In a bid to improve its long term financial position, Kraft Heinz has decided to sell parts of its cheese business. The company will sell its natural cheese business to France’s Lactalis for USD 3.2 billion. It will continue to own Kraft Singles, Philadelphia Cream Cheese, Velveeta Processed Cheese, and Cheez Whiz Processed Cheese businesses in Canada and the United States. The company has also decided to get back to tried and tested business strategy to overcome the underperformance. It will use the proceeds to pay the part of its USD 26 billion debt. Kraft Heinz is also targeting to save USD 2 billion in the next five years by focusing on manufacturing, logistics, and procurement.
Kraft Heinz CEO Miguel Patricio said that the company feels that the dairy and cheese business would thrive in the hands of a global dairy firm like Groupe Lactalis. “Moreover, the transaction will help you to become stronger in the business where we have strong foothold and brand equity. The company will use consumer based platforms and manufacturing scale to increase its growth prospects,” Patricio said. The businesses that the company has planned to sell contributed around USD 1.8 billion in sales in the last year ending June 27. The deal is expected to be finalized in the first half of the next year. This deal will result in the transfer of around 750 employees of Kraft Heinz employees to move over to France’s Groupe Lactalis.
The deal has been termed as strategic transformation plan by the company and it is targeting 1 per cent to 2 per cent growth for organic net sales. The ketchup company is hopeful of per share earnings to rise about 4 per cent to 5 per cent. Chief Financial Officer Paulo Basilio said that the company is committed to returning to consistent growth. Kraft Heinz was formed after the merger which was led by Warren Buffett and 3G Capital.