Kraft Heinz Was a Rare Buffett Blunder. Now Berkshire's New Boss Looks Ready to Move On.

All investors make mistakes. Give Warren Buffett credit, though, because when he was running Berkshire Hathaway (BRKA +0.92%) (BRKB +0.92%), on the rare occasions he made an investing gaffe, he was forthright about it afterward.

Kraft Heinz (KHC +2.10%) was one of the Oracle of Omaha’s errors. In what was supposed to be a “dream partnership,” Berkshire teamed up with Brazil’s 3G Capital in 2013 to orchestrate the $55 billion merger of Kraft and Heinz, creating what was then one of the largest consumer staples companies in the world. That transaction made Buffett’s conglomerate the largest shareholder in Kraft Heinz.

But the dream became a nightmare: The food stock has shed 72% of its value over the past decade. It’s no wonder Greg Abel, the new CEO of Berkshire, pondered liquidating the company’s Kraft Heinz stake.

An overhang for Kraft Heinz stock

A quick refresher on what’s happening at Kraft Heinz. In September, the company announced plans to split into two separate publicly traded companies again. Buffett and Abel voiced displeasure with that decision. In January, Berkshire filed plans with the Securities and Exchange Commission (SEC) to potentially unload its Kraft Heinz stake.

Emphasis on “potentially,” because that sale hasn’t occurred yet, and Kraft Heinz’s new CEO, Steve Cahillane, has backed the company away from that breakup plan. Call it a “black cloud” or an “overhang,” but the mere specter of Berkshire dumping its 27.5% stake is likely a big reason why the stock is down by around 9% year to date. Amplifying that gloomy performance is the fact that the S&P 500 Consumer Staples index, a widely followed benchmark for the sector, is up 8%.

On the more positive side of the coin, Abel clearly stated that, now that Kraft Heinz has ditched the breakup proposal, Berkshire doesn’t plan to sell any or all of its equity in the ketchup maker. That doesn’t mean Abel is hurrying to add more Kraft shares to the Berkshire portfolio. He’s not.

Additionally, he may not be rushing to unload Berkshire’s $7.2 billion stake in Kraft Heinz because, if the entire position were dumped rapidly, the conglomerate would take, by its standards, a modest loss. That’s not a ringing endorsement of the stock.

Tread carefully with Kraft Heinz stock

For now, Berkshire is sticking with Kraft Heinz, but that’s no guarantee of things to come. Although Abel has been at the helm for just a few months, he has shown a willingness to move on from some Berkshire equity holdings, including some with superior growth and quality profiles compared to Kraft Heinz.

Likewise, the consumer packaged goods company isn’t one of Berkshire’s “forever” holdings. It’s not part of the pantheon that includes American Express, Coca-Cola, and a few others, and it’s unlikely that it ever will be.

With $373 billion in cash and equivalents on its booksas of the end of 2025, Berkshire doesn’t need the liquidity it would free up by selling Kraft shares, but all that says is that the conglomerate has the luxury of holding on to the stock. Ordinary investors ought to approach Kraft from a “show me” perspective. In order to make its case to investors, the company will need to prove that its turnaround efforts are bearing fruit by showing improved sales and a shrinking debt load.