Kraft Heinz could well be Warren Buffett’s favourite investment right about now, given how his 2013 investment in HJ Heinz resulted in a windfall gain of $4.4 billion for his firm Berkshire Hathaway. Thanksto the one-time gain, the firm’s third quarter net profit nearly doubled. Buffett teamed up with investment firm 3G Capital in 2013 to buy ketchup maker HJ Heinz and then embarked on a massive cost-cutting drive to improve the company’s profitability.
Then, inMarch, the company bought Kraft Foods Group to create the third-largest F&B company in North America and the fifth-largest F&B company in the world, with eight brands breaching the $1-billion level. The Kraft Heinz portfolio today has products as diverse as cheese, ketchup, instant coffee, marshmallows, mayonnaise, salted peanuts and some of the most recognisable food brands in the world, such as Philadelphia, Oscar Mayer, Complan and Ore-Ida.
Heinz has been selling ketchup for 140 years now, holding over 60% market share in the US and a similar chunk of market share in some of its other key markets, such as UK and Canada. Post the merger, the combined entity boasts of total sales of $28 billion and profit of $1.65 billion, looking to get stronger with $1.5 billion savings in costs by 2017.
If Heinz’s global story is on song, its India story has been quite the opposite. Heinz, which made its entry here through the acquisition of Glaxo’s family products division in 1994 for ₹210 crore, seems to have lost its way. Every single brand it owns has lost market-share consistently. Its entry into new segments failed miserably and line extensions bombed, too.
And, most importantly, the product that Heinz is synonymous with globally and the only product from the parent’s stable that was ever introduced in India — tomato ketchup — is insignificant with an unimpressive 6% market share, even 15 years after its launch. As of 2014, Heinz’s India sales stood at ₹1,274 crore, a dismal 6% growth from ₹1,1