Some of the most familiar names in ketchup, pickles, cheese and hot dogs are set to come under the same roof after H.J. Heinz Co. announced plans Wednesday to buy Kraft and create one of the world’s largest food and beverage companies.
The deal would bring together an array of longtime staples in American kitchens, including Oscar Mayer lunch meats, Jell-O desserts, Miracle Whip spreads, Ore-Ida potatoes and Smart Ones diet foods.
The combination of the two companies — each more than a century old — was engineered by Warren Buffett’s Berkshire Hathaway and Brazilian investment firm 3G Capital, which teamed up just two years ago to buy Heinz. While shoppers are not expected to see any major changes, the creation of The Kraft Heinz Co. reflects the pressures facing some of the biggest makers of packaged food in the U.S.
As consumers increasingly migrate from popular packaged foods in favor of options they consider less processed, companies such as Campbell Soup, General Mills and Kellogg have been slashing costs or striking deals to update their products offerings.
The Heinz-Kraft deal is, in many ways, just the latest example of that, although Buffett noted that the two companies still have a strong base of customers.
“I think the tastes Kraft and Heinz appeal to are pretty enduring,” he said in a phone call to the business news channel CNBC.
Still, the early plans outlined by Kraft and Heinz executives in a conference call Wednesday focused largely on the savings that would be achieved through the deal, rather than the potential for sales growth in North America. They said they expect to save $1.5 billion through moves such as combining manufacturing and distribution networks.
James Angel, an associate professor of finance at Georgetown University’s McDonough School of Business, said that will probably result in job losses.
“Even though it is painful for the people involved, those resources will be freed up for other, potentially more productive uses,” he said.
H.J HEINZ CO.
LOCATION: Pittsburgh
EMPLOYEES: 24,500
2014 NET INCOME: $657.1 million
2014 REVENUE: $10.9 billion
BRANDS: Classico pasta sauce, Heinz Ketchup, Ore-Ida, Lea & Perrins, Bagel Bites, Nurture infant formula, Weight Watchers Smart Ones and Golden Circle.
KRAFT FOODS GROUP INC.
LOCATION: Northfield, Ill.
EMPLOYEES: 22,100
2014 NET INCOME: $1.04 billion
2014 REVENUE: $18.2 billion
BRANDS: A1, Athenos, Breakstones, CapriSun, Cheez Whiz, Cracker Barrel, Cool Whip, Country Time Lemonade, Jell-O, Kool Aid, Maxwell House, Oscar Mayer, Planters, Stove Top and Velveeta.
The Associated Press
