Big Food splits smart move or strategic misstep? Summary
- Big Food pursues demergers amid investor pressure and shifting portfolio strategies
- Unilever and Kraft Heinz splits triggered share price declines
- Boards expect long-term value but tolerate underperformance briefly
- Operational complexity, culture disruption, and talent attrition challenge leadership teams
- Successful splits demand execution patience and clear post separation strategies
Big changes have dominated Big Food over the past year. And, when we say ‘big changes’, we’re talking industry-changing big!
There was the Mars, Inc. acquisition of snack brand Kellanova, in an historic deal worth $36bn (€31bn).
Ferrero Group bought WK Kellogg Co, combining two of the biggest names in the industry, and signalling a major strategy shift for the Italian chocolate maker.
Then there are the changes that are still ongoing, and which happen to all be splits.
First up there’s Nestlé’s sale of part of its coffee and waters businesses.
Then there’s The Kraft Heinz Company’s plans to split into two separate entities - a move that’s currently on hold
And finally (for now) Unilever’s decision to spin off almost its entire Foods business.
And it’s these splits that we want to focus on. Because, while they were announced with much confidence and enthusiasm, they’ve proved less than popular with employees and shareholders, causing markets to tumble and raising questions over whether they should go-ahead at all.
Big Food demergers cause shares to plummet
To split or not to split?
The March announcement that Unilever is to separate its Foods business was met with an immediate drop in share price, as investors made their feelings on the deal clear. And, despite the British multinational’s reassurances, the price has remained determinedly low at just 4221.50 GBX (Great Britain Pence).
This mirrors a similar share-price drop witnessed by Kraft Heinz following the announcement it planned to separate into two separate entities. The difference here is, of course, that the company has since paused its split after its biggest investor, Berkshire Hathaway, made moves to sell its entire stake.
In other words, Big Food’s biggest names should proceed with caution when considering a separation. Though there can often be multiple factors driving the decision.
“Demergers in the food space are rarely driven by a single factor,” explains Doug Ehrenkranz, managing partner at consultancy firm, Boyden. “Typically, it’s a combination of both long-term strategy and short-term investor expectations.”
Brands that are sold or spun-off are often smaller, niche businesses that no longer align with the parent company’s strategy. Or they’re more mature brands in decline. These “orphan brands” are then taken on by companies better equipped to operate and grow them.
Importantly, when demergers do work, the upside can be significant. A successful split can give each business a much clearer strategic focus, allow capital to be allocated more efficiently and speed up decision‑making. In theory, both the parent company and the newly independent business end up better positioned to compete – provided the execution is successful.
Separating successfully
When it comes to the financial side of a split, Ehrenkranz says Big Food’s leadership teams are “typically well prepared for the financial mechanics of a separation as they’re more predictable in nature”. Things get trickier, however, when it comes to the day‑to‑day realities – or more specifically the reality of detangling operations – manufacturing and production, supply chain and logistics, IT systems and data, etc.
Added to this, the culture of a company is often overlooked. Demergers can fundamentally reshape a company’s identity, leaving employees facing prolonged uncertainty, something that’s often underestimated at the outset. All the while, leaders are trying to keep the core business moving, even as managing the separation itself becomes a major draw on time and attention.
What’s more, Ehrenkranz warns break‑ups can destabilise talent, as uncertainty drives attrition, especially among high-performing employees who have external opportunities available to them. Retaining talent during a period of change is critical, he says, but often far from easy.
Beyond employees, splits can also create knock‑on effects for customers and retail partners. Questions around continuity of supply, commercial terms and account ownership can emerge, particularly when shared systems or teams are being dismantled. Even when disruption is temporary, it can add another layer of pressure during an already complex process.
The route a company takes also matters. A full spin‑off, a partial divestment or an outright sale all come with different demands, timelines and risks – from governance and standalone capability building to regulatory approvals, tax considerations and geopolitical exposure. For global food companies, these factors can further complicate an already delicate exercise.
What does success look like?
Boards typically measure separation success over a long period of time, but the reality is much more nuanced, mostly because, as Ehrenkranz says, “demergers rarely go exactly as planned”. And while there’s often an understanding that value creation takes time, patience can wear thin if performance dips for too long.
Tolerance for underperformance is often limited to a 12–24 month window, which can put leadership teams under pressure to show tangible results sooner than may be realistic. That tension can make it harder to balance staying the course with meeting near‑term expectations, even when the strategic logic of the separation remains sound.
What happens next can be pivotal. If the benefits of a split haven’t materialised within that window, boards may revisit strategy, adjust leadership or push for further change. In that sense, the demerger itself is rarely the final chapter, but rather the start of a new, and often equally demanding, phase for Big Food’s biggest players.
Does splitting solve the problem?
For Big Food, splitting the business is rarely a simple value‑unlocking exercise. While demergers promise cleaner structures and sharper strategic focus, they also bring disruption, uncertainty and a long list of execution risks that are easy to underestimate.
Investor reactions over the past year suggest markets are far from convinced that every split will deliver on its logic – at least not quickly.
As companies like Unilever and Kraft Heinz have discovered, success hinges not just on the strategic rationale, but on timing, communication and an ability to manage cultural, operational and talent challenges alongside financial ones. In an industry already grappling with inflation, changing consumer habits and supply‑chain complexity, a demerger can be both an opportunity and a distraction.
The question, then, is not simply whether Big Food should split, but whether leadership teams and boards are truly prepared for what comes next.
