Buffett's Big Blunder

At least the world's most-admired investor can admit he was horribly wrong about Kraft Heinz

“You only have to do a very few things right in your life so long as you don’t do too many things wrong.” - Warren Buffett

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Awe shucks. That ketchup and Velveeta deal sure wasn’t such a swell idea.

Here’s what Warren Buffett said about merging H.J. Heinz Co. and Kraft Foods Group in 2015:

“I am delighted to play a part in bringing these two winning companies and their iconic brands together. This is my kind of transaction, uniting two world-class organizations and delivering shareholder value. I’m excited by the opportunities for what this new combined organization will achieve.”

And here’s what he told CNBC on Tuesday when the combined company finally admitted it would be better off splitting into two more manageable pieces:

“It certainly didn’t turn out to be a brilliant idea to put them together, but I don’t think taking them apart will fix it.”

It only took 10 years and a 60% decline in shareholder value to come to this realization. This marks a collective loss of about $57 billion. But when you are as successful as Warren Buffett, you have plenty of room to blunder.

“Hmm. This might taste better than Dairy Queen.” (Comic: ChatGPT.)

Read More: The Biggest Business Blunders Of All Time

Despite Buffett’s big food folly, stock of Berkshire Hathaway has almost quadrupled from about $205,000 a share to nearly $760,000 a share since the Kraft Heinz deal was announced.

Yes, for those who you who don’t follow the almighty Oracle of Omaha, he doesn’t believe in stock splits and his Berkshire Hathaway’s A shares are valued in the hundreds of thousands. So blunder away.

Buffett announced in May that it’s time for him to retire as he approaches his 95th birthday. His great indelible ketchup and mustard stains will surely blemish his obituary one day, but he won’t die with too much Jell-O on his face.

There’s a lesson here about mistakes. Don’t make them bigger than your successes. That gives you the luxury of being able to admit when you’re wrong. After all admitting a mistake like this can be expensive.

So what went so wrong?

• An era of historically low interest rates must have made Buffett wish that he was an Oscar Mayer wiener.

• That the Capri-Sun would always shine on a bigger-is-better deal that was grossly overvalued.

• That creating the third-largest food company and slashing its cost structure - including research and development - was going to be Ore-Ida.

• That Millennials were going to keep eating Lunchables and never discover avocado toast or unprocessed foods.

• That no one would ever notice all the cheesy “shrinkflation” in resized Kraft Heinz products.

• That Wall Street investors would keep drinking the Kool Aid.

For it’s part, Buffett’s Berkshire Hathaway didn’t lose anywhere near as much as everyone else who bought stock in the combined company thinking that every stupid little box of Kraft Mac & Cheese smelled like money.

Buffett wrote in his 2015 shareholder’s letter that Berkshire’s cost basis in this deal was around $9.8 billion. It’s now down to $8.5 billion.

So while other investors may be licking what’s left of their Cool Whip, a $1.3 billion loss to an investment giant worth more than $1 trillion is like spilling a can of Heinz Beans.

“Pardon me, Mr. Buffett, would you have any Grey Poupon?”