Strategic Restructuring in the Packaged Food Sector: M&A, Spinoffs, and Activist Influence

The packaged food sector is undergoing a seismic shift as companies grapple with stagnant sales, margin pressures, and evolving consumer preferences. Kraft Heinz and PepsiCo, two titans of the industry, are at the forefront of this transformation, leveraging spinoffs, activist investor pressure, and strategic overhauls to unlock value. These moves reflect a broader trend where structural change is no longer optional but imperative for survival.

Kraft Heinz: A Dual-Track Strategy for Growth

Kraft Heinz’s decision to split into two publicly traded entities—Global Taste Elevation Co. and North American Grocery Co.—marks a pivotal step in its restructuring. The former will focus on premium condiments and sauces (Heinz ketchup, Grey Poupon mustard) and ready meals (Philadelphia cream cheese), while the latter will handle staples like Oscar Mayer meats and Lunchables [1]. This separation aims to streamline operations, reduce complexity, and allow each entity to pursue distinct growth strategies.

Financially, the split is backed by strong gross margins (34.7% for Kraft Heinz in 2024) but tempered by declining operating profits [2]. The condiments segment, with its higher EBITDA growth, is expected to drive innovation and global expansion, while the grocery staples unit will prioritize operational efficiency and steady cash flow [3]. Analysts note that this structure mirrors Kellogg’s 2023 split into three entities, which saw standalone adjusted earnings per share rise to 31¢ in Q3 2024 despite restructuring costs [4].

PepsiCo’s Activist-Driven Turnaround

PepsiCo, meanwhile, faces a different but equally urgent challenge. Activist investor Elliott Management, with a $4 billion stake, has pushed for a comprehensive restructuring, including refranchising its bottler network and divesting underperforming brands [5]. The firm argues that PepsiCo’s sluggish sales in North America and weak margins have obscured its international potential. Elliott’s proposal—modeled after Coca-Cola’s bottler strategy—could free up capital for reinvestment in core assets like Gatorade and Frito-Lay [6].

PepsiCo’s struggles are evident: its 2024 operating margin of 15% fell short of its long-term target of 17%, and North American beverage sales declined by 2.5% year-over-year [7]. However, the company’s “wide moat” in snack and beverage synergies, if optimized, could still deliver 4% annual sales growth [8]. The success of Elliott’s push will hinge on PepsiCo’s ability to balance short-term cost-cutting with long-term innovation—a challenge it has historically navigated well.

Lessons from Kellogg’s Spinoff

The 2023 Kellogg split offers a cautionary yet hopeful precedent. While the company faced a 2% revenue decline in 2024, its adjusted EBITDA margin expanded to 30%, driven by supply chain modernization and portfolio rationalization [9]. This suggests that spinoffs can stabilize margins even amid revenue headwinds, provided execution is disciplined. For Kraft Heinz and PepsiCo, the key takeaway is that structural change must be paired with operational rigor to deliver shareholder value.

Investment Implications

For investors, the restructuring of Kraft Heinz and PepsiCo presents both risks and opportunities. Kraft Heinz’s dual entities, with their distinct growth profiles, could attract sector-specific investors, while PepsiCo’s activist-driven overhaul may catalyze a valuation re-rating if executed effectively. However, both companies must navigate execution risks—such as integration costs for Kraft Heinz and brand dilution for PepsiCo.

The broader sector trend—toward spinoffs and activist intervention—signals a shift toward agility over scale. As consumer preferences fragment and private-label competition intensifies, companies that can adapt their structures to prioritize innovation and efficiency will outperform.

Source:
[1] Kraft Heinz Breakup Plan Promises Sharper Focus And Bigger Growth [https://www.aol.com/kraft-heinz-breakup-plan-promises-135129551.html]
[2] Kraft Heinz Company Strategic Restructuring and Financial Report [https://monexa.ai/blog/the-kraft-heinz-company-strategic-restructuring-an-KHC-2025-07-14]
[3] Kraft Heinz Evaluating Potential Spin-Off Of A Grocery Business [https://www.forbes.com/sites/joecornell/2025/07/17/kraft-heinz-evaluating-potential-spin-off-of-a-grocery-business/]
[4] WK Kellogg Reaches Milestone With Improving Trends In Q3 [https://www.foodbusinessnews.net/articles/27149-wk-kellogg-reaches-milestone-with-improving-trends-in-q3]
[5] Elliott Sends Presentation to Board of Directors of PepsiCo Inc. [https://www.prnewswire.com/news-releases/elliott-sends-presentation-to-board-of-directors-of-pepsico-inc-302543745.html]
[6] Elliott Calls for Turnaround Plan At PepsiCo [https://finance.yahoo.com/news/elliott-calls-turnaround-plan-pepsico-171546923.html]
[7] PepsiCo: Plan to Turn Around Lagging Performance [https://www.morningstar.com/stocks/pepsico-plan-turn-around-lagging-performance-looks-cogent-execution-is-key]
[8] Kraft Heinz’s Strategic Breakup: A Recipe for Shareholder Value [https://www.ainvest.com/news/kraft-heinz-strategic-breakup-recipe-shareholder-2508/]
[9] WK Kellogg On Strong Growth Trajectory [https://www.forbes.com/sites/joecornell/2024/05/13/wk-kellogg-on-strong-growth-trajectory/]