Tag Archives: Kraft Heinz

Kraft Heinz Buys Cerebos Brands from Suntory

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Kraft Heinz is expanding its brands marketed in Australia and New Zealand with its purchase of the Cerebos food and instant coffee business from Japan’s Suntory Group.

The purchase price will be A$290 million and includes popular brands such as the Gravox gravies, which is one of the all-time great Australian brands, and traces its roots back to 1917.

Cerebos’ Food & Instant Coffee business includes iconic food brands in Australia and New Zealand such as Fountain, Gravox, Saxa, Foster Clark’s, Gregg’s, Bisto, Raro and Asian Home Gourmet. The business has market-leading brands across a number of categories including sauces, gravies, herbs & spices, salt, condiments, Asian sauces, desserts and cooking ingredients.

The sale agreement does not include the Cerebos Fresh Coffee business in Australia/New Zealand, which SBF will retain.

Cerebos Australia and New Zealand is a trans-Tasman integration of two companies, Cerebos (Australia) Limited and Cerebos Gregg’s Limited in New Zealand. Our parent company, Cerebos Pacific Limited, is based in Singapore and has been wholly owned by Suntory Limited, a Japanese global food and beverage group. Within this structure, the companies have operated with a great deal of autonomy.

Kraft Heinz is the fifth-largest food and beverage company in the world and has a strong platform in Australia and New Zealand, with a staple of well-known brands such as Heinz, Kraft, Wattie’s, Eta and Golden Circle in categories including beans & spaghetti, sauces, soups, sauces & dressings and many others.

Bruno Lino, CEO of Kraft Heinz Australia and New Zealand, who will lead the combined business, said: “The transaction provides an exciting opportunity for Kraft Heinz to expand its portfolio into complementary categories, stretching the footprint of Cerebos’ brands into new categories and markets.”

“In addition to the iconic local brands, Cerebos has a strong team that will play an important role in our future growth. This transaction reinforces our commitment and long-term plan to the Australia and New Zealand markets in addition to our significant investment in the Kraft brand for 2018. We will continue investing in our brands, factories and our employees to meet consumer needs and expectations,” he said.

Terry Svenson, CEO of Cerebos Australia/New Zealand, said the company was pleased with the outcome of the transaction.

“As we announced in April 2017, the Food & Instant Coffee business has a number of market-leading brands across Australia and New Zealand and has made significant progress in recent years, particularly in relation to improvements in manufacturing efficiency. However, Food & Instant Coffee is not a core focus category for SBF and we believe this business can be maximised under different ownership. The Food & Instant Coffee business will now have opportunities to leverage Kraft Heinz’s operations to grow the business further.”

The transaction is scheduled to close in the first quarter of 2018, subject to regulatory approvals.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire to Benefit from Increased Dividend at Kraft Heinz

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As the largest shareholder in Kraft Heinz, the fifth-largest food and beverage company in the world, Berkshire Hathaway will benefit from the company’s recently announced increase in its quarterly dividend.

On August 3, Kraft Heinz announced that its Board of Directors approved an increase in the company’s quarterly dividend to $0.625 per share of common stock, or $2.50 per share of common stock on an annual basis.

This represents an increase of approximately 4.2 percent versus the prior quarterly dividend rate of $0.60 per share, or $2.40 on an annual basis.

The dividend declared is payable on September 15, 2017 to shareholders of record as of August 18, 2017.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz Keeps Fullerton Factory Open Due to Lunchables Demand

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Kraft Heinz has decided to keep open a factory in Fullerton, California, which it had scheduled to close at the end of 2016.

In November 2015, the company announced its plans to reduce excess capacity by closing seven manufacturing facilities, including the Fullerton plant which employs 430 people.

The plant makes Lunchables, a prepackaged lunch for kids that is sold under the Oscar Mayer brand. According to the L.A. Times, the company reports it is facing “an undersupply of Lunchables.”

The move to keep the plan open comes after Teamsters Local 952 ratified a new 3-year Agreement that raises wages but cuts some Kraft Heinz’s health care costs.

