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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

#41

Post by Lockyy »

bjourne wrote: post #28
nirvana wrote: post #19

Earlier quoted context omitted.

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…

The OP is assuming it is a ripoff because you can buy other producers ketchup for half the price of "brand-name" Heinz ketchup. I doubt many people would tell the difference between Heinz and something else in a double-blind test. And if they can it is because the better tasting ketchup contains more sugar which anyway is bad. Same thing with jeans, you cant see the difference (unless they have the brand printed on t…

You act as if the only difference in high quality clothing is the looks, instead of considering that they may be much more comfortable to wear. People close to me have also admitted that wearing brand name clothing provides them with confidence in social situations that they wouldn't otherwise have. I think it's rather unfair to disregard brand names just because of looks.

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

#42

Post by adestefan »

AlexMuir wrote: post #23
nirvana wrote: post #19

Earlier quoted context omitted.

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…

Ketchup is a physical product with raw material costs which requires physical storage and delivery, and must be distributed through intermediaries. It also has a shelf life, and ingredients that fluctuate in price seasonally. Your comparison is about as sensical as me complaining I can't type an essay using 100 bottles of ketchup. However, my points are that a) we routinely pay 10x the 'value' of food products, and b…

Heinz ketchup is worth it to me because it tastes like Heinz ketchup. They could sale the off brand for $0.01 and I still wouldn't buy it. I'm not going to go broke by buying a $3 bottle of ketchup that will last me months.

The other food that I will only buy one brand is Kraft Mac & Cheese. I know the stuff is nasty. I know it's bad for me. But, damn it that's what boxed Mac & Cheese is suppose to taste like.

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

#43

Post by pyre »

twoodfin wrote: post #26
AlexMuir wrote: post #23

Earlier quoted context omitted.

Ketchup is a physical product with raw material costs which requires physical storage and delivery, and must be distributed through intermediaries. It also has a shelf life, and ingredients that fluctuate in price seasonally. Your comparison is about as sensical as me complaining I can't type an essay using 100 bottles of ketchup. However, my points are that a) we routinely pay 10x the 'value' of food products, and b…

You keep talking about the 'value' of products and what they're 'worth'. Things are worth what people will pay for them. As nirvana pointed out, looking at only the marginal production cost of something is highly misleading. Heinz makes about 36% gross margins [1], which is certainly good, but it's not as if they're seeing the 'value' of that '10x' markup. And lest you think the rest of their cost is advertising to f…

  | Things are worth what people will pay for them.
If I pay $50 million for a forged Mona Lisa, does that mean that forgeries of the Mona Lisa are all worth $50 million?

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

#44

Post by adestefan »

bjourne wrote: post #28
nirvana wrote: post #19

Earlier quoted context omitted.

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…

The OP is assuming it is a ripoff because you can buy other producers ketchup for half the price of "brand-name" Heinz ketchup. I doubt many people would tell the difference between Heinz and something else in a double-blind test. And if they can it is because the better tasting ketchup contains more sugar which anyway is bad. Same thing with jeans, you cant see the difference (unless they have the brand printed on t…

I'm guessing that you'd be surprised by the number of people that would be able to pick out the Heinz ketchup in a double blind test. I know people that refuse the ketchup at McDonalds specifically because it's not Heinz.

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

#45

Post by twoodfin »

pyre wrote: post #43
twoodfin wrote: post #26

Earlier quoted context omitted.

You keep talking about the 'value' of products and what they're 'worth'. Things are worth what people will pay for them. As nirvana pointed out, looking at only the marginal production cost of something is highly misleading. Heinz makes about 36% gross margins [1], which is certainly good, but it's not as if they're seeing the 'value' of that '10x' markup. And lest you think the rest of their cost is advertising to f…

| Things are worth what people will pay for them. If I pay $50 million for a forged Mona Lisa, does that mean that forgeries of the Mona Lisa are all worth $50 million?

Of course not. Had you known it was a forgery, you wouldn't have spent $50 million. That would apply just as well to buying a bottle of Heinz ketchup tainted with rat poison.

But people know what's in Heinz. They know what it tastes like. They keep buying it at the price Heinz and their grocer charges.

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

#46

Post by tedunangst »

pyre wrote: post #43
twoodfin wrote: post #26

Earlier quoted context omitted.

You keep talking about the 'value' of products and what they're 'worth'. Things are worth what people will pay for them. As nirvana pointed out, looking at only the marginal production cost of something is highly misleading. Heinz makes about 36% gross margins [1], which is certainly good, but it's not as if they're seeing the 'value' of that '10x' markup. And lest you think the rest of their cost is advertising to f…

| Things are worth what people will pay for them. If I pay $50 million for a forged Mona Lisa, does that mean that forgeries of the Mona Lisa are all worth $50 million?

It means, at the time you bought, you thought the painting was worth $50 million. Later, when you discover it's not, you'll be less likely to buy anything else from that art dealer. Same as anything else in life. People keep buying ketchup because ketchup remains valuable to them, even at $2 a bottle.

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

#47

Post by nicholassmith »

Evernoob wrote: post #37
nicholassmith wrote: post #33

Earlier quoted context omitted.

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?

Well that's the interesting thing, I'd imagine that there is some kind of penalty but I have no idea what. Misrepresentation of a food product to consumers? Maybe. It's tenuous, but I'd imagine it's very possible for them to spin it like that.

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

#48

Post by objclxt »

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…

> I worked for Lucozade (UK Gatorade) for a while. Our total cost, delivered to retailer, of a bottle was 12p. We sold it to them for min 50p and they sold it for at least £1.

FMCG goods have typically awful margins on them for retailers. A 50p markup sounds good, but consider that out of that 50p the retailer has to cover transportation costs, salaries, cost of display, cost of retail space, etc. Supermarkets are not exactly raking in profit.

And it's not such a rosy picture for the brand manufacturers either. The 20p raw cost of supplying the bottle of Lucozade doesn't include advertising expenses, which for branded products tend to be substantial (after all, that's how they become brands in the first place).

Lucozade's parent company, GSK, makes a lot of money, but nearly all of that money comes from bio-tech and pharma. They don't make nearly as much money from Lucozade, and there was actually a story a week ago that they're trying to offload the brand[1].

[1]:http://www.thisismoney.co.uk/money/markets/article-2274545/G...

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

#49

Post by Graham24 »

alanctgardner2 wrote: post #36
huherto wrote: post #34

Earlier quoted context omitted.

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!

just say neigh.

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

#50

Post by Graham24 »

erock wrote: post #40
ahi wrote: post #22

Earlier quoted context omitted.

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

and the quality film.
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