Brazilian private equity firm 3G Capital has quietly sold its 16.1% stake in Kraft-Heinz in the fourth quarter, nearly nine years after he orchestrated the blockbuster merger of Kraft Foods and Heinz with Warren Buffett.
This sale marks the end of an era for 3G. The company’s influence over Kraft Heinz has declined in recent years, with the number of board seats reduced from three to none in July 2022.
“3G has not been involved in the management of Kraft Heinz nor has it been a board member for several years. They have continued to be an investor and have been treated as we are for any what an investor,” Kraft Heinz said in a statement to CNBC. “We learned from their recent filing that 3G has completely exited Kraft Heinz stock in 2023.”
The company added that Buffett’s Berkshire Hathaway, its largest shareholder with a 26.8% stake, is a committed long-term owner.
Heinz Kraft Ketchup available in Hastings-on-Hudson, New York, United States on Tuesday, July 25, 2023.
Tiffany Hagler-Geard | Bloomberg | Getty Images
The doomed romance between Berkshire and 3G began on Valentine’s Day in 2013, when the two companies announced they were teaming up to take Heinz private. The merger with Kraft Foods took place two years later.
The new company initially pleased investors with profit growth, thanks to its cost-cutting approach favored by 3G. The company had already found success with this strategy when it created beer giant Anheuser-Busch InBev through a series of megamergers, took Burger King private and revived its sales.
But the packaged food sector presented new challenges. Consumers are shifting towards increased consumption of fresh foods. Additionally, retailers’ private brands and new entrants posing as a a healthier option was stealing Big Food shoppers. Kraft Heinz sought to boost its inorganic growth by launching a takeover bid for Unilever, but the Popsicle owner rejected its offer.
Then a disastrous quarter arrived for Kraft Heinz in 2019. In a single earnings report, the company cut its dividend, disclosed a Securities and Exchange Commission investigation into its accounting practices and wrote down its brands by $15 billion.
Several months later, Buffett told CNBC that Berkshire and 3G overpaid for Kraft Heinz, driven by optimism that its brands were more valuable than they actually were. Yet he supported both 3G and Kraft Heinz. Other investors have blamed the company’s struggles on aggressive 3G cost-cutting.
To reverse the company’s downward spiral, 3G selected the food giant’s new chief executive, an AB InBev veteran, and Kraft Heinz went into turnaround mode. The company announced plans to increase its marketing and advertising spending and change its strategy for manufacturing new products. To reduce its exposure to private label competition, it also sold its cheese business to Lactalis, a French dairy giant, and its Planters nut brand to Hormel.
In 2021, Jorge Paulo Lemann, founding partner of 3G, resigned from the board of directors of Kraft Heinz. The following year, Alexandre Behring, founding partner, left the board of directors. And two months after Behring’s departure, 3G’s last board member, former AB InBev CEO Joao Castro-Neves, also resigned. Kraft Heinz announced its departure in a regulatory filing, but no press release – or fanfare – accompanied it.
3G had been periodically reducing its stake in Kraft Heinz since 2018. When it sold 25 million shares in 2019, at the height of the company’s struggles, the stock fell 4% in response to the disclosure. In 2022, she distributed about 7% of Kraft Heinz to investors in her fund, which reportedly includes tennis star Roger Federer.
Last year, Kraft Heinz named Carlos Abrams-Rivera as its new chief executive officer. Although he has been with the company since 2020, he is notably the first CEO of the company not linked to 3G.
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