Food giants merge brand as deal closes
Get used to calling it the Kraft Heinz Co.
Pittsburgh’s H.J. Heinz Co. and Illinois-based Kraft Foods Group officially merged Thursday after the stock market closed, creating the third-largest food and beverage company in North America based on its approximately $28 billion in annual revenues. PepsiCo and Nestle are bigger based on revenues.
Kraft shares will cease trading on the Nasdaq. On Monday, when the markets reopen after the July Fourth holiday, shares of the company will begin trading under the symbol KHC.
Co-headquartered in Pittsburgh and in Northfield, Ill., the new business’s ownership will be split. A joint venture that partners Warren Buffett’s Berkshire Hathaway with Brazilian private investment firm 3G Capital owns 51 percent, while former Kraft shareholders hold 49 percent of the company.
The same joint venture had acquired Heinz two years ago for about $28 billion, and shook up the old-line food business that had employed generations of Pittsburghers in making products such as ketchup, pickles and soup. And not just Pittsburghers. Even in 2013, the majority of Heinz sales came from outside North America, an appealing fact in an increasingly global economy.
With 3G Capital’s devotion to zero-based budgeting — or basically starting each new budget from scratch — and using cost-cutting as a way to bring more funds to the bottom line, the Heinz global workforce shrunk by between 6,000 and 7,000 jobs, and its plant operations were retooled and slimmed down.
Most analysts see the Kraft operations that are now part of Kraft Heinz as likely to go through the same weight-watching process.
Bernardo Hees, formerly CEO of Heinz and of another 3G Capital property Burger King, will be in charge here, too. “I am honored and humbled to be the CEO of the Kraft Heinz Co.,” said Mr. Hees in Thursday’s announcement. “Kraft and Heinz are both world-class organizations with storied pasts and together, an even brighter future.”
Mr. Buffett will be on the new board and 3G Managing Partner Alex Behring will serve as chairman.
In addition to Heinz ketchup, the new company inherits numerous iconic brands such as Velveeta, Oscar Mayer and Lunchables from Kraft, along with Ore-Ida and Smart Ones from Heinz.
Officials have said the business will be continued to be dual headquartered in Pittsburgh and in Northfield, with Heinz brands managed here and Kraft brands managed there.
“We will continue our founders’ unwavering dedication to acting with integrity and the highest ethical standards, as well as our enduring support for the communities where we do business,” said Michael Mullen, senior vice president for corporate and government affairs of Kraft Heinz, in an emailed statement.