Berkshire’s Heinz Exit: A Sensible Retreat

So, Greg Abel has officially taken the reins at Berkshire Hathaway, succeeding the legendary Warren Buffett. It’s a bit like inheriting a particularly well-stocked and profitable garden. One assumes there will be weeding. And it appears one of the first weeds Abel is eyeing is Kraft Heinz. Which, when you think about it, is a rather large weed. A colossal, ketchup-stained weed, really.

An SEC filing the other day suggested Berkshire might be shedding its entire stake in the company – roughly 325 million shares, amounting to about $8.5 billion. That’s a sum that could comfortably buy a small country, or at least a very large collection of antique staplers. Berkshire, you see, owns a hefty 27.5% of Kraft Heinz, making it the largest shareholder. A position it acquired, rather boldly, in 2015.

The filing doesn’t guarantee a sale, of course. It merely provides the legal mechanism. It’s a bit like buying a very expensive fishing rod and then deciding you’d rather take up competitive origami. You have the option to fish, but no obligation. Still, the fact that Berkshire is preparing to unload the entire position suggests a certain…lack of enthusiasm. Which, if you look at the stock’s performance, is perfectly understandable.

A Merger That Aged Poorly

The whole Kraft Heinz saga is a fascinating case study in how things can go awry. Back in 2015, Buffett and Berkshire orchestrated the merger of HJ Heinz and Kraft. It seemed like a sensible idea at the time – combining two food giants to create a powerhouse. But as anyone who’s ever tried to herd cats can tell you, combining things isn’t always a recipe for success. It turns out that squeezing costs and chasing efficiencies can sometimes…well, squeeze the life out of a company.

Berkshire’s partner in this venture, 3G Capital, began offloading its stake years ago, eventually exiting completely in late 2023. Berkshire, however, held on, perhaps hoping for a miraculous turnaround. A bit like waiting for a penguin to learn to fly. The stock, alas, has been on a rather consistent downward trajectory since 2015, dropping from over $90 per share to its current $22.40. That’s an average annual return of roughly -11%. Which, let’s be honest, is not something to brag about at cocktail parties.

The Final Ketchup Stain

The final straw, it seems, was Kraft Heinz’s recent decision to split back into two separate companies. A move that Buffett openly expressed his disappointment with. It’s a bit like dismantling a perfectly good bicycle to build two slightly less functional unicycles. Logically, it made little sense. And for Berkshire, it signaled that the grand experiment had run its course.

Frankly, it’s a sensible move. Holding onto a declining asset out of stubbornness or misplaced hope is rarely a winning strategy. Better to cut your losses, redeploy the capital elsewhere, and invest in something with a bit more…oomph. Something that doesn’t involve so much processed cheese.

We’ll get a clearer picture of Abel’s plans when Berkshire releases its next earnings report on February 23rd. Until then, it’s a safe bet that he’s quietly tidying up the garden, pulling out the weeds, and preparing for a more bountiful harvest. And that, as any seasoned investor knows, is precisely what you want to see.

2026-01-25 02:52

A Merger That Aged Poorly

The Final Ketchup Stain

Read More