According to the Teamsters, the Agreement “included minor concessions and significant improvements to the H&W with no employee contribution for the first year and minor employee contribution rate for each of the following years. The Agreement also includes yearly wage increases of thirty-five (0.35) cents on Jan. 1st of each year of the contract. Additionally, workers secured a pay-out of the Productivity Bonus of three thousand ($3,000) dollars which will be paid out thirty days after ratification as well as a severance package security going forward.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: Is Now the Time for Kraft Heinz to Make a Play For Mondelez?

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When Berkshire Hathaway and 3G Capital put together Kraft Heinz in 2015, the talk in the street was all about whether adding Mondelez International would be the next step. After all, Mondelez used to be part of Kraft before it was spun-off in 2012.

At the time, Warren Buffett downplayed the idea, noting that the newly formed Kraft Heinz had much to do in order integrate the two companies.

“At Kraft Heinz, we have our work cut out for us for a couple of years,” Buffett told CNBC. “Frankly, most of the food companies sell at prices that it would be very hard for us to make a deal even if we had done all the work needed at Kraft Heinz.”

Is Now the Time?

Here we are a year later and the fate of Mondelez in the rapidly consolidating food industry is still not clear. The company just dropped its proposed takeover of chocolate king Hershey, and the question of whether it’s an acquirer or acquiree is back in play.

As far as size goes, Mondelez has a market cap of roughly $67 billion, as compared to Kraft Heinz’s $109 billion, and combined they would put Kraft Heinz ahead of Unilever, which has a market cap of $143.4 billion, and move it closer to Nestle, which has a market cap of over $246 billion.

Berkshire and 3G Capital

Warren Buffett has clearly been pleased with his dealings with Jorge Paulo Lemann, Alex Behring and Bernardo Hees of 3G Capital. Partnering with 3G has brought a tough, tight-fisted management style that seeks to ring inefficiencies out of large-scale legacy companies, and Berkshire has benefited by gaining equity and putting large chunks of cash to work financing the deals.

Much of Berkshire’s financing takes the form of preferred stock, which has paid high interest rates in a low interest rate world. It’s a deal that Buffett loves, and one that he also used to help shore up companies such as Bank of America, Goldman Sachs and Dow Chemical during the Great Recession.

However, the high interest dominoes have been falling one after another as companies became healthy enough to get cheaper financing.

Similarly, when Berkshire and 3G went in on Kraft Heinz in 2013, Berkshire received $8 billion in preferred shares that paid it $720 million annually. Those shares were redeemed this summer as Kraft Heinz moved to lower its borrowing costs. It was a move that Buffett lamented in his annual letter to shareholders “…will be good news for Kraft Heinz and bad news for Berkshire.”

In addition, Berkshire’s $3 billion in preferred stock in Dow Chemical, which currently pays Berkshire $255 million a year, looks likely to end this year unless the market slumps, keeping the price of Dow Chemical shares below $53.72. .

Now that those deals have been coming to an end, a large chunk of preferred stock from a combined Kraft Heinz and Mondelez merger would be a fitting substitute.

Placing Their Bets

In August 2015, activist investor Bill Ackman took a $5.6 billion stake in Mondelez, a bet that clearly signaled he thought the snack maker would be acquired.

Among the other potential buyers could be Pepsi, which already owns Frito-Lay, and is facing declining sales in the traditional soda business, as consumers look for healthier options.

A Prize Worth Winning?

While a merger of Kraft Heinz and Mondelez has made sense to Wall Street, does it ultimately make sense in the world of consumer preferences in the 21st century?

When Mondelez was spun-off from Kraft, it was supposed to be the more exciting, high-flying of the two companies. However, its stock promptly slumped, and today it’s barely higher than it was five years ago. Many of Mondelez’s brands, which include Triscuit, Ritz, and Chips Ahoy!, reflect the consumer tastes from the 1930s-1960s, and its Oreo cookie goes back even further, first hitting store shelves in 1912. These brands are still popular, but will they be in another fifty years?

So, is Mondelez even a prize worth winning? That depends on whether there are similar savings that can be wrung out of Mondelez as there has been with Kraft and Heinz. If Berkshire and 3G think there are, there could be the next global food giant ready to take the stage.

