We've all read plenty about the whopper of a merger between Kraft and Heinz, creating the third-largest food and beverage company in North America and fifth-largest in the world. The question I'd like to explore is, "Is it a good thing or a bad thing?"
On the "good" side:
On the "bad" side;
There's plenty to like, and hate, about these deals. People get hurt. People get rich. So it kind of comes down to the side of the political spectrum on which you tend to sit. If you're a hard-boiled capitalist, you see this kind of "creative destruction" as an example of laissez-faire capitalism working its magic — breaking up under-performing assets and reallocating them to some more efficient and more profitable investment. If you're more of a "safety net" believer, you hate the way people get ground up and spit out in this kind of merger, and want to see some softer landing for folks.
In a dog-eat-dog world, the model wielded by 3G and backed by Buffet is ruthlessly efficient. It strips a slow-growth enterprise of its excess baggage and makes a lot of money doing it. We don't know yet what the end game is. Do they ultimately sell off the remaining assets and move onto another bloated organization, or do they eventually change the model and start focusing on growth? The purchase of Kraft suggests that they are not about to change the model, but rather port it over to other assets. It's the model they know how to wield better than anyone else right now. The chum is in the water. Expect more mega food and beverage mergers now that 3G has set a new benchmark and shown a way for generating higher value from Big Food brands. It's free market capitalism at its efficient best — as long as you're not caught in the middle of it.