Kraft Heinz Pauses Breakup and Bets $600 Million on Itself

Kraft Heinz's new CEO, Steve Cahillane, paused the company's planned breakup in February — barely six weeks into the job — and announced $600 million in fresh spending on marketing, sales, and R&D instead. The breakup, investors had been told, would "unlock shareholder value." The same release reported a loss of nearly $6 billion for 2025, driven by goodwill impairments.

The reversal matters because it breaks a pattern. Kraft Heinz took a $15.4 billion write-down on its Kraft and Oscar Mayer brands in 2019, slashed its dividend, and disclosed an SEC probe into its accounting. Even Warren Buffett called the deal "a mistake." Now a CEO has concluded that the most valuable thing he can do for owners is invest in the future again.

What does shareholder primacy actually deliver?

The doctrine traces to Milton Friedman's 1970 essay, which argued managers should follow shareholders' desires, "which generally will be to make as much money as possible while conforming to the basic rules of the society." The machinery is well understood: a penny miss on quarterly guidance can erase billions in market cap, and 43% of CEOs report a planning horizon of three years or less. S&P 500 companies spent roughly $1 trillion on buybacks in 2025 alone.

The origins are instructive. A prompt for Friedman's essay was "Campaign GM," a citizen movement pressing General Motors on safety and pollution. Friedman and allies called such ideas "pure and unadulterated socialism." GM got its free pass. European and Japanese carmakers innovated instead, building safer, cleaner cars. GM posted a record loss by 1980, saw its U.S. market share fall from over 50% in the 1960s to about 33% by 1990, and sits at 16.7% today.

There is also a flaw in the theory itself. As Lazonick and Jacobson argue, public shareholders do not invest in a company's productive assets — and they are not the only parties making risky investments in them. Average holding periods tell the story: about five years in the 1970s, roughly 10 months today.

When the playbook backfires

At the National Association for Corporate Directors' annual summit, author Eric Ries delivered a keynote on this gap between evidence and practice. Three cases stand out:

• Vectura. In 2021, the UK inhaler maker's board backed Philip Morris International's bid over a lower offer from Carlyle. It maximized the sale price — and was predictably hit with backlash from doctors and regulators. PMI sold Vectura in 2024 for about a third of what it paid, booking a roughly $200 million loss.
• Buybacks. Open-market repurchases were considered illegal stock manipulation before an SEC rule change in 1982. Economist William Lazonick argues buybacks, unlike dividends, reward those who sell their shares, not those who hold them.
• Employee ownership. Decades of research show worker-owned firms grow faster and survive downturns better. KKR's ownership-and-sale of C.H.I. Overhead Doors, which made all employees beneficiaries, is the standout example.

Who defies the playbook and wins?

Costco caps markups, pays above retail norms, and has held its hot dog and soda combo at $1.50 since the 1980s. Its long-run shareholder returns have beaten retailers that followed analysts' advice to be less generous. Patagonia's Chouinard family transferred ownership to a trust and nonprofit in 2022, declaring Earth its only shareholder. Wegmans has appeared on Fortune's best-employers list every year since it began. Nvidia poured money into CUDA and GPGPU computing for years while investors questioned the spending — patience that built the platform the AI economy now runs on. Progressive refuses to give earnings guidance, lists "not managing to short-term earnings expectations" as a risk factor in its own filings, and keeps taking auto insurance share.

Ries calls the common thread "mission protection." The author's term is strategic centering: a coherent organizing principle — mission, customer, technology, or ecosystem — that lets boards ask "Does this strengthen or erode what we are for?" before approving a buyback. A center gives boards a test, justifies invisible investments in training and R&D, reinforces trust, and attracts patient shareholders.

What boards can do now

The prescription is concrete:

• Require proof that investments sustaining the company's center are fully funded before approving buybacks or special dividends.
• Drop quarterly guidance, as Progressive has for decades.
• Tie executive equity to multiyear measures, not next year's EPS.
• Report spending on people, R&D, and customers as investment.
• Broaden ownership; employee ownership is one of the best-evidenced performance levers available.

The irony: pension funds, index holders, and ordinary savers — the shareholders with the most at stake — are exactly the investors who need companies to have a future. If Cahillane's $600 million bet marks a turning point, the alternative model is already on the shelf at Costco.