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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

#51

Post by TylerE »

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…

Not true at all. Many off-brand ketchups are thin and overly vinegar-y,

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

#52

Post by logn »

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

You can see the workings of Heinz factories here (the video also corroborates the existence of restaurant ketchup inspectors):

https://www.youtube.com/watch?v=Yz6FudM0zKk

They have full-time tasters who are amongst the only 8 people to know the full recipe.

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

#53

Post by logn »

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…

In addition to the Heinz margins, most grocers rely on only 1% margins.

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

#55

Post by lukeschlather »

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?

That's a really clear-cut trademark issue. If you're using Heinz' trademark to sell a different product they can sue you easy.

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

#56

Post by lutusp »

lukeschlather wrote: post #55
Evernoob wrote: post #37

Earlier quoted context omitted.

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?

That's a really clear-cut trademark issue. If you're using Heinz' trademark to sell a different product they can sue you easy.

> If you're using Heinz' trademark to sell a different product they can sue you easy.

No. If you're using the Heinz trademark in such a way as to confuse and mislead the public, then they can sue you. Otherwise probably not.

Consider the example of Apple Computer and Apple Music (once owned by the Beatles). Two businesses, no conflict, so no lawsuit.

Once Sun Computer threatened to sue me because I had a Web page named "Sun Computer" (the page computed the position of the sun: http://www.arachnoid.com/lutusp/sunrise/). My argument was that I wasn't trying to confuse the public, and my use of the word "sun" was legitimate because it referred to the astronomical object by that name. Their objection was that my use of "Sun Computer" as a page name caused my page to appear above theirs in the Google search listings.

I decided their position had merit, and I renamed the page. My point is that it is all about the degree to which use of a trademark or trademarked name would confuse the public and hurt someone's business, not use of a trademark per se.

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

#57

Post by Mvandenbergh »

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.

Probably true as far as growing your own goes, but bulk dry food like pasta and beans lasts long enough that you can buy in bulk even for one person.

Of course, you can't amortise the labour of cooking over as many people, so it may still make sense to get the ready meals from that perspective.

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

#58

Post by Mvandenbergh »

filvdg wrote: post #8
geraldchan wrote: post #5

The fundamentals of this transaction will be outside the scope of understanding of the HN crowd.

Understanding value investing might be nice if you want to attract VC interest in your start up , taken that most start ups are bought by other companies and don't go IPO (if they don't fail)it might be interesting to understand the fundamentals ... this one if brand identity for sure

Value investing and venture capital are about as different as investment strategies could be. Value investors don't usually companies that don't pay regular dividend streams, most tech companies (let alone start-ups) never pay revenue.

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

#59

Post by ricardobeat »

lutusp wrote: post #56
lukeschlather wrote: post #55

Earlier quoted context omitted.

That's a really clear-cut trademark issue. If you're using Heinz' trademark to sell a different product they can sue you easy.

> If you're using Heinz' trademark to sell a different product they can sue you easy. No. If you're using the Heinz trademark in such a way as to confuse and mislead the public, then they can sue you. Otherwise probably not. Consider the example of Apple Computer and Apple Music (once owned by the Beatles). Two businesses, no conflict, so no lawsuit. Once Sun Computer threatened to sue me because I had a Web page nam…

The different product the parent mentioned is still ketchup. The scenario is replacing the ketchup in a Heinz bottle with ketchup from another brand, not selling "Heinz Cola" or something.

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

#60

Post by sueders101 »

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…

Not all jeans, even within a brand are created equal. Levi's quality varies greatly between product lines. The jeans they sell at Kohl's for $35 and the ones they sell at their own stores are completely different products. I own a couple pairs of Levi's Commuter jeans/pants and as a daily bike commuter in Portland they've definitely been worth the price difference. There's far more to clothing than how it looks.
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