Last week, the announced breakup of Kraft Heinz wasn’t just another corporate restructuring story—it’s a seismic shift that will reshape every grocery store in America. As someone who walks the grocery aisles and has watched the food industry evolve for decades, I can tell you that what we’re witnessing is a transformation in how Americans will shop, eat, and relate to the brands that have defined our pantries for generations.
The Kraft Heinz downsizing gives retailers permission to finally act on that reality. Having to walk past 40,000+ items to select the 20 or so items consumers have on their shopping list is just ridiculous and helps fuel the growth of online grocery shopping.
The End of the Megabrand Era
For nearly a century, American consumers have operated under a simple cultural assumption: Bigger is better, more choices equal more freedom, convenience foods have no limit, and zillions of national brands represent quality and reliability. Kraft Heinz, with its sprawling portfolio of household names from Oscar Mayer to Jell-O, embodied this philosophy perfectly. But that era is ending, and retailers need to prepare for what comes next.
Kraft Heinz has over 20 major brands in its portfolio, with eight brands generating over $1 billion in sales each. The splitting of the company separates brands including Heinz, Philadelphia Cream Cheese and Kraft Mac & Cheese into one company (temporarily and bizarrely called Global Taste Elevation Co.) while Oscar Mayer, Kraft Singles, Lunchables, Maxwell House and Capri Sun will form the other company called North American Grocery Co. — for now.
The proposed divestiture of brands isn’t happening in a vacuum. It reflects a profound shift in consumer behavior that smart retailers have been tracking for years. Today’s shoppers—particularly millennials and Gen Z—don’t want endless grocery aisles with a mind-boggling variety of processed foods. They want authenticity, transparency, well-being, and purpose. They’d rather have three exceptional hot sauce options instead of 30 mediocre ones; a philosophy that ALDI has paid attention to and proven with increased sales and customer count.
The Retail Reality Check
Here’s what this means for grocery retailers: The center store is about to get a lot less crowded, and that’s actually good news for everyone except the CPG giants and their brand managers who are still clinging to the old model.
Let’s talk shelf space economics. My guess is that Kraft Heinz will likely shed 20 to 30 percent of its portfolio, and retailers will suddenly find themselves with prime shelf real estate that’s been tied up for decades. Smart grocers will use this opportunity to continue to expand their own-brand offerings, fill their shelves with more local and regional brands, or—and this is my personal hope—create more experiential shopping zones.
I’ve been saying for years that the traditional grocery store layout is obsolete and irrelevant. The Kraft Heinz downsizing gives retailers permission to finally act on that reality. Having to walk past 40,000+ items to select the 20 or so items consumers have on their shopping list is just ridiculous and helps fuel the growth of online grocery shopping. Instead of 60 feet of me-too salad dressings, clever retailers will reimagine how to use that space for more service departments, fresh foods and prepared foods that make their stores more human and exciting.
A Cultural Shift: From Abundance to Curation
What we’re really witnessing is the end of what many call “the paradox of choice“—the uniquely American belief that having fewer choices somehow diminishes our quality of life. The pandemic taught consumers that they could live quite well with less variety and forced many brands to reduce their SKUs to be able to meet demand and operate their production facilities more efficiently. The Consumer Price Index (CPI) for food at home prices from March 2020 to March 2024 increased by 24.7 percent and food inflation has reinforced for many shoppers the value of making more intentional purchasing decisions.
This cultural evolution favors retailers who understand curation over accumulation. The grocers who will thrive in this new environment are those who can tell a story about why they chose particular foods, something Trader Joe’s has mastered for decades in their Fearless Flyer and podcast. The grocers who strive to just offer the most options are those who face extinction.
The Divestiture Domino Effect
Don’t think this is just about Kraft Heinz. Every CPG company should be watching closely, and many will follow. Unilever, Nestle, Conagra, Mondelez and General Mills are already trimming their portfolios. What we’re seeing is the industrialization of food production reaching its natural conclusion—and now the pendulum is swinging back toward specialization.
This downsizing of America’s food choices isn’t a loss—it’s a liberation. Consumers are tired of decision fatigue. They want to trust that the products on grocery shelves are there for good reasons, not just because they’ve always been there.
The grocery retailers who recognize this shift and adapt accordingly will find themselves in a stronger position than ever. They’ll have more control over their assortments, better margins on their products, and form closer relationships with their customers.
The grocery industry is about to become more dynamic, more local, and more responsive to actual consumer needs rather than corporate me-too-isms, line extensions and promotional efforts. For grocery retailers willing to embrace this change, the future has never looked brighter.