Shares of Warren Buffett’s Berkshire Hathaway plummet after dismal Kraft Heinz report

By: Carleton E.

Warren Buffett’s taste for junk food is starting to give him major indigestion.

The folksy billionaire who regularly grabs McDonald’s for breakfast saw his Berkshire Hathaway conglomerate lose more than $4 billion on Friday as its stake in Kraft Heinz got clobbered on a dismal earnings report.

Shares of the snack-food giant — in which Berkshire holds a 26.7 percent stake — plunged more than 27 percent to all-time lows as it took a $15.4 billion write-down on its Kraft and Oscar Mayer brands, slashed its dividend and disclosed that the Securities and Exchange Commission was probing its accounting practices.

The news came less than two weeks after shares of Coca-Cola — where Berkshire holds a 9.4 percent stake — saw their worst single-day drop since the financial crisis as the soda giant warned of a weak sales outlook.

Notorious for his decades-old predilection for anything sugary and salty, Buffett is famously a longtime investor in See’s Candies and Dairy Queen. Berkshire likewise owns a stake in Burger King owner Restaurant Brands, as well as small stake in Oreo-maker Mondelez.

Still, the Oracle of Omaha has recently been forced to admit that his portfolio isn’t entirely healthy.

“It is a tougher business than it was 10 years ago,” Buffett admitted in a CNBC interview in August when asked whether it made sense for a company like Kraft to acquire rivals like Campbell Soup.

“Branded packaged goods are a very, very, very good business in terms of returns on tangible assets, but they’re not a sensational business in terms of where you could be five or 10 years from now,” he said at the time.

Packaged foods have been crunched as increasingly health-conscious shoppers spend more time in the outer ring of grocery stores — where the fresh foods are — versus the center aisles where the processed, sugary products from the likes of Kraft and Coca-Cola reside.

To be sure, Buffett has made a bundle on Kraft. Even including Friday’s heart-stopping plunge, his investment has returned 41 percent including dividends, according to Bloomberg. But changing food tastes and Kraft’s dwindling stock price suggest that the future may not be so kind.

“Maybe looking at the long-term track record of these companies is misleading,” said Meyer Shields, managing director at Keefe, Bruyette & Woods.

“You can’t force new appetites into an old paradigm,” Shields said, adding that Buffett may not have the “agility” to react to new food trends.

Kraft has been known for its cost-cutting initiatives — cuts that Wall Street now thinks were too aggressive.

“So far that just isn’t working. All they did was front load a bunch of costs and now they have to put them back,” Shields said.

Berkshire Hathaway is set to release its annual letter to shareholders Saturday.

It’s not clear whether Kraft’s Friday implosion will get a mention, but Wall Street will be listening closely to see if Buffett is switching his stance on junk food.

“This will be a big deal at Berkshire’s annual meeting,” Shields said.