Heinz is just the latest target of Brazil’s global buying spree

The Brazilians are coming

 
FILE - In this March 2, 2011 file photo, Heinz ketchup is seen on the shelf of a market in Barre, Vt. H.J. Heinz Co. says it agreed to be acquired by an investment consortium including billionaire investor Warren Buffett in a deal valued at $28 billion. (AP Photo/Toby Talbot, File)
(AP Photo/Toby Talbot, File)

They own your beef. They own your beer. They own your burgers. Now they own your ketchup too.

Brazilians—as we predicted would happen in our 2013 Outlook issue, we’d like to note—now own even more of the products Canadians love. On Thursday, Brazilian billionaire Paulo Lemann’s 3G Capital partnered with Warren Buffett’s Berkshire Hathaway to acquire H.J. Heinz Co. for US $23 billion in cash.

The deal is the largest in the history of the food industry, according to Heinz, and is the latest in a growing string of major acquisitions by Brazilians on the global stage. 3G bought Burger King in 2010. In January 2013, JBS—Brazil’s, and the world’s, largest meat company—bought XL Foods, one of Canada’s largest (and most beleaguered) packing plants. And since 2008, Brazilians have controlled AB InBev, by far the world’s most powerful brewer.

Today, InBev, which owns brands including Stella Artois, Beck’s and Budweiser, is run by Carlos Alves de Brito, a 50-something former protégé of Lemann’s. Brito’s stewardship of that company may give some hint of what’s to come for Heinz.

As laid out in this Bloomberg Businessweek feature by Devin Leonard published last October, Brito has ruthlessly trimmed spending at the combined beer giant.

“After InBev bought Anheuser-Busch, he slashed costs at the combined company by $1.1 billion in a single year. AB InBev’s margins widened substantially, and its share price has nearly quadrupled since the takeover. In 2011, Brito made Fortune magazine’s Fantasy Sports Executive League Dream Team as a designated hitter.”

Some, however, believe Brito sacrificed quality to make those cuts.

“The company’s shipments in the U.S. have declined 8 percent to 98 million barrels from 2008 to 2011, according to Beer Marketer’s Insights. Last year, Coors Light surpassed Budweiser to become America’s No. 2 beer. (Bud Light remains No. 1.) Meanwhile, Brito is alienating lovers of AB InBev’s imports by not importing them. And he’s risking the devotion of American beer lovers by fiddling with the Budweiser recipe in the name of cost-cutting.”

3G, as Reuters wrote this morning, “is known for aggressively controlling costs at its operations.” And although a representative from the company said Thursday it was too early to talk about cuts at Heinz, they will likely come, eventually. Will that mean messing with the world’s most famous ketchup? That remains to be seen. But one thing you can expect: Brazilian buyers will soon come calling to an industry near you.

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