Foodservice

Kraft Heinz to sell cheese business for $3.2 B to Groupe Lactalis

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September 15, 2020

The Kraft Heinz Co. has agreed to sell its natural, grated, cultured and specialty cheese businesses to a U.S. affiliate of Groupe Lactalis for $3.2 billion, according to a press release. The proposed transaction is expected to close in the first half of 2021, subject to regulatory review and approval.

The transaction includes Kraft Heinz's natural, grated, cultured and specialty cheese businesses in the U.S., grated cheese business in Canada, and the entire international cheese business outside these two countries, including the following brands: Breakstone's, Knudsen, Polly-O, Athenos, Hoffman's, Cracker Barrel in the U.S. only, and outside the U.S. and Canada only, Cheez Whiz.

In addition, Kraft Heinz will partner with Groupe Lactalis on a perpetual license for Kraft in natural, grated and international cheeses and Velveeta in shredded and international cheeses.

Kraft Heinz will retain the Philadelphia Cream Cheese, Kraft Singles, Velveeta processed cheese and Cheez Whiz processed cheese businesses in the U.S. and Canada, the Kraft, Velveeta and Cracker Barrel Mac & Cheese businesses worldwide, and the Kraft sauces business worldwide.

"We believe these cheese and dairy businesses will thrive in the hands of a global dairy company like Groupe Lactalis," Kraft Heinz CEO Miguel Patricio said in the press release. "At the same time, the transaction will enable us to build sustainable competitive advantage in businesses where we have stronger brand equity, greater growth prospects and can use our manufacturing scale and consumer-based platforms approach. This is a great example of agile portfolio management at work."

As outlined in the new Kraft Heinz operating model announced today, platform roles will help guide resource allocation and investment decisions. Kraft Heinz will focus on growth areas and take strategic action where appropriate. This will help to accrete the company's growth profile, enhance strategic focus and create shareholder value.

Under the terms of the agreement, Kraft Heinz will sell production facilities located in Tulare, California; Walton, New York; and Wausau, Wisconsin and a distribution center in Weyauwega, Wisconsin. These facilities and their employees will continue to operate in ordinary course. Approximately 750 employees will be transferred from Kraft Heinz to Groupe Lactalis.

The cheese businesses being sold contributed approximately $1.8 billion to Kraft Heinz's net sales for the 12 months ended June 27, 2020. Kraft Heinz expects to use post-tax transaction proceeds primarily to pay down debt.