The numbers aren’t pretty, but the Kraft Heinz saga goes beyond its balance sheet. This story is also about a shift in food preferences that is transforming the way people shop for food. Kraft Heinz is faltering because people are eating less processed crap. This probably got started with the farm-to-table movement and the growing popularity of farmers markets and cooking shows, which introduced locally-sourced, farm-fresh food to a new generation of urban and suburban dwellers. The result is a more conscious shopper, one who is starting to think about where her food comes from and what packaged food is doing to her body.
For years Heinz has been using high-fructose corn syrup in its ketchup, knowing perfectly well that this junk is a leading contributor to type 2 diabetes and obesity (read THIS). Then there’s Kraft and its never ending roster of processed foods and meats. Take a look at what they use in their Mac and Cheese Sauce Mix. The stuff is literally poison! They made a few changes after receiving some criticism but they continue to add harmful chemicals in their food.
Right now Warren Buffet’s 27% stake in the company is the only reason this stock is not trading lower, which makes me think that $16 billion write-down could be only the beginning because this company has a lot of debt and its credit rating is near junk. Buffet himself has admitted to overpaying for the Kraft merger, a costly mistake that forced Berkshire to take a $3 billion charge. It was one of the biggest quarterly losses in company history and the Oracle of Omaha is basically holding the bag on this one. Why should you?