The 100 billion dollar Heinz-Kraft deal

Abstract

Purpose

The purpose of this paper is to assess the motivations behind the merger of Heinz and Kraft. This merger, finalized on July 2nd, was one of the largest mergers to take place in 2015. Warren Buffet via Berkshire Hathaway and the Brazilian, Jorge Paulo Lemann, orchestrated the deal, at the headquarters of 3G Capital. What were the motivations and objectives of this merger? A few months after the deal, what measures have been introduced?

Design/methodology/approach

This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.

Findings

It remains to be seen if the Berkshire Hathaway – 3G Capital partnership will continue and manage to achieve their predicted 1.5 billion dollars in cost reduction by the end of 2017. Such predictions should be taken with a grain of salt, given the fact that even though Heinz has improved its profitability, it is not yet on a path towards growth. In addition, it is worth asking whether customer demands for healthier products will permit Kraft to develop its sales, in particular outside of the USA. In any case, cost reduction will not be sufficient.

Practical implications

The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations.

Originality/value

The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Citation

Chaboud, I. (2016), "The 100 billion dollar Heinz-Kraft deal", Strategic Direction, Vol. 32 No. 6, pp. 5-7. https://doi.org/10.1108/SD-03-2016-0035