American food giant The Kraft Heinz Company has agreed to sell part of its cheese business to France's Groupe Lactalis for $3.2 billion. The sale comes as Kraft Heinz faces significant disruptions to its global supply chain due to the prolonged coronavirus pandemic.
Kraft Heinz announced on Tuesday that it has reached an agreement with Lactalis for the sale of its U.S. natural cheese business along with a number of its other international cheese brands. The company, which sells the iconic Heinz-branded ketchup and Oscar Mayer meats, stated that the divestment is part of its wider strategy to simplify its business and focus more on its core brands and products.
The company's chief growth officer, Nina Barton, mentioned during a virtual meeting with investors on Tuesday that Kraft Heinz is moving to rebuild its connection with consumers by streamlining its product line.
While demand for grocery items has skyrocketed since the start of the pandemic, major suppliers have lost some market share due to their inability to keep up with demand. Smaller providers have been able to swoop in to cater to the rising demand for packaged foods as the pandemic had forced consumers to stock their pantries and cook food at home. At the height of the health crisis, Kraft Heinz was unable to keep stores stocked with products such as its iconic mac and cheese, enabling companies such as General Mills to take up the slack.
Since the pandemic hit earlier in the year, Kraft Heinz has been working to overhaul its portfolio, unloading underperforming brands and products. Analysts have noted that the company may be taking to heart the theme of "bigger isn't always better" in its latest strategy. Apart from Kraft Heinz, food giants such as Unilever and Nestle have also made significant divestments to better focus on their respective core brands.
During its latest investors' meeting, the company noted that the proceeds of the deal with Lactalis will be used toward reducing its massive standing debts. Kraft Heinz currently has a standing debt of close to $30 billion, just a few billion shy of its current market capitalization of around $40 billion. Kraft Heinz told investors that it plans to cut around $2 billion in operational costs over the next five years through further divestments.
