Kraft, Heinz Merger Brings Together Famous Food Brands
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Two of the most famous American food companies are merging. H.J. Heinz Company will join forces with Kraft, the maker of such iconic brands as Velveeta and Cool Whip. The companies are hoping the deal will leave them better positioned to cope with some big changes in consumer taste. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: The merger will create a single, new company called Kraft-Heinz. It will be the third-largest U.S. food company and the fifth-biggest in the world. The deal brings together some of the most famous food brands in the world, including Heinz ketchup, Jell-O and Miracle Whip. These are quintessential American food products with strong brand identity. But American consumers are increasingly looking askance at packaged food products, says Michael Moss, author of the book "Salt Sugar Fat."
MICHAEL MOSS: Almost all of the food giants - the biggest food manufacturers - have been reporting really weak sales that they are attributing to this, you know, growing consumer interest in eating healthier.
ZARROLI: Kraft, he says, has seen its growth prospects stall. Heinz hopes to address that by selling more of Kraft's products overseas. The company does most of its business in North America right now. And Heinz will address the company's bottom line in other ways. Heinz is partly owned by the Brazilian private equity firm 3G Capital, which has been involved in some of the biggest of food mergers in North America. Bea Chiem analyzes the food industry for Standard and Poor's. She says 3G has been especially adept at finding ways to cut costs.
BEA CHIEM: They did that with Heinz, and then they've had a track record of doing that with Burger King and Anheuser-Busch. So they clearly have a track record of being able to take costs out of some of these consumer products companies.
ZARROLI: In a conference call today, executives at Kraft and Heinz said they hope to save a billion-and-a-half dollars by combining manufacturing and distribution networks. Because the company will be a lot bigger, it should also have more power to get better prices on the ingredients it buys. The merger also has an important partner in Warren Buffett's Berkshire Hathaway, which will own about nine-and-a-half billion dollars of stock in the company. Buffett has sometimes criticized private equity firms that buy companies only to bleed them dry with debt. But Buffett told CNBC today that 3G is different. He says 3G buys to keep and maintains an active role in running companies.
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WARREN BUFFETT: In every respect - both in terms of ability but just in terms of integrity - every aspect of it. 3G has been a perfect partner.
ZARROLI: Buffett also said he retains a lot of faith in the products sold by Kraft and Heinz. He said they have a strong base of customers. And the tastes they appeal to are pretty enduring. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.