One thing that is clear, in the 21st century world of food manufacturing and distribution companies, the assumption is that size matters in order to have global reach that can take advantage of growing markets in South America, India and China.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz Dividend Increase Means Extra $10.57 Million for Berkshire

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Kraft Heinz has announced that its Board of Directors approved an increase in the company’s quarterly dividend to $0.60 per share of common stock, an increase of approximately 4.3 percent versus the prior rate of $0.575 per share.

The company, which is 26.78 percent owned by Berkshire Hathaway, posted earnings of $0.85 per share on total revenue of $6.79 billion.

The increase of 4.3 percent will bring Berkshire an addition $10.57 million in dividends.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

No Kraft Heinz Hotdogs at Heinz Field

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It might seem logical that Heinz Field, which is the home of the NFL’s Pittsburgh Steelers, would serve Kraft Heinz’s Oscar Meyer hotdogs, but that’s not to be.

On June 28, the Smith Provision Company announced that it entered into a multi-year agreement with Heinz Field, featuring Smith’s Hot Dogs as The Hot Dog of Heinz Field, and Smith’s brand Boski Kielbasa as The Kielbasa of Heinz Field.

“We are thrilled to have developed a partnership with the iconic Pittsburgh Steelers organization,” said Sara Kallner, Vice President of Smith Provision Company. ”

Headquartered in Erie, Pennsylvania, the Smith Provision Company was founded in 1927 by Harry Smith, who operated Smith’s as a small retail butcher shop. The company was bought by the Weber family, which as a fourth generation family owned business, still runs it today.

Oh, well, hopefully Heinz Field will still top the hotdogs with Kraft Heinz’s yellow mustard, ketchup and relish. No telling whether Kraft Heinz’s Grey Poupon mustard will make the cut.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz Set to Close Pennsylvania Plant

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Kraft Heinz’s streamlining, which has been moving forward aggressively since Berkshire and 3G Capital took the reins in 2015, is continuing with plant closings that were first announced in November 2015.

The Lehigh Valley, Pennsylvania plant will close July 31, with its product lines moving to facilities in Michigan, Illinois and Canada. The plant manufactures A-1 steak sauce, Grey Poupon mustard, and Keurig coffee.

The plant is one of seven plants that will be closed. The others are in Fullerton and San Leandro, California; Federalsburg, Maryland; St. Mary’s, Ontario; Campbell, New York and Madison, Wisconsin.

The Leigh Valley plant is closing despite having received grant money in 2014 from the Department of Community and Economic Development when it was owned by Kraft.

The grant was provided to expand the facility and hire more workers, and Kraft Heinz will repay $200,000 to the State of Pennsylvania for closing the plant.

State vs. State

States across the U.S. have been a fierce battle to retain Kraft Heinz plants, and under an agreement spearheaded by U.S. Senator Charles Schumer and Governor Andrew Cuomo, $20 million in New York state funds were committed to keep open and expand Kraft Heinz’s plants in Walton, Avon and Lowville, New York.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz Pushes for $55 Million in Infrastructure Improvements for NY Plant

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Village officials in Lowville, New York are hoping that their push for $55 million in state-funded infrastructure improvements will lead to 150 new jobs at an expanded Kraft Heinz string cheese plant in the town.

County and village officials are seeking $17.7 million to upgrade five main streets and make improvements to the water and sewer systems. They are also seeking $37 million for a new sewage treatment system featuring four anaerobic digesters.

Part of the funding will come from a $17.7 million 30-year, no-interest loan from the state Environmental Facilities Corporation.

If approved, Kraft Heinz will build a 67,756-square-foot string cheese addition in the rear of its Utica Boulevard manufacturing plant. It will also add a 5,923-square-foot receiving bay addition on the north side and a 2,169-square-foot two-pack addition on the front.

The daily milk usage at the plant will grow from 1 million to 3 million pounds, and the four new anaerobic digesters will be needed to handle increases in the whey waste byproduct.

Up to 150 additional employees could work at the expanded facility.

