Kraft and Heinz to Merge into World’s 5th Largest Food Group

Recently it was announced that two giants in the food industry, Kraft and Heinz, would merge. Once combined into one company, Kraft Heinz will be the 5th largest food and beverage groups in the world, according to an article at the New York Times. In fact, the Kraft Heinz Company is expected to have a market value in excess of $80 billion. As you can imagine, this is the largest merger of 2015 thus far.

While Heinz focused primarily on condiments and canned goods such as ketchup, baby food, Classico spaghetti sauces, and other sauces, meals, and infant/nutrition, 3G Capital will take control of Kraft Foods, famous for Planters nuts, Jell-O, Mac and cheese, Oscar Mayer label meats, and other foods. 3G acquired Berkshire Hathaway, a companied formed by billionaire investor Warren Buffett, in 2013.

What is the intention of the merger? 3G, who took over beer giant Anheuser-Busch in 2008, intends to take ownership of iconic brands in an effort to expand the companies internationally, and drastically cut costs. According to news resources, Warren Buffett and 3G are hoping that combining Heinz and Kraft will result in steady growth of sales for such names as Velveeta, Lunchables, and Kool-Aid, just as the Heinz ketchup brand has risen in sales steadily since its acquisition in 2013.

Currently, the majority of Kraft products are sold in the U.S., while most of Heinz sales are generated abroad. 3G chairman of Kraft Heinz Alex Behring hopes that by merging, Kraft’s sales will expand into the global market. According to Behring, “Combining our two businesses, we’ll create the third-largest food and beverage company in North America, and the fifth-largest food and beverage company in the world.” Behring went on to say that the merger will enjoy a substantially enhanced scale at both the retail and food service channels in North America, its key market.

The merging of Heinz and Kraft has been in the works for years, however it wasn’t until the beginning of 2015, when John T. Cahill took over as CEO at 3G that Mr. Buffett approached Kraft about the two companies merging. In a statement, Buffett said that he was “delighted to play a part in bringing these two winning companies and their iconic brands together.” Buffett went on to reveal his excitement and anticipation of the opportunities possible for the newly combined organization.

At Spotora & Associates, our LA business merger attorneys know the complexities involved when two companies become one, and the potential pitfalls. Whether your company is small and local or known globally, work with a skilled and experienced Los Angeles business attorney to ensure positive, profitable results for your company.

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This entry was posted on Tuesday, March 31st, 2015 at 9:15 pm and is filed under Business & Corporate Law, Contract Law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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