Kraft Heinz plunges to record low on writedown of brands' value

Chicago Illinois. Kraft Foods Group Inc. said it will merge with H.J. Heinz Co. to form the third largest food and beverage company in North Ameri

Growe said he doesn't believe Kraft Heinz is in a strong position as the industry undergoes consolidation because Kraft Heinz is looking to sell off more brands.

Net sales of $6.89 billion fell short of analysts' estimates of $6.94 billion in the reported quarter.

Now, if Kraft Heinz was banking on buying another company to feed its growth prospects, that avenue may not longer be available.

Kraft Heinz and other food makers that dominated grocery shelves for much of the post-World War II era have been whipsawed by a seismic shift in what consumers want.

Kraft Heinz, known for its ketchup and macaroni and cheese among many other packaged foods, said Thursday that it would cut its dividend by more than a third - and also disclosed that it had received a subpoena from the SEC over its accounting practices.

The almost $13 billion loss in the most recent quarter is a devastating recognition that efforts to change the trajectory of the company have not been as successful as once thought.

Investors will also be disappointed to see that the fourth quarter dividend has been cut by 35.4% from $0.62c to $0.4c per share to shore up the balance sheet and support commercial investments.

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Meanwhile, the prices of many commodities that food companies use are rising, such as agricultural products and materials like aluminum and pulp for packaging.

Buffett's Berkshire Hathaway and 3G Capital bought Heinz in 2013, and since merging with Kraft, has busied busied itself with cutting costs. The trend hasn't been good for some of Kraft Heinz' standbys like Jell-O and Kool-Aid and Oscar Mayer hot dogs.

Wall Street was doing just that Friday. "For that, we take full responsibility".

"By doing this we can improve our growth and returns over time", said CEO Bernardo Hees.

"Investors for years have asked if 3G's extreme belt-tightening model ultimately would result in brand equity erosion", Goldman wrote. As a result of that investigation, it said it recorded a $25 million increase to the cost of its products. "We think the answer arguably came yesterday in the form of a $15 billion intangible asset write-down for the Kraft and Oscar Mayer brands". Over the years, speculation about potential targets has centered on food peers like Mondelez International Inc., General Mills Inc., Campbell Soup Co. and Kellogg Co. Thursday's announcement marks the second time this year that a Berkshire holding has disclosed unfavorable news after the markets closed, hurting its stock. And executives are considering more asset sales, they said on the earnings call, specifically businesses "with no clear path to competitive advantage".

Two years after the merged Kraft Heinz tried - and failed - to buy Unilever for $143 billion in a deal that would let it continue slashing costs and improving profit margins, it has struggled to boost sales with a portfolio of exhausted brands, including Capri Sun and Maxwell House.

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