When Bigger Isn’t Always Better
Kraft Heinz is ending a decade-long experiment in bigness. Back in 2015, Kraft Foods—best known for Kraft Mac & Cheese, Jell-O, and Oscar Mayer hot dogs— merged with H.J. Heinz, kings of ketchup and condiments, in a deal orchestrated by Warren Buffett, to form one of the largest food conglomerates in the world. Now, ten years later, the merger didn’t pan out as expected: what was originally billed as a way to scale smarter, cut overhead, and spark cross-brand innovation became slower decisions, diluted accountability, and underfunding of their best-selling products—the classic complexity tax.
Commenting on the recent decision to split into two separate companies, Kraft Heinz Chief Executive, Carlos Abrams-Rivera, explained “Scale by itself is not the answer, but having scale along with focus creates opportunities.”
In one line, Mr. Abrams-Rivera says it all. Kraft–Heinz recognized that the massive scale of the combined entity created complexity and made it difficult to innovate and apply resources effectively. The evidence was clear: despite its massive size, the company was struggling with declining sales for core products as simple as macaroni and cheese.
For years, Kraft Heinz tried to manage dozens of household brands under one roof. But the sprawl blurred priorities, and the result was a company too complex to grow. Real momentum comes not from sheer bulk but from clarity, strategy, and focus.
Lessons Beyond Mac & Cheese
Which made me think of other giants with bloated portfolios. If Kraft Heinz wrestled with dozens of brands, Google’s parent company Alphabet is juggling entire industries. Under its umbrella sits Google Search, Google Cloud, Google Chrome, Gmail, Android, and YouTube, plus moonshots like the self-driving car unit Waymo. On the one hand, it’s remarkable to see so many category leaders under one roof. On the other, the sheer scope raises the question: is this focus, or simply scale masquerading as such?
Some components genuinely complement each other. Search advertising and YouTube, for instance, share monetization engines that reinforce one another. Google’s AI feature is another example of a complementary business, as it’s built on the immense reservoirs of data from Search and Gmail. (While most of us don’t pay for Gmail, we know Google still finds ways to extract value—such as scanning emails to help train its AI models. You can opt out, by the way—just Google it!)
Happy Shareholders?
From an investor’s perspective, the question cuts closer to the bone: is value trapped inside the bundle, masked by a conglomerate discount, simply because these companies insist on keeping everything under one roof?
At times, the market values a diversified conglomerate at less than the sum of all its parts. There is a case to be made that breaking up these mega-companies could actually increase shareholder value, since smaller independent firms are sometimes worth more on their own.
Currently, the most vocal politician calling for the dismantling of corporate giants is Senator Elizabeth Warren (D-MA), arguing that they wield too much power and stifle competition. But here’s the irony: if breaking up these companies ultimately unlocks additional shareholder value, it’s the wealthy—the very group Warren often criticizes—who could benefit the most. In other words, her crusade against corporate concentration might inadvertently make the rich even richer.
The Big Tech Balancing Act
Meta has Facebook, Instagram, WhatsApp, Threads, and a very expensive VR headset hobby. Amazon bundles retail, Amazon Web Services, advertising, streaming, and groceries under one roof. Some of these combinations naturally reinforce each other in a self-sustaining way. For example, Amazon can use the money AWS earns to fuel its retail expansion. Similarly, Meta can use its advertising platform to make both Instagram and Facebook more profitable. Others look more like managerial optimism than synergy. Executives may hope that unrelated businesses will work well together, but in practice, those investments bleed cash and reduce how investors value the company overall.
Which brings us back to Kraft Heinz. If a food giant like Kraft- Heinz learned that “only with focus” comes real growth, even though they were only putting together hot dogs with mustard, shouldn’t Big Tech and the rest of the market take note?
Otherwise, instead of ketchup on fries… they might just end up with egg on their face.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
