Kraft Heinz Made Its Factories Really Efficient. Now It Has to Sell Bologna

For decades, Kraft Foods Group produced Oscar Mayer cold cuts out of a six-story, former slaughterhouse built in 1872.The systems seemed out of another era. Workers drove forklifts loaded with giant vats of ham, turkey and chicken parts on and off freight elevators to different processing points. A typical turkey breast required four rides between floors to get from raw meat to packaged slices. Breakdowns could slow production to a crawl. The inefficiency was easy to spot for 3G Capital LLC, the acquisitive Brazilian investment giant, which took over Kraft in 2015. The outdated plant—workers called it the world’s biggest bologna maker—immediately landed on a list of seven facilities to close when the 3G-run H.J. Heinz finalized the $49 billion deal, one part of a plan to extract nearly $2 billion in savings by applying 3G’s cost-cutting mantra to operations.Over the past 2½ years, thousands of workers lost their jobs, and iconic Kraft buildings, including the original Oscar Mayer headquarters in Madison, Wis., have been shuttered and sold. The cost-cutting project is now wrapping up, giving Kraft HeinzCothe highest operating profit margin among its peers in the U.S. food industry. That success, however, has unveiled a new, tougher challenge, one that is outside 3G’s traditional area of expertise. Kraft Heinz commands a smaller share of a shrinking overall market for processed meats, hit by consumers’ desire for fresher, more natural foods. And while 3G is expert at taking over iconic American brands and squeezing out costs, it is less known for building sales—especially for a product out of sync with consumer tastes.