Now you can have your mac and cheese and… pour ketchup on top?
3G Capital, a Brazilian private investment firm, and Warren Buffer’s Berkshire Hathaway announced March 25 that they are buying Kraft and merging it with Heinz to create the Kraft Heinz Company. This Franken-corporation might seem an odd combo at first, but considering the strength both brands have in processed foods, it really was just a matter of time before someone made them a mega-conglomerate.
The new company will become one of the world’s largest food and beverage companies. Alex Behring, a managing parter of 3G who will be chairman of the new Kraft Heinz, said they would be become the fifth-largest food and beverage company in the world. The annual sales for Kraft Heinz are estimated at $28 billion and will have an expected market value of $80 billion. No small peanuts.
Some people are suspicious that the deal will be as successful as predicted. While Kraft does hold iconic brands including Velveeta, Kool Aid, and Capri Sun, the current market trend is turning away from processed foods and toward more natural and organic brands. Kraft’s earnings fell 62% in 2014 in the face of consumers’ changing preferences. They have made move to address consumer concerns, like removing the artificial coloring from their mac and cheese, but it doesn’t seem to have helped much.
Heinz has had some more success. Their iconic ketchup is increasing in sales, but some of their other brands, like Ore-Ida french fries and frozen dinners, are facing sales troubles.
Part of the plan to drive profit forward will center around 3G’s ability to cut costs (which could mean eliminating jobs) as much as $1.7 billion annually. They also plan to use Heinz to help Kraft’s international sales. While Heinz has a strong presence abroad, most of Kraft’s sales are domestic, which means Heinz could draw Kraft onto a global stage. Will this work? Only time will tell, but Berkshire Hathaway and 3G plan to invest $10 billion into Kraft Heinz, so they seem pretty determined to make the whole thing work out.
Kraft shareholders still have to vote on their approval of the deal, but sources are talking about the merger as a certainty. Co-headquarters for Kraft Heinz are planned for Chicago and Pittsburgh.
Kraft has been stirring up a lot of attention in 2015. First, they announced that Singles would display a Kids Eat Right logo that doesn’t mean the processed cheese is healthy but that the company supports the idea of kids eating right (we don’t get it either). Then, they voluntarily recalled 6.5 million boxes of mac and cheese that contained flakes of metal.
So are we gonna see 57 ketchup varieties in our blue boxes of dollar mac ‘n’ cheese? Time will tell, but one thing’s for sure: the corporate heart of Kraft Foods will keep on tickin’.
Feature Photo Credit: “A box of Kraft Macaroni and Cheese” by Steve Cukrov and “Heinz tomato ketchup sauce in plastic squeezable bottle” by abimages | Shutterstock