Kraft Heinz(KHC.US) Looks for New Growth Avenues After Halting Spin-Off: Launches a Series of Healthy New Products to Boost Underperforming Brands

Kraft Heinz Company (KHC.US) is launching a series of healthier products to boost some of its underperforming brands; this is the first phase of measures the company is taking to revitalize growth after pausing its split plan. In March and April of this year, the company will officially launch a high-protein Kraft Macaroni & Cheese, a small-pack lunchbox, and a low-sugar Capri Sun hydration drink with added electrolytes.

CEO Steve Cahillane stated in an interview that the launch of these products is part of the company’s strategy to revitalize growth in three previously underperforming brands that have shown improvement after recent investments. He expressed that the company aims to provide “evidence” to customers and investors that Kraft Heinz can turn around its business by replicating similar initiatives across other brands.

The newly launched foods will test whether Cahillane’s bet is correct, that investing in Kraft Heinz’s product development and aggressively promoting high-protein, healthier foods can help revive sales.

Last month, Cahillane unexpectedly halted Kraft Heinz’s plan to split into two companies, stating that he believes the food manufacturer is too streamlined and can be revitalized through a $600 million investment in new products, marketing, and price reductions.

Given that Cahillane led the split of cereal manufacturer Kellogg before taking over Kraft Heinz in January, this move surprised many investors. He noted that while the logic behind a split might work again, “I don’t think it will happen in the short term.”

As consumers increasingly lean toward fresher, less processed foods, some investors remain skeptical about the ability to save certain brands under Kraft Heinz. Since Cahillane halted the split plan, Kraft Heinz’s stock has dropped about 9%, although large packaged food companies are generally experiencing a downward trend.

Cahillane stated that customers are increasingly inclined to choose foods with shorter ingredient lists and healthier options over packaged foods displayed on central store shelves. He hopes to attract them back to the central shelves by “precisely catering to customers’ shopping motives as they head to the store periphery.”

Kraft Heinz’s initiative comes as U.S. Health Secretary Robert F. Kennedy has indicated efforts to define and potentially label ultra-processed foods. Cahillane remarked that any efforts should be “constructive.” He added, “It’s not simple or straightforward; the last thing you want to do is provide misinformation.”

Recently, food companies have also faced risks related to the Middle East conflict, which has led to rising crude oil and fertilizer prices. Kraft Heinz is closely monitoring any disruptions in the supply chain, Cahillane stated, acknowledging that rising fuel prices could increase pressure on economically strained consumers.

“We have been working to lower product prices,” he said. As part of the $600 million investment plan, the company is lowering prices through promotions and initial price reductions. “This is more important now, and I believe it will remain unchanged for the rest of the year.”

Growth Goals

The new products aim to uplift those brands that have been dragging down Kraft Heinz. Last month, Cahillane stated at a meeting that the company has begun to see sales recover for those brands that “caused the most resistance at the beginning of 2025,” including Kraft Macaroni & Cheese, lunchboxes, mayonnaise, and juice.

In the interview, Cahillane expressed his goal for Kraft Macaroni & Cheese to “hold steady or grow slightly year-round,” for Capri Sun juice to accelerate its “low single-digit growth” shown in the second half of 2025, and to “restore growth” for lunchboxes. He also sees opportunities to expand Heinz Ketchup, Philadelphia Cream Cheese, and Kool-Aid flavored drinks.

Kraft is investing $1 million to provide consumers with trial packs of Kraft Macaroni & Cheese. The product will hit supermarket shelves this month, with each serving containing 17 grams of protein and 6 grams of fiber. The suggested retail price is $2.99, with each box exceeding 7 ounces, aimed at being more affordable than competing products. In contrast, a 6-ounce package from emerging boxed pasta company Goodles is priced at $3.59 on the Kroger website.

Cahillane remarked, “People want healthier food, but they don’t want to compromise on taste.”

The new small-pack Lunchables will contain cheese and crackers, aiming to extend the product line to other times of the day, including between meals, and attract consumers beyond school-age children.

Cahillane noted that with Capri Sun hydration drinks, Kraft Heinz is continuing the momentum gained from last year’s launch of resealable bottled beverages as a replacement for traditional pouches, expanding its coverage in convenience stores.

Historically, as consumers age, the brand has begun losing customers. “They think of Capri Sun as a drink exclusively for when they were younger,” but the bottled version and the new low-sugar sports drink both provide opportunities to “retain those aging consumers.”

This adjustment does not include some other underperforming brands under Kraft Heinz, such as Oscar Mayer deli meats and Maxwell House coffee. Capri Sun and Kool-Aid are not part of this specific initiative. Cahillane indicated that the company is not actively seeking to sell any brands at this time, but does not rule out any possibilities.

He stated, “Sometimes, a brand may be more valuable to other entities than to us.” In such cases, the company “has a responsibility as shareholders to consider these opportunities.”