“We’re heading in the right direction,” said County Manager Elizabeth Swearingin, who was hired by Lewis County’s legislators in 2014. At a joint meeting to update county legislators and village trustees on the project, Swearingin emphasized the uniqueness of the opportunity. “We’re not going to have another opportunity like this in our lifetime.”

New York State Saves Kraft Heinz Plants

Under an agreement spearheaded by U.S. Senator Charles Schumer and Governor Andrew Cuomo, $20 million in state funds has been committed to keep open Kraft Heinz’s plants in Walton, Avon and Lowville.

Kraft-Heinz was initially planning to close the Avon facility and layoff all 405 employees, and the agreement also reversed the planned closure of the Walton facility.

An agreement was reached between New York State and Kraft-Heinz to save three of their facilities in Upstate New York, including the Walton facility in Delaware County that was initially slated for closure, as well as add additional jobs in Lowville.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz to Bring Davenport Facility into the 21st Century

Continuing to be the king of bologna is important not only for Oscar Meyer, it’s important for Iowa.

The Kraft Heinz Company’s planned $203 million Davenport, Iowa, facility will bring its Davenport facility into the 21st century. That’s a big leap from its antiquated downtown facility that was originally constructed in the late 19th century and is known as the “World’s Biggest Bologna Factory.”

The new facility will be built in the Eastern Iowa Industrial Center, and will receive a property tax exemption from the City of Davenport.

The project, which will be finished by 2017, will also receive financial assistance from the Iowa Economic Development Authority in the amount of a $1.75 million in tax credits and a $3 million forgivable loan.

On its end, Kraft Heinz has committed to preserving at least 475 full-time positions of the current 1,200 that exist at the old facility. Even with the workforce expected to be reduced by half, the construction of the new plant in Iowa is seen as a victory, as the state of Iowa defeated a competing offer from another unnamed state.

In a situation similar to the one in Davenport, the Oscar Mayer headquarters, which is also in a nearly century-old plant in Madison, Wisconsin, will not stay open, and its 1,000 jobs will be eliminated by 2017.

Under 3G Capital’s management of the recently combined companies, Kraft Heinz has committed to wringing out $1.5 billion in annual savings, and the company announced in November 2015 that it will close seven factories in the U.S. and Canada.

Warren Buffett Supports 3G’s Strategy

“3G has been buying businesses that have too many people,” Buffett explained at the 2015 Berkshire Hathaway annual meeting. “You will have never found a statement from Charlie or me saying that a business should have more people than needed.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

$229 million Kraft Heinz Expansion Saves the Bacon in Missouri

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The city of Kirksville, Missouri, and the Kraft Heinz Company are nearing the completion of a $229 million financing agreement that will see the company adding as many as 69 jobs and will preserve the existing 463 full-time jobs.

Kraft Heinz had originally planned to lay-off 279 workers and close its bacon producing facility.

Under the terms of the agreement, the city of Kirksville will issue Chapter 100 bonds that allows cities or counties to purchase or construct certain types of projects with bond proceeds and to lease or sell the project to a company. These “industrial development” bonds may be issued either as a “revenue” bond or a general obligation bond.

Eligible projects include purchase, construction, extension and improvement of warehouses, distribution facilities, and industrial plants.

Property Tax Abatement

Under Missouri law, upon the approval of the city/county issuer, it may be possible to exempt/abate most of the real and/or personal property tax of new real estate improvements and new machinery financed by a Chapter 100 bond. To enact this procedure, the city/county must own the assets financed by the bonds and an eligible company would lease the assets from the city/county for the term of the bonds. The amount and term of abatement/exemption depends on a negotiation with the city/county issuer, as they have the discretion to abate any portion of the property taxes.

The property tax is exempt by virtue of public ownership, however, the city/county may require that a portion of the payments otherwise due will be paid in the form of a payment in lieu of tax.

In this case, the city of Kirksville will own the property, eliminating property taxes for Kraft Heinz over a 10-year period.

Kraft Heinz will pay PILOTs (payments in lieu of taxes) to the local taxing districts. The amount will be 50-percent of the revenues that will be generated from the expansion project.

The tax abatement period will begin in 2017 and end in 2026.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.