Food company Kraft Heinz (NASDAQ:KHC) is exploring the sale of its Oscar Mayer business, the Wall Street Journal reported. The sale could generate proceeds between $3 billion and $5 billion. KHC has engaged Bank of America and Centerview Partners to facilitate the sale process.
It’s important to highlight that KHC’s Oscar Mayer business meats business includes a portfolio of hot dogs, ham, bacon, and bologna.
This move could be part of Kraft Heinz’s broader strategy to restructure its portfolio and focus investments on growth areas.
New Product Platforms
It’s worth noting that KHC has realigned its portfolio around three new platforms: Accelerate, Protect, and Balance. Kraft Heinz expects its Accelerate Platforms to drive substantial revenue growth and generate higher margins. This category includes products where the company holds a significant market share and faces limited competition from private labels.
The Protect Platform includes desserts and hydration products. It has moderate growth potential but generates high margins. Kraft Heinz holds a significant market share in the Protect Platform and has low exposure to private labels in these categories. The company focuses on maintaining profit margins in this segment.
The last group, Balanced Platforms, provides scale and generates cash flow to support investments in other platforms. This category includes meats, cheese, and coffee, where Kraft Heinz has strong brand equity and market share but is exposed to commodity-driven volatility. Oscar Mayer falls under this Balanced platform.
Is Kraft Heinz a Buy or Sell?
Kraft Heinz stock has underperformed the broader market over the past year and is down about 5%. However, its focus on restructuring its portfolio and accelerating growth bodes well for future growth.
Wall Street is cautiously optimistic about KHC stock. It has received seven Buy, eight Hold, and one Sell recommendations for a Moderate Buy consensus rating. Analysts’ average price target on KHC stock is $38.44, implying 5.34% upside potential from current levels.
