Kraft Heinz is said to prepare to break itself up

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(Bloomberg) — Kraft Heinz Co. is preparing to break itself up, people familiar with the matter said.

Under the plan, the company could spin off a large part of its grocery business into a new entity, according to the people. This would allow it to focus on faster-growing segments such as sauces, they said.

Kraft Heinz is still finalizing details of the split, which could be announced in the coming weeks, the people said, asking not to be identified discussing confidential information.

Shares of Kraft Heinz were trading 1.3% higher at 2:30 p.m. in New York on Friday, giving the company a market value of about $31.7 billion. The Wall Street Journal reported on the plans earlier on Friday.

“As announced in May, Kraft Heinz has been evaluating potential strategic transactions to unlock shareholder value,” a spokesperson for the company said in response to an inquiry from Bloomberg.

Kraft Heinz was formed in a 2015 merger orchestrated by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. The deal created a packaged-food behemoth with a stable of household names, from Heinz ketchup and Classico tomato sauce to Jell-O and Oscar Mayer hot dogs.

But the combined company has struggled to expand its sales, with revenue declining for the past two fiscal years as consumer tastes shift and competition intensifies. Profitability, as measured by operating margin, also dipped in the most recent year. In April, Kraft Heinz trimmed its annual sales and profit outlook, citing worsening consumer sentiment.

Packaged food companies more broadly are battling shifting sentiment from consumers opting for healthier, less processed options, as well as cheaper store brands. Federal regulators are also pressing for shorter, more natural ingredients lists.

A reconfiguring of the packaged food world accelerated this week when Italian candymaker Ferrero International SA agreed to acquire WK Kellogg Co., maker of Froot Loops and other iconic cereals.

The value of deals in the consumer staples sector has risen by more than a third this year to $138 billion, data compiled by Bloomberg show, bolstered by food companies. Bloomberg News reported Friday that Performance Food Group Co. has attracted takeover interest from US Foods Holding Corp., a potential deal that would create a food distribution company with combined sales of roughly $100 billion.

—With assistance from Dinesh Nair.