Heinz And Kraft To Marry

It was just announced that puppet master Warren Buffett connected some of his favorite companies to create the third-largest North American food company by merging H.J. Heinz Company, Brazilian private equity firm 3G Capital, and Kraft Foods Group, Inc. in a $46 billion deal. Mega-mergers are not new in the highly competitive world of consumer packaged goods. Consumers are exceedingly price sensitive. The success rate of new products is very low, resulting in little opportunity for organic growth. The search for cost savings and efficiencies is constant. Acquisition is the natural (and sometimes only) option to grow revenue and increase margins. The Heinz/Kraft merger reportedly expects to save about $1.5 billion in annual costs by the end of 2017. 3G has a reputation for introducing aggressive cost cuts and improving efficiencies at other portfolio companies including Anheuser-Busch. Its corporate culture is supposedly one of no-frills. Never mind a corporate jet. 3G execs reportedly travel coach, even internationally. Imagine the combination of two old-school CPG companies like Heinz and Kraft is like a late-life marriage with Warren Buffett officiating the wedding. The result is a large blended family composed of once highly successful child stars who haven’t done much lately. CEO Bernardo Hees is the new stepdad from Brazil who isn’t going to let them live in the basement anymore without paying rent...more