The food industry is once again undergoing a wave of structural reconfiguration, marked by high-profile divestitures, spinoffs, and portfolio rebalancing. Kraft’s recent post-Heinz breakup, Kellogg’s 2023 separation into Kellanova and WK Kellogg Co, and Mars’ and Ferrero’s shifts in brand focus exemplify the broader trend: the unraveling of scale-driven conglomerates that dominated the late 20th and early 21st centuries.
Why Are These Breakups Happening—Again?
History shows that when scale begins to erode value rather than create it, boards respond by unbundling. The assumption that “bigger is better” has repeatedly proven flawed when operational complexity outpaces synergy. What may have made sense in a deflationary cost environment—where squeezing margin through purchasing power and centralized operations worked—is now out of step with the demands of a fragmented, fast-moving, and inflation-sensitive consumer and operator base.
Moreover, many of these conglomerates were built not for the foodservice channel, but for traditional center-store retail economics. As retail shifts toward private label and DTC models, and as foodservice becomes more operationally complex and segmented (fast casual vs. ghost kitchens vs. non-commercial), the justification for holding large, diverse brand portfolios weakens. CEOs are increasingly choosing to divest low-growth or channel-incongruent businesses to focus on agility, core brand building, or expansion in growth verticals like snacking, global flavors, and health-forward platforms.
Are CEOs Flying Blind—or Finally Reading the Map?
Do CEOs know what they’re doing? In most cases, yes—but not in a visionary sense. Rather, they are responding to investor pressure, supply chain friction, and the rising cost of capital. Simplifying brand portfolios allows for sharper strategic focus and capital allocation, and it positions companies for acquisition or divestiture themselves. The days of indefinite conglomerate holding are gone. Activist investors, ESG mandates, and even internal cost pressures are pushing food CEOs to “shrink to grow”—or at least “shrink to survive.”
The supply chain, meanwhile, is exerting structural pressure. Post-pandemic disruptions exposed the liabilities of overextended product lines and global dependencies. Manufacturers are now aligning closer with fewer SKUs, tighter production schedules, regional co-packers, and streamlined ingredient sourcing—pressuring legacy brands to choose between scaling down or becoming irrelevant.
Implications for Foodservice-Focused Manufacturers
Foodservice suppliers should see this as both challenge and opportunity. On the one hand, major customers may now be more selective, less open to experimentation, and focused on supporting fewer core brands across fewer menu platforms. On the other hand, this creates whitespace for nimble suppliers that can co-create, innovate faster, and serve niche segments or formats (e.g., sauces, snacks, plant-forward sides) that large CPGs are deprioritizing.
Operators will increasingly look for partners who bring not just product, but category insight and executional simplicity. Distributors, too, will favor manufacturers that can reliably supply high-turn, margin-accretive SKUs. As conglomerates recalibrate, foodservice manufacturers have an opening to define their value not by portfolio breadth but by precision, speed, and service orientation.
In short: the breaking apart of big food is not a failure—it’s a response to channel complexity and new economics. The winners in foodservice will be those who lean into focus, not scale.
Foodservice IP is a professional services firm aimed at delivering ideas for managers to guide informed business decisions. To learn more about FSIP’s Management Consulting Practice, click here.
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