Industry Giants Kraft and Heinz to Form Processed-Food Voltron
Warren Buffet likes to put his mouth where his money is.
The 84-year-old billionaire recently told Fortune that he deliberately eats like a six-year-old, consuming copious amounts of Coca-Cola on a daily basis. He also owns a stake in the soda giant—$16 billion worth of stock—and he’s invested in other six-year-old favorites too, including See’s Candy and Dairy Queen.
On Wednesday, news broke that his child-like-eating empire will continue to grow: Buffet’s Berkshire Hathaway has a hand in a $36 billion proposed merger of Kraft Foods Group and H.J. Heinz. With regulators' blessings, the deal will not only create the world’s fifth-largest food company but enviable brand synergy between Kraft Singles and Heinz ketchup, the key components of a Buffett Diet–friendly grilled cheese sandwich.
Buffett’s gut may be as close to unimpeachable as it comes with regard to stocks, but his dietary choices are decidedly out of the mainstream. Kraft in particular has been struggling to reconcile its hallmark brands with the shift in consumer demand toward healthier, less processed foods; sales have been remained flat for the most part since 2012, at about $18 billion annually. In 2014, its profit dropped by a whopping 62 percent. While the 2013 announcement that Kraft’s classic Macaroni & Cheese would be reformulated to eliminate artificial colorings was met with praise, the recent paid “endorsement” from the Academy of Nutrition and Dietetics’ "Kids Eat Right" campaign for Kraft Singles looks far more cynical.
G3, the Brazilian private equity firm that owns Heinz (and along with Buffett will hold 51 percent of the stock) is known for buying up companies and streamlining its acquisitions by cutting costs and fat. Kraft could be subjected to some of that, and analysts have also said that it could benefit from Heinz’s international market, which is far larger.
However, Bob Goldin, the executive vice president of Technomic, a food industry consulting group, told Reuters that both Kraft and Heinz are missing out on the growth areas of the food industry: organic and fresh foods.
All of which could lead to the world’s fifth-largest food company making a strategic shift away from the Buffett Diet and moving in a healthier direction.
Original article from TakePart
