The Berkshire Beat: July 18, 2025

All of the latest Warren Buffett and Berkshire Hathaway news!

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Kraft Heinz probably won’t be remembered as one of Warren Buffett’s best investments. It all started promisingly enough when Berkshire Hathaway teamed up with 3G Capital to acquire H.J. Heinz in 2013. Two years later, though, they (admittedly) overpaid for Kraft Foods in a mega-merger meant to create a consumer packaged goods giant.

A nice idea, but one that just hasn’t worked out at all. Berkshire’s 27.5% stake in the combined company has plummeted in value from a peak of $30+ billion in early 2017 to just $9.1 billion today. Even after a recent price rally — more on that in a minute — the KHC 0.00%↑ position remains under Berkshire’s $9.8 billion cost basis.

(Berkshire is technically still in the black on this investment, thanks to dividends collected from its since-redeemed preferred shares and existing common stock holdings. This accounting “win”, though, masks a rather significant opportunity cost.)

I don’t mention all of this to dwell on a rare misstep from Buffett and co., but because Kraft Heinz is now reportedly considering breaking itself up. According to the Wall Street Journal, the company is “planning to spin off a large chunk of its grocery business, including many Kraft products, into a new entity that could be valued at as much as $20 billion”.

Apparently, the Heinz portfolio of brands — ketchup, sauces, condiments, etc. — would remain a separate business. In the past, Buffett has sounded much more bullish about Heinz than Kraft, so perhaps that is a clue as to how he will view the separated companies. While no final decision has been made, the WSJ says the split could be just a few weeks away.

For its part, Kraft Heinz neither confirmed nor denied the rumor. “As announced in May,” said a company spokesperson, “Kraft Heinz has been evaluating strategic transactions to unlock shareholder value.”

Back in 2019, in the midst of Kraft Heinz’s fall from grace, Buffett told CNBC’s Becky Quick that a rapidly-changing retail environment had really walloped the company:

I was wrong in a couple ways on Kraft Heinz. The packaged goods companies are always in a struggle with retailers. The really strong brands can go toe-to-toe with Walmart or Costco or whoever it may be — but the weaker brands tend to lose out.

When you’re going toe-to-toe with a Walmart or a Costco — maybe an Amazon pretty soon — and you have a modestly good brand, maybe one where the trend is a little against it or something like that, you’ve got a weaker bargaining hand than you had ten years ago.

Heinz was started in 1869. They’ve got all that time to develop various products, particularly ketchup and things like that. The Kraft part of it is a little more murky, but it goes back to C.W. Post in 1895. Those companies have brought all kinds of brands out. You know them, you had them as a kid, [and] you have them now. They’ve been distributed worldwide through tens and hundreds of thousands of outlets. They’ve had hundreds of millions [of people] try them. They spend a fortune on advertising. And their sales, now, are $26 billion.

Costco introduced the Kirkland brand in 1992 — twenty-seven years ago — and that brand did $39 billion last year, whereas all the Kraft and Heinz brands did $26 billion. So here they are, a hundred years plus [head start], tons of advertising, built into peoples’ habits and everything else — and now Kirkland, a private label brand, comes along and with only 750 or so outlets does 50% more business than all the Kraft Heinz brands.

In a separate 2019 interview, Buffett warned Andy Serwer that “we have a new retailing environment now”. One in which customers are more willing to change and leave well-established brands behind.

And that’s a problem when you also overpay for the company in question. “The business does not earn more just because you pay more for it,” lamented Buffett.

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And, now, some more news and notes out of Omaha…

BNSF Railway launched a new intermodal service that slashes transit time between Los Angeles and Houston by two days. The accelerated service targets customers who seek faster delivery and might otherwise turn to trucks as an alternative. “By continuing to create more opportunities to convert over-the-road freight to rail,” said vice president Jon Gabriel, “we provide a cost-effective, direct solution to bring freight to the dynamic and growing Houston area.”

• Another way for the rail industry to combat its trucking rivals might be through further Class I consolidation to create a true transcontinental railroad. A reader kindly sent over this link to a recent Semafor report on Union Pacific beginning to explore just that. According to “people familiar with the matter”, UNP 0.00%↑ is already working with investment bankers from Morgan Stanley to size up its target. “Union Pacific CEO Jim Vena has talked publicly about the virtues of a transcontinental railroad, which would mean combining his western network with one of two East Coast carriers: CSX or Norfolk Southern. Either deal, should Union Pacific move ahead, would be large — CSX is valued at $62 billion, Norfolk Southern at $58 billion — and create the country’s first coast-to-coast carrier.” Then, just yesterday, the Wall Street Journal revealed that Union Pacific is eyeing a mega-merger with Norfolk Southern. “The talks are early stage,” writes the WSJ, “and there are no guarantees they will result in any deal or receive regulatory sign-off. It is also possible another suitor could emerge.” That, in turn, led Barron’s to speculate that such a merger might spur BNSF to build its own transcontinental line by bidding for CSX. 👀

On Tuesday, Sirius XM launched its first low-cost, ad-supported subscription tier. Priced under $7 a month, the new SiriusXM Play package targets cost-conscious customers with more than 130 channels and limited in-car ads. “SiriusXM Play presents us with an incredible opportunity to thoughtfully scale our audio service on the road and off to even more listeners across North America,” said COO Wayne Thorsen. SIRI 0.00%↑ plans to make Play available to nearly 100 million vehicles by the end of this year. (FYI: Berkshire owns 35.4% of Sirius XM.)

• This could also be a big opportunity for advertisers. “Play is an exciting net-new opportunity for marketers looking to tap into passionate, high-quality audiences across some of SiriusXM’s most beloved music, talk, and sports channels,” said chief advertising revenue officer Scott Walker. “The car is the final frontier for digital ad-supported media.”

Last week, Berkshire-owned Ben Bridge Jeweler acquired Olympic Manufacturing in “a significant step towards greater vertical integration”. The two companies have a longstanding relationship — with Olympic handling much of Ben Bridge’s repair and custom jewelry work. “We haven’t traditionally done acquisitions like this,” said CEO Lisa Bridge. “We have been fortunate to grow mostly organically. This was such an exciting opportunity to bring in a new skill set and new aspect of the business.”

And, finally, a few odds and ends to finish off the week…

• This week, Berkshire received over $230 million in quarterly dividends from Occidental Petroleum. That includes $63.6 million via its common stock position and $169.8 million via the preferred shares from the Anadarko deal. On a much smaller scale, Berkshire also collected $139,450 in dividends from HEICO and $76,286 from Lennar.

• UBS analysts believe that Apple will release its much-anticipated folding iPhone late next year — at a lower-than-expected price between $1,800 and $2,000.

• A little weekend reading: Marcelo Marini wrote about the difference between investors thinking for themselves versus just blindly following the crowd.