For much of the past decade, Kraft Heinz – which earlier this month put its idea to split in two on hold – has served as both a symbol of aggressive cost-focused financial discipline and, increasingly, a cautionary tale for legacy packaged food manufacturers. Its struggles are not simply the result of category maturity or shifting consumer tastes. They reflect a deeper strategic imbalance that extends well beyond one company.
In prioritising efficiency, scale and margin expansion over brand reinvention, portfolio evolution and long-term consumer relevance, Kraft Heinz exposed vulnerabilities that now confront much of “Big Food.”
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The question for 2026 is not whether Kraft Heinz can stabilise performance but whether the broader legacy CPG sector is prepared to confront the assumptions that produced this outcome.
Efficiency became the strategy
When Kraft and Heinz merged in 2015 under the influence of 3G Capital, the playbook was explicit – zero-based budgeting, aggressive cost control and disciplined capital allocation. In the early years, the model basically delivered what it promised. Margins improved. Cash flow strengthened. Investors applauded.
But, at some point, efficiency stopped being a means to fund growth and became the growth plan itself.
That distinction matters. Cutting complexity, reducing overhead and eliminating waste are prudent managerial acts. Treating those actions as a substitute for consumer-led reinvention is a strategic gamble. For a time, the market rewarded that gamble. Eventually, the bill came due.
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By GlobalDataKraft Heinz’s massive $15.4 billion goodwill and intangible asset impairment charge in 2019 was not just a write-down. It was evidence the underlying cash-generating assumptions attached to certain brands were no longer defensible. The issue was not ketchup or macaroni and cheese. It was the belief that legacy brand strength, supported by scale and distribution, would offset slower reinvestment and modest innovation.
Many executives across the packaged foods sector quietly shared that belief.
The centre-of-store constraint
Kraft Heinz’s portfolio remains heavily concentrated in centre-of-store categories. These categories are not disappearing. They are large, habit-driven and profitable. But they are structurally low growth and highly exposed to private label and challenger brands, both of which have been outpacing legacy brand growth for a number of years now, according to annual data from Circana.
This is not unique to Kraft Heinz. General Mills continues to navigate cereal headwinds. Kellogg’s separated its cereal and snack businesses in recognition that the growth profiles were fundamentally different. The Campbell’s Company has spent years (without much success) diversifying beyond condensed soup. Conagra Brands has sought to reposition frozen and shelf-stable offerings for a more premium consumer.
The old assumptions about automatic shelf advantage and brand inertia no longer hold with the same force
The structural challenge is straightforward. Growth has shifted toward premium snacking, functional nutrition, high-protein formats and fresh-adjacent solutions. Retailers have dramatically improved the quality and branding of private-label. Start-up and emerging CPG brands are where the innovation is. Consumers have become more sceptical of heavily processed products unless those products deliver clear value.
Legacy packaged foods companies built their operating models for a retail environment dominated by a few powerful chains and mass advertising. The 2026 consumer environment is more fragmented, more digital and more values-oriented. The old assumptions about automatic shelf advantage and brand inertia no longer hold with the same force.
The industry did not totally ignore these changes. But in many cases, it avoided them or underestimated their durability.
Innovation became incremental
Large organisations are naturally risk-averse. Renovation is safer than reinvention. Line extensions are easier to justify than wholesale reformulations. Adjacent category entries are simpler than platform pivots.
During the height of the efficiency era, innovation pipelines at many legacy companies tilted toward incrementalism. Flavour extensions and packaging refresh preserved shelf presence but rarely altered consumer perception.
Internally, this approach often felt rational. Why disrupt a billion-dollar brand when modest updates can defend share? Why rework a formula when consumers still purchase the product?
The problem is cumulative. Incremental innovation defends the present. It does not secure the future.
Challenger brands, unburdened by legacy scale, positioned themselves around sharper propositions: cleaner labels, higher protein, plant-based functionality, sustainability narratives or premium craftsmanship. Retailers welcomed them because they differentiated assortments and supported margin expansion.
The uncomfortable question for legacy brand company executives is whether internal incentives reward transformative thinking or simply penalise failure. If compensation structures prioritise short-term margin stability over long-term brand repositioning, the system will predictably produce incremental outcomes.
Investor expectations shaped the playbook
It is too easy to attribute these dynamics solely to management teams. Capital markets played a role.
The post-merger narrative around Kraft Heinz centered on disciplined capital allocation and reliable cash returns. Investors valued predictability. Dividend stability and margin expansion were central to the investment thesis.
That dynamic constrained strategic flexibility. When earnings consistency becomes the primary performance metric, reinvestment decisions face higher scrutiny. Marketing increases are questioned. Reformulation projects are weighed against near-term dilution. Portfolio divestitures are evaluated through an EPS lens.
Modernisation will require boards and investors to accept that reinvestment phases may temporarily compress margins in pursuit of durable growth.
Across the legacy brand CPG sector, similar pressures exist. Shareholder return commitments and margin targets established during inflation created elevated baselines. Executives now operate within those expectations.
There is nothing inherently wrong with financial discipline but, when the market signals that stability is valued more than experimentation, corporate behaviour follows.
Modernisation will require boards and investors to accept that reinvestment phases may temporarily compress margins in pursuit of durable growth.
The inflation aftermath
The inflationary period from 2022 through 2024 provided breathing room for many legacy players. Pricing actions restored profitability after input cost shocks. Kraft Heinz, like its peers, benefited.
Yet pricing also tested brand elasticity. In categories with limited differentiation, sustained increases sped up moves by some shoppers to trade down to private-label. Some consumers returned to brands as promotions intensified. Others did not.
Executives now face a more complex environment. Margins achieved during inflation set expectations among analysts and shareholders. At the same time, volume recovery requires sharper value propositions and, in some cases, more promotional support.
Margin recovery is different from brand strengthening. If price becomes the primary lever, loyalty erodes quietly.
Relevance is not permanent
One of the most persistent myths in packaged food is that brand heritage guarantees resilience. Heritage can be an asset. It can also become a crutch.
Kraft Heinz’s flagship brands remain widely recognised. Recognition, however, does not automatically translate into preference among younger consumers.
Millennials and Gen Z shoppers are more willing to switch, more sceptical of scale and more attentive to ingredient transparency.
Legacy brand companies often assumed that decades of household penetration would sustain future demand. That assumption underestimated how quickly consumer heuristics around health, processing and authenticity could shift.
Relevance must be actively maintained. It cannot be harvested indefinitely.
A five-year test for legacy CPG
It would be a mistake to view Kraft Heinz as an isolated case tied solely to a specific merger strategy. The structural pressures it faces are widely shared.
Over the next five years, legacy CPG companies will confront a clear test. Those that modernise their portfolios, reinvest behind brand meaning and accept measured margin variability in pursuit of growth will likely stabilise and strengthen their positions.
Those that continue to prioritise efficiency without reinvention risk gradual erosion. Share may slip incrementally. Private-label penetration may deepen. Brand equity may weaken in ways that are not immediately visible in quarterly reports.
By the time the impact becomes obvious, corrective options narrow.
Scale, distribution and cost control remain powerful advantages. But they are no longer sufficient on their own. In a marketplace defined by evolving consumer expectations and agile competitors, adaptive relevance is the true competitive moat.
Kraft Heinz illustrates what happens when that balance tilts too far toward financial optimisation. The broader industry now faces a choice. It can treat this episode as a company-specific setback, or it can recognise it as a structural warning.
The next five years will reveal which interpretation prevails. Perhaps Kraft Heinz and its new CEO, Steve Cahillane, will lead the way?
