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The CEO of Kraft Heinz, Bernardo Hees, has said that acquisitions are a part of the company’s culture – less than three months after it launched an audacious $143 billion bid for Unilever.
Hees was responding to concerns from investors that the company’s incessant cost-cutting would reduce its ability to target a major acquisition – even if Unilever proved too big to capture. The Anglo-Dutch company had turnover more than twice that of Kraft Heinz last year, and it firmly rebuked February’s approach by saying that it didn’t merit further discussions.
Hees said: “If you think about our culture and what it’s all about, it’s actually quite simple and very consistent over decades. It’s all about ownership, meritocracy, high performance, brands, and dreaming big. It’s all about those five things. And I truly believe those five things are applicable in many companies and many segments and so on. So through this culture we have… I don’t think it will be more difficult or easier to do any other transaction.”
Analysis: ‘Rumour mill in overdrive’
Since Kraft Heinz’s approach for Unilever, the rumour mill has gone into overdrive. We know that the business is looking to grow its reach considerably, and is almost certainly chasing alternative acquisitions to achieve that more quickly. General Mills, PepsiCo (or at the very least Frito-Lay) and Mondelēz – itself embattled by calls to replace CEO Irene Rosenfeld – have all been touted as potential targets for Kraft Heinz, though nothing has emerged to suggest that a bid for any of them is even likely. So, given Bernardo Hees’ comments today and the suggestion by Kraft Heinz’s chief financial officer that whether an acquisition target has non-food brands is almost immaterial, expect to hear a lot more rumour and conjecture about the company in the coming months.
On a more definitive note, Kraft Heinz announced its first-quarter results this week. Net sales were down 3.1% to $6.36 billion, primarily driven by lower consumption in North America. Will this expedite the company’s attempts to find a suitable growth partner?
Kraft Heinz’s chief financial officer, Paulo Luiz Araújo Basílio, went on to clarify its position on expanding Kraft Heinz into vertical markets. When Kraft Foods and HJ Heinz merged in 2015, the pair said that they wanted to create a global food and beverage powerhouse.
A deal for Unilever would have added a number of high-profile of domestic and personal care products to Kraft Heinz’s portfolio, which is presently focused exclusively on the food and beverage industry. The $143 billion bid was partly so surprising because it would have completely transformed the nature of Kraft Heinz’s business. That has led to speculation that the US company might, in place of Unilever, look for new acquisition targets that expand its presence into the personal care category, the foodservice channel, or even a completely distinct market like tobacco.
Araújo Basílio said: “Related to the Unilever potential transaction, we really believe that, as I said in the M&A framework, it’s kind of – again, if you go back here in terms of only consumer brands, brands with a strong market share, brands that can travel, similar go-to-market, similar operation – I think at the end of the day that these two segments of consumer goods are very similar and that’s the reason why you see many companies operating [different] brands for consumers: sometimes food, sometimes personal care, sometimes healthcare.
“The way that we think about our M&A framework, which hasn’t changed since the beginning, is pretty much that we want to own brands that we’d be happy owning for the long run: brands with strong equity, strong relative market share, brands that can travel. But we also analyse how the business operates, the go-to-market of the business, and more important than that how the business… would operate better, how they [can grow faster by] being together. And, of course, during this analysis, we take everything into consideration, including all the synergies that we have, all the options that we have in terms of getting a better performance.”
© FoodBev Media Ltd 2020