- Owning about 325 million shares, or about one-quarter of Kraft Heinz, and having invested $9.5 billion over the transactions to acquire common stock, Warren Buffett and Berkshire Hathaway's stake in the combined company is valued at about $24 billion after Kraft Heinz's trading debut closing at $72.96 on Monday.
- "Berkshire also owns $8 billion of preferred shares in Kraft Heinz that pay 9 percent in dividends annually. The securities can be redeemed next year," according to Bloomberg.
- Kraft Heinz is now Berkshire Hathaway's second-largest stock investment, trailing only Wells Fargo & Co., valued at $26 billion on Monday. This puts Kraft Heinz ahead of Buffett's other major food and beverage industry investment, Coca-Cola Co.
While specific plans for the combined company's growth are currently being left up to the investors' and experts' imaginations, what is likely is significant cost-cutting measures at the company, including potentially massive job cuts at Kraft. These cost-cutting measures are predicted to total about $1.5 billion in annual savings by the end of 2017. Employee shake-ups already began last week.
3G Capital has seen success in the past from this strategy, including its 2013 acquisition of H.J. Heinz Co., which reported profit margins near the top of the industry by the end of 2014. "At Heinz, EBITDA margins increased 800 basis points in the two years subsequent to 3G’s takeover, generating a 35% increase in EBITDA to $2.8 billion," according to Forbes. 3G Capital is planning the same future for Kraft, which did not see improved financial results following its spinoff from Mondelez International Inc. in 2012.
Another topic for debate are the brands the company will divest and which the company will keep, if divestments are on the table, something Kelly O’Keefe, a branding expert and professor at Virginia Commonwealth University, discussed with Food Dive. Kraft Heinz does face challenges going forward that include dealing with under-performing brands.
"Credit Suisse analysts believe some 26.4% of Kraft’s retail portfolio, whether it its Maxwell House coffee, Kraft cottage cheese, Shake ‘n Bake, or A1 steak sauce, is now in some form of structural decline," Forbes reported. "Combine that with low-to-unimpressive growth across Kraft’s remaining portfolio, falling sales at Heinz, consumer trends towards healthy foods and the combined company begins to look like a risky proposition."
However, Kraft could be interested in brand licensing agreements with Mondelez, as about $150 million in sales have recently expired, and another $850 million are set to expire in the near future. Absorbing these brand licensing agreements could position Kraft to increase sales in emerging markets, such as Brazil, China, and Indonesia, as well as Western Europe and Australia, at little cost to the company.
Credit Suisse suggests that if all goes has planned — or better — for Kraft Heinz, the combined company could be well-positioned to acquire still another competitor, such as General Mills Inc. or Kellogg Co., Forbes reported.