In every company the words maximizing the potential of brands and business is easily found, what is harder is to actually do it. At the moment, the world’s eyes are on a Brazilian company called 3G Capital and for they manage to find profits in the restaurant chain Burger King. The company also owns the beer brewer InBev and they teamed up with Warren Buffett to buy Kraft to combine it intor KraftHeinz. From a financial point of view, 3G creates value by putting dynamic management teams in charge and instilling a culture of cost cutting that incumbent management did not achieve. Part of the process is a zero based budgeting in which managers have to start from scratch in year to justify their operating budgets. The process has lead to higher operating margins (making more money); closing of manufacturing plants and elimination of less profitable product lines. From a financial point of view these are good things to be doing. The big question is can the team from 3G Capital turn around Kraft? for in the past Kraft’s execution of those wonderful words of maximizing the potential of brands and business was not that great. In an article by David Milstead he believes it is not quite the time to buy shares in KraftHeinz.

Linking to dividend paying stocks, Kraft is a large company with a healthy market share but has not been lean and operationally efficient as Heinz. There maybe reasons but times are changing and using the companies resources to the best return for the shareholders is going to be a good thing for the combined company. The results will likely take a number of quarters and then the company can be a long term hold.

There are more questions than answers, till the next time – to raising questions