By Juveria Tabassum and Alexander Marrow
Nov 4 (Reuters) - Kraft Heinz said on Wednesday it would divest its North American coffee business in a deal that values the unit at $650 million, as CEO Steve Cahillane sharpens focus on its core packaged food and condiments.
While consumer goods conglomerates such as Procter & Gamble, Unilever and Nestle have been streamlining their portfolios in recent years, Cahillane put a planned split at Kraft Heinz on hold soon after becoming CEO in January, preferring
to fix existing problems first.
The former Kellogg boss is overseeing a $700 million uptick in spending on marketing and innovation as Kraft Heinz leans into protein-heavy foods and electrolyte-infused drinks to attract health-conscious consumers.
The divestiture of the coffee unit, which houses brands such as Maxwell House and Gevalia, to private equity firm One Rock Capital Partners is expected to close in mid-2027. Kraft Heinz will retain a 30% equity stake, the company said.
"Judging the financial merits of the deal is tough as no profit figures have been disclosed, but our preliminary math suggests the EV/EBITDA multiple does not look particularly attractive for Kraft Heinz," said BNP Paribas analysts.
Exiting coffee could be a sensible move. Beverage company Keurig Dr Pepper warned on Tuesday of slower profit growth in US coffee in the fourth quarter as consumers traded down to cheaper brands.
Shares in Kraft Heinz, which expects a slightly smaller decline in its annual organic net sales of 1.25% to 0.5%, rose nearly 5% in early trading.
In the third quarter, overall volumes fell 1.1 percentage points, with North America reporting the sharpest drop at 2.4 percentage points.
Several years of price hikes to offset input costs have eroded volumes for packaged goods companies as consumers pushed back.
While quarterly prices were flat for the first time in more than five years, Kraft Heinz, like other packaged goods firms, is coming up against higher freight costs as the US war in Iran drags up diesel prices to record highs.
"There's clearly more inflation," Cahillane said. "That's disappointing, but it's real. A lot of that is logistics...fuel driven, some commodities."
"I do think you'll see more pricing in 2027, not less pricing," he added, echoing rival firms warning of price hikes to cover rising costs.
(Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Joyjeet Das and Shreya Biswas)
