NEW YORK CITY, New York: Kraft Heinz is weighing a major corporate shake-up that could unravel its 2015 mega-merger, as the food giant struggles to reignite growth and regain investor confidence.

The company is exploring the idea of spinning off a large segment of its grocery portfolio, including slower-growth legacy brands such as Velveeta and Oscar Mayer, into a separate entity, according to a source familiar with the matter. The potential spinoff, first reported by the Wall Street Journal, could be valued at up to US$20 billion—making it the largest deal in the consumer goods sector this year.

Kraft Heinz declined to comment.

The move would effectively reverse the nearly $45 billion merger between Kraft and H.J. Heinz, which was backed by Warren Buffett's Berkshire Hathaway. The deal had aimed to streamline operations and expand globally, but shares in the combined company have since plunged by about two-thirds.

U.S. shoppers have shifted away from traditional packaged foods, especially as prices have risen. Products like Lunchables are also facing backlash amid growing support for the Make America Healthy Again (MAHA) movement, led by Health Secretary Robert F. Kennedy Jr.

In May, Kraft Heinz said it was "evaluating potential strategic transactions to unlock shareholder value." That announcement came shortly after Berkshire Hathaway's executives exited the board—moves that analysts said signaled declining confidence in the company's prospects.

If the split proceeds, the company's 200 brands could be divided into two groups. One would focus on condiments and spreads, led by Heinz ketchup and Philadelphia cream cheese. That business posted $11.4 billion in sales last year and is considered to have stronger international potential.

The remaining portfolio—featuring Kraft-branded cheeses and Oscar Mayer meats—earned $14.5 billion but faces stiff competition from cheaper store brands. Analysts believe this segment would likely trade at valuations similar to the full company, which currently sells for less than nine times earnings.

The strategy carries risks. Simply separating the businesses may yield limited upside unless outside buyers are willing to pay a premium for one or both units.

"It doesn't look like there's a whole lot of upside," said Bank of America analyst Peter Galbo. "It really is reliant on an acquisition down the line."

Kraft Heinz may be looking to replicate Kellogg Co's recent breakup, which led to the sale of WK Kellogg to Ferrero for $3.1 billion, and of Kellanova (maker of Pringles) to Mars for about $36 billion.

Possible buyers for Kraft Heinz's condiments arm could include McCormick, Unilever, or Nestlé, though none have confirmed interest. The Kraft-branded business may appeal to companies seeking leverage with major U.S. retailers like Walmart and Kroger, said Aptus Capital's Dave Wagner.

Still, Wagner warned, "If you keep the company as it is now or split it, both are going to have some type of black eye."

Kraft Heinz's total sales fell three percent in 2024, and the company has cut its full-year guidance for revenue and profit.