Berkshire Hathaway's Kraft Heinz Writedown and Strategic Implications for Long-Term Value

In the second quarter of 2025, Berkshire Hathaway took a $3.76 billion writedown on its 27.4% stake in Kraft Heinz, marking a pivotal moment in the conglomerate's history. This decision, disclosed in a regulatory filing on August 2, 2025, reflects a broader recalibration of Warren Buffett's successor strategy under Greg Abel. The writedown, classified as “other-than-temporary,” underscores the challenges of holding legacy investments in a rapidly shifting economic landscape—and offers critical lessons for investors evaluating Berkshire's evolving portfolio.

The Cost of Stagnation: How Mispriced Legacy Investments Impact Performance

The Kraft Heinz investment, once a cornerstone of Berkshire's consumer staples portfolio, has long been a mixed bag. Acquired in 2017 for $16.3 billion, the stake was initially justified by the company's dominant market position and stable cash flows. However, the 2015 merger between Kraft and Heinz created a portfolio plagued by overleveraging and underperformance, compounded by shifting consumer preferences toward healthier options and the inflationary pressures of 2022–2025.

The $3.76 billion writedown—a 30% decline in Berkshire's cost basis—was not a surprise. It followed a $3 billion writedown in 2019 and coincided with Kraft Heinz's own strategic review, which included potential spinoffs of its legacy brands. For Berkshire, this represents a painful but necessary correction. The writedown reduced Q2 2025 net income by 59%, a stark reminder of the risks associated with underperforming assets in a conglomerate model.

Yet, this move is not a failure but a recalibration. By acknowledging the diminished value of its Kraft Heinz stake, Berkshire has freed up capital to pursue higher-conviction opportunities—a hallmark of its value-investing philosophy. The key question for investors is whether this disciplined approach can offset the drag from mispriced legacy investments and reinvigorate long-term returns.

Strategic Reallocation: Energy, Infrastructure, and the Future of Berkshire's Portfolio

Greg Abel's leadership has ushered in a new era for Berkshire, characterized by a deliberate shift toward sectors with durable cash flows and pricing power. The Kraft Heinz writedown is part of a broader strategy to reallocate capital away from volatile financials and consumer staples toward energy, infrastructure, and industrial assets.

This reallocation is already evident. In 2025, Berkshire exited its positions in Citigroup and reduced its Bank of America stake, while simultaneously increasing its exposure to energy. The company added $1.2 billion to its Occidental Petroleum position and deepened its investments in Japanese trading firms, which offer diversified access to global markets. These moves reflect a focus on sectors insulated from macroeconomic volatility, particularly in a political climate where U.S. trade policy and tariffs under President Donald Trump remain unpredictable.

Moreover, Berkshire's $344.1 billion cash reserves provide a unique advantage. Unlike many conglomerates, Berkshire is not forced to deploy capital at suboptimal prices. For example, the company passed on a $10 billion investment opportunity in Q1 2025 due to unfavorable terms—a decision that underscores its commitment to disciplined capital allocation. This flexibility, combined with Abel's emphasis on operational efficiency, positions Berkshire to capitalize on undervalued opportunities in energy and infrastructure.

Opportunities in the New Era: Where to Focus for Long-Term Value

The Kraft Heinz writedown highlights a broader trend: conglomerates must adapt to structural shifts in consumer behavior and macroeconomic conditions. For investors, the implications are clear.

1. Energy and Infrastructure as Anchors: Berkshire's deepening investments in energy—particularly in renewable and storage technologies—signal a long-term bet on sectors with stable cash flows.

2. Strategic Patience: The company's ability to walk away from deals that don't meet its criteria is a strength. This patience ensures capital is deployed only when the risk-reward asymmetry is favorable.

3. Railroad Consolidation: With BNSF Railway evaluating a potential merger with CSX, Berkshire could benefit from the broader trend of railroad consolidation, which enhances scale and pricing power.

Conclusion: A Calculated Exit, A Resilient Future

The Kraft Heinz writedown is not the end of a story—it is the beginning of a new chapter for Berkshire. By shedding underperforming assets and realigning its portfolio with sectors that thrive in uncertainty, the conglomerate is positioning itself for long-term resilience. For investors, the lesson is simple: legacy investments can drag down performance, but disciplined reallocation and strategic patience can unlock new value.

As Berkshire navigates a world of economic volatility and shifting consumer preferences, its focus on energy, infrastructure, and operational efficiency offers a roadmap for sustainable growth. The Kraft Heinz writedown, while painful, is a testament to the company's willingness to adapt—a trait that has defined its success for decades.