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Berkshire and 3G Capital to Buy Heinz for $23 Billion

dealbook.nytimes.com

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Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#31

Post by adestefan »

WillyF wrote: post #17

I've heard stories that Heinz is so defensive of their brand that they send out "Ketchup Inspectors" to make sure restaurants aren't refilling Heinz bottles with lesser ketchup. This is the only somewhat legitimate source that I could find: http://www.freerepublic.com/focus/f-news/1067133/posts

Why shouldn't they? Heinz ketchup has a specific flavor profile. If a restaurant is filling Heinz bottles with a different ketchup the consumer could be lead to believe that Heinz is changing their flavor and may never buy it again.

I don't even like ketchup and I could pick out Heinz in a blind taste test.

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#32

Post by goatforce5 »

nirvana wrote: post #19
AlexMuir wrote: post #6

Over the last few months I've been noticing a lot of adverts for Heinz products on the radio. They go like this: "When I was younger dad would take us out for fish and chips. We'd walk along the canal and feed the ducks, even in the rain. Then I'd unwrap the bag, with the steam rising, and squirt on a dollop of ketchup. And, like always, it has to be Heinz." I'm always amazed at the ability of brands to sell £0.20 pr…

You're looking at the cost of production, and then the price and assuming that all of the space between the two is profit, and seem to be implying that somehow it is a ripoff. What you're not considering is the value to the customer. The incremental cost of a copy of Microsoft Office (with electronic delivery they cut out virtually all of their manufacturing cost) is close to zero. Probably 12p as well. Yet Microsoft…

> remember when spreadsheets were physical sheets of paper and companies had staffs of dozens of women whose sole job was to type up correspondence on typewriters?

Back in the 60's before I was around, my mum worked in the accounting department of a mid-sized car dealer. Her job title was "Computer" because she'd update their books by hand. Later on they got the first electronic desktop calculator in the city and the local paper came by to do a story on this modern marvel.

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#33

Post by nicholassmith »

WillyF wrote: post #17

I've heard stories that Heinz is so defensive of their brand that they send out "Ketchup Inspectors" to make sure restaurants aren't refilling Heinz bottles with lesser ketchup. This is the only somewhat legitimate source that I could find: http://www.freerepublic.com/focus/f-news/1067133/posts

I'm sure there was a reddit where someone said they'd worked in a restaurant and they'd seen the ketchup checks happening.

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#34

Post by huherto »

meaty wrote: post #13
AlexMuir wrote: post #6

Over the last few months I've been noticing a lot of adverts for Heinz products on the radio. They go like this: "When I was younger dad would take us out for fish and chips. We'd walk along the canal and feed the ducks, even in the rain. Then I'd unwrap the bag, with the steam rising, and squirt on a dollop of ketchup. And, like always, it has to be Heinz." I'm always amazed at the ability of brands to sell £0.20 pr…

Spot on. Those figures make me shiver. Branding is just not worth it on food when you know about the details. Small rant: I stopped buying brands years ago, avoid supermarkets like the plague and don't buy ready meals. Instead I purchase from wholesalers in bulk and grow a few expensive things (chillis, peppers, tomatoes, herbs etc). Granted I have to buy beans in 2kg tins and pasta by the 5kg bag from the wholesaler…

Well, you have an economy of scale. 5 people.

For me, I think it is cheaper just to buy at the super market and buy ready meals.

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#35

Post by 3am »

r4vik wrote: post #24
Retric wrote: post #18

Earlier quoted context omitted.

1.3 / 23 is less than 6 percent ROI, and buffet thinks this is a good investment. Granted, they may think the business can be streamlined, but I still think this says a lot about the capital glut that's driving down returns. Ps: Most of this deal is financed with debt, so there buying 6% ROI with debt.

as long as the debt costs them less than 6% then free money

Berkshire Hathaway's biggest problem is finding productive investments on the scale of the cash they generate. There insurance float provides them with what is essentially interest free loans if they estimates losses well.

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#36

Post by alanctgardner2 »

huherto wrote: post #34
meaty wrote: post #13

Earlier quoted context omitted.

Spot on. Those figures make me shiver. Branding is just not worth it on food when you know about the details. Small rant: I stopped buying brands years ago, avoid supermarkets like the plague and don't buy ready meals. Instead I purchase from wholesalers in bulk and grow a few expensive things (chillis, peppers, tomatoes, herbs etc). Granted I have to buy beans in 2kg tins and pasta by the 5kg bag from the wholesaler…

Well, you have an economy of scale. 5 people. For me, I think it is cheaper just to buy at the super market and buy ready meals.

As a bonus, you get lots of tasty horse!

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#37

Post by Evernoob »

nicholassmith wrote: post #33
WillyF wrote: post #17

I've heard stories that Heinz is so defensive of their brand that they send out "Ketchup Inspectors" to make sure restaurants aren't refilling Heinz bottles with lesser ketchup. This is the only somewhat legitimate source that I could find: http://www.freerepublic.com/focus/f-news/1067133/posts

I'm sure there was a reddit where someone said they'd worked in a restaurant and they'd seen the ketchup checks happening.

What's the penalty if you get caught? Restaurants usually just say it's "ketchup" without mentioning that it's Heinz. What can Heinz actually do to you if you buy a bottle of their stuff and fill it with something else?

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#38

Post by mseebach »

r4vik wrote: post #24
Retric wrote: post #18

Earlier quoted context omitted.

1.3 / 23 is less than 6 percent ROI, and buffet thinks this is a good investment. Granted, they may think the business can be streamlined, but I still think this says a lot about the capital glut that's driving down returns. Ps: Most of this deal is financed with debt, so there buying 6% ROI with debt.

as long as the debt costs them less than 6% then free money

as long as (profit - cost of debt)/(invested capital) > (ROI on best alternative investment) then free money.

Low risk, low volatility 6% ROI isn't a bad investment at all, but I think smart money is on Buffett having an idea or two for increasing that number.

Re: Berkshire and 3G Capital to Buy Heinz for $23 Billion

#40

Post by erock »

ahi wrote: post #22
AlexMuir wrote: post #11

Earlier quoted context omitted.

I suppose one interesting thing about brands (or perhaps just Heinz) is that we assume they're local. I would have said Heinz was a British company, no question. Likewise with Kelloggs.

Kelloggs' biggest factory is in the UK, but it has something of a strange American history: https://en.wikipedia.org/wiki/Kelloggs#History

for more in depth history, check out this book https://en.wikipedia.org/wiki/The_Road_to_Wellville
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