Berkshire Hathaway is now in the red on its big investment in Kraft Heinz and might have to take a noncash write-down on it in the coming quarters.

Berkshire got its 27% stake in the big food company -- some 325.6 million shares -- when H.J. Heinz merged with Kraft Foods in 2015 to form Kraft Heinz.

Berkshire's holding in Kraft Heinz is now worth $9.4 billion after fresh declines this year in the company's stock. Berkshire's cost is $9.8 billion, based on comments by CEO Warren Buffett in his 2015 shareholder letter release.

Kraft Heinz shares declined 1.2% Monday to $28.96, leaving it just above its recently hit 52-week low.

The stock is down 6% this year, nearly 20% in the past 12 months. It has fallen about 60% since the merger of Heinz and Kraft, making it one of the worst-performing major food stocks over the past decade.

Kraft Heinz has been one of the bigger disappointments in Berkshire's $300 billion equity portfolio over the past decade. The merger of Heinz and Kraft came when the two companies were riding high as Brazil's 3G Capital -- which had partnered with Berkshire in the buyout of Heinz in 2013 -- took over the management of the combined companies.

3G was known for its cost-cutting, but its approach didn't work at Kraft Heinz as revenue and earnings stalled and the stock came under pressure. 3G exited the last of its investment in Kraft Heinz in 2023 and is no longer involved with management.

The company's struggles have continued, with net sales down 2.8% in the third quarter while adjusted earnings per share rose 4% to 75 cents a share. Kraft Heinz took a $1.4 billion noncash impairment charge in the quarter partly related to its struggling Lunchables business, where sales were down an estimated 15% in the third quarter.

Kraft Heinz has a more challenging portfolio -- including Oscar Mayer, Lunchables, Kraft Macaroni and Cheese, Heinz ketchup, Jell-O, and Philadelphia brand cream cheese -- than other food companies. Overall it skews more toward lower-income consumers and has more private-label competition.

Mizuho analyst John Baumgartner downgraded the stock Monday to Neutral from Outperform, writing there is "Limited EPS Upside Amid Reinvestment." The company is expected to have earned about $3 a share in 2024, similar to 2023 and little growth is expected in 2025.

Berkshire is carrying the Kraft Heinz stake for $13 billion under the equity method of accounting since it owns more than 20% of the company. Under that 20% level, Berkshire would carry the stake at market value.

In its third quarter 10-Q, Berkshire said it had examined the Kraft investment and determined that "recognition of an impairment charge in earnings was not required." Berkshire also performed a similar test of its equity investment in Occidental Petroleum equity -- also carried under a similar accounting -- and found no impairment was required.

Berkshire could take an impairment charge on the Kraft Heinz investment when it reports its fourth-quarter earnings on Feb. 22. Any impairment charge would be noncash and therefore would probably be ignored by investors. Berkshire already took a $2.8 billion non-cash impairment of the Kraft Heinz stake in 2018.

Kraft, which is due to report its fourth-quarter results on Wednesday, continues to carry a large amount of goodwill and other intangible assets on its balance sheet that totaled about $70 billion on Sept. 30. It has a book value of about $40 per share but its tangible book value is negative due to all the goodwill and intangible assets.

The bull case in Kraft is that its efforts to boost sales will prove successful, and that it has a rock-bottom stock valuation at less than 10 times earnings. Its stock yields about 5.5%, one of the highest dividend rates in the food industry, and the payout of $1.60 a share annually is well covered by earnings.

Berkshire has pocketed a nice dividend on Kraft, but the overall investment has been one of the worst major investments by Buffett in the past decade. Since the Kraft/Heinz merger, the S&P 500 has tripled, highlighting the opportunity cost to Berkshire.