Will the merger which will establish the fifth largest food company in the world trigger further acquisitions?
Considering the Warren Buffett-orchestrated merger brought two huge names together, could other companies be up for grabs? A General Mills acquisition could certainly help if 3G Capital is attempting to get into a healthier food space. By acquisition proxy, it could have Annie’s at its fingertips. And this way, maybe the rumors around General Mills shedding Green Giant could cease. Annie’s in particular was a saving grace for the company in its latest earnings report.
This merger certainly brings to question what other mergers and acquisitions might be on the horizon, and one area of focus is General Mills. Could Nestle be the one to snatch it up? And plus, with rumors previously swirling around Kraft selling off some brands, it would make sense if Kraft and Heinz saw some brands go in order to fit more snugly.
Why might this bring up antitrust concerns?
With two huge food companies coming together, there is a worry about some kind of food monopoly. Reuters reports experts saying the deal might not have to jump through regulatory hoops due to limited overlap in items, though steak sauces could be a point of contention. With some Kraft brands under performing, it is reasonable that those brands could be eliminated.
Why focusing on “junk food” companies?
We know that Warren Buffett’s diet certainly isn’t what more nutrition-minded parents and millenials claim as "healthy." Because people talk about eating healthier, does that mean "junk food" companies need to worry? Not necessarily. According to a Sweetener360 study, consumers are still buying sugary items. Kraft’s attempt to make its Kraft Singles seem more nutritious was not a smooth operation, but it is not likely a deal-breaker with consumers. It seems Buffett is banking on the notion that “healthy” doesn’t cancel out what consumers really crave. As Buffett said on CNBC: "There are seven billion people in the world and they all have different taste."
Consumers have, however, nonetheless apparently lost their tastes for sugary drinks. A negative public perception of soda has sales slumping, and there’s a push for gluten-free foods and healthier cereals. Coke’s CEO, Muhtar Kent, however, thinks the answer is selling more soda. Perhaps Buffett, who has quite a stake in Coke, influenced his thinking.
What does this mean for the consumer?
There could certainly be price fluctuations, the disappearance of some brands and yet another new marketing strategy. Could that mean back-tracking from Kraft’s healthy push? Given previously reported slumping net profit, probably not.
What does this mean for Kraft employees?
It’s probably not looking good, considering the severe cuts made previously by 3G Capital-acquired companies, like Heinz’s ousting of 11 out of 12 top executives following a company leadership conference as well as Anheuser-Busch seeing 1,400 jobs cut when InBev took the reins.
What about a new logo?
Clearly an important question for marketers: what will the company’s new logo incorporate? Both companies are very established. But, expect money to be spent on research and development of newer and improved products. These brands enter consumers’ homes every day, so much rides on the message they arrive at to send to consumers.