Kraft Heinz has hired Royal Bank of Canada to review options for its Breakstone's sour cream and cottage cheese business, which could include a sale, people familiar with the situation tell CNBC.
Kraft Heinz, as part of a broad overhaul, continues to put long-time brands on the block. One of the latest is its Breakstone's business, which sells cottage cheese, butter and sour cream.
Breakstone's, which has roughly $400 million in revenue and $50 million in earnings before interest, taxes, depreciation and amortization, could fetch a valuation of roughly $400 million, the people said. It could appeal to dairy companies like Dean Foods, Saputo or national milk cooperative, Dairy Farmers of America, one of the people said.
The U.S. has a $1.4 billion cheese surplus, according to the U.S. Department of Agriculture. Sales of cottage cheese, meantime, have steadily declined since the days when it was a dieting favorite in the 1970's. At that time, Americans were eating an average of 5 pounds of cottage cheese a year, according to the USDA.
Kraft Heinz was created by 3G Capital and Berkshire Hathaway, which bought H.J. Heinz in 2013 and merged it with Kraft two years later. 3G Capital developed a reputation in the U.S. for its"zero-based budgeting" process in which managers much justify every cost, every year. That approach to cost management was initially prized in the U.S. food industry, where industry executives acknowledged expenses had become bloated with extravagances like private planes and other costs.
Adding to the pressure are rising commodity prices, which 3G critics have said the company prepared insufficiently for by focusing too much on cost-cutting and eventual dealmaking.
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