May 17, 2017 – from Investor Insights

How to Strip Big Food Down to Its Essentials

Various food itemsFollowing a failed takeover bid of Unilever, Kraft Heinz may be on the prowl again. The company, which is majority-owned by Brazilian consortium 3G Capital and Berkshire Hathaway, is reportedly looking to add another Big Food name to its coffers. This consolidation is the ultimate sign of weakness: When 3G sees a slow-growing industry, it unleashes a wave of extreme, barbarians-inside-the-gate cost cutting. Big Food has come to a fork in the road, and firms must make a choice: Invest in healthier upscale products, or drastically slash expenses to preserve the bottom line (either on their own or through 3G).

Founded in 2004, 3G Capital specializes in mass consolidation, bare-bones efficiency, and low prices. The Brazilian private equity firm regularly partners with Berkshire Hathaway to finance bids for large public companies. By merging Kraft and Heinz, 3G created the fifth-largest food and beverage company in the world. But 3G has made its mark on more than just Big Food. Through a spate of deals spanning…

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