.

Last month, Cahillane unexpectedly halted Kraft Heinz’s plan to split into two companies, citing his belief that the food manufacturer was too streamlined and could be revitalized by investing $600 million in new products, marketing, and price reductions.

Given Cahillane’s past leadership of the split of cereal maker Kellogg’s before taking over Kraft Heinz in January this year, many investors were surprised by this move. He said that while the logic of splitting might work again, “I don’t think it will happen in the short term.”

With consumers increasingly favoring fresher, less processed foods, some investors remain skeptical about the potential to save certain Kraft Heinz brands. Since Cahillane halted the split plan, Kraft Heinz’s stock has fallen about 9%, though shares of large packaged food companies have generally been declining.

Cahillane said consumers are increasingly choosing foods with shorter ingredient lists and healthier profiles over packaged foods displayed on store center aisles. He hopes to attract them back to the center aisles by “precisely meeting their shopping motivations to visit the store’s periphery.”

This move by Kraft Heinz comes as U.S. Secretary of Health and Human Services, Xavier Becerra, announced efforts to define and possibly label ultra-processed foods. Cahillane said any efforts should be “constructive,” adding, “It’s not straightforward, and the last thing you want is to provide misinformation.”

Recently, the food company has also faced risks related to Middle East conflicts, which have led to rising oil and fertilizer prices. Kraft Heinz is closely monitoring supply chain disruptions, Cahillane said, and acknowledged that rising fuel costs could increase pressure on consumers already feeling the pinch.

“We’ve been working to lower product prices,” he said. As part of the $600 million investment plan, the company is reducing prices through promotions and initial price cuts. “This is even more important now, and I believe it will remain so for the rest of the year.”

Growth Goals

The new products aim to boost brands that have been dragging down Kraft Heinz. Last month, Cahillane said in a meeting that the company has begun to see a recovery in sales of brands that “caused the biggest resistance early in 2025,” including macaroni and cheese, lunch boxes, mayonnaise, and juice.

Cahillane stated in the interview that his goal is to keep Kraft Macaroni & Cheese’s performance “flat or slightly up for the year,” accelerate Capri Sun’s low-single-digit growth in the second half of 2025, and restore growth for Lunchables. He also sees opportunities to expand Heinz ketchup, Philadelphia cream cheese, and Kool-Aid flavored drinks.

Kraft plans to invest $1 million in providing consumers with free samples of Kraft brand macaroni and cheese. The product will hit supermarket shelves this month, with each serving containing 17 grams of protein and 6 grams of fiber. The suggested retail price is $2.99 per box, over 7 ounces, aiming to be more affordable than competitors. In comparison, emerging boxed pasta company Goodles sells a 6-ounce box for $3.59 on Kroger’s website.

Cahillane said, “People want healthier foods, but they don’t want to compromise on taste.”

The new small-pack Lunchables will include cheese and crackers, aiming to expand the product line into other times of the day, including between meals, and attract consumers beyond school-aged children.

Cahillane noted that with Capri Sun, Kraft Heinz continues the momentum gained last year from replacing traditional pouch packaging with resealable bottles, expanding its reach in convenience stores.

Historically, the brand has lost customers as they age. “They see Capri Sun as a drink for young people,” but the bottled and new low-sugar sports drinks offer opportunities to “retain these aging consumers.”

This adjustment does not include some other underperforming Kraft Heinz brands, such as Oscar Mayer deli meats and Maxwell House coffee. Capri Sun’s spokesperson said the company is not actively seeking to sell any brands at this time but does not rule out any possibilities.

He said, “Sometimes, a brand might be more valuable to other entities than to us.” In such cases, the company “as a shareholder has a responsibility to consider these opportunities.”