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jerryking : 3g_capital   22

An unusual family approach to investing
May 30, 2018 | FT | John Gapper.

JAB’s acquisition of Pret A Manger resembles private equity but with a long-term twist.

Warren Buffett’s definition of Berkshire Hathaway’s ideal investment holding period as forever. ....Luxembourg-based JAB, owned by four heirs to a German chemical fortune, takes a family approach to investing. It is unusual in that this holding company seeks to retain its portfolio companies for at least a decade. These include Panera Bread, Krispy Kreme and Keurig Green Mountain coffee, which it merged with Dr Pepper Snapple in an $18.7bn deal in January 2018. This week JAB acquired the UK sandwich chain Pret A Manger for £1.5bn, continuing its buying spree of cafés and coffee, mounting a challenge to public companies such as Nestlé.

**These companies are acquired not to be traded but to be invested in and expanded.**

JAB is an innovative combination of ownership and investment in a world that needs challengers to stock market ownership and private equity. It is family controlled, but run by veteran professional executives. When it invests in companies such as Pret A Manger, it deploys not only the Reimann family’s wealth but that of other entrepreneurs and family investors.......Some of the equity for its recent deals, including Panera and Dr Pepper, came from funds raised by Byron Trott, the former Goldman Sachs investment banker best known for being trusted by the banker-averse Mr Buffett. Mr Trott’s BDT banking boutique specialises in advising founders and heirs to corporate fortunes, including the Waltons of Walmart, and the Mars and Pritzker families.

This is investment, but not as most of us know it. By definition, the world’s companies are mostly controlled by founders and their families — only a minority become big enough to be floated on stock markets and need to disclose much of their workings to outsiders. Family fortunes also tend to remain as private as possible: there is little incentive to advertise how much wealth one has inherited......As [families'] fortunes grow in size and sophistication, more of the cash is invested in other companies rather than in shares and bonds. That is where JAB and Mr Trott come in.

Entrepreneurs and their families tend to be fascinated by their own enterprises and bored by managing their wealth. But they want to preserve it, and they often like the idea of investing it in companies similar to their own — industrial and consumer groups that need more capital to expand. It is not only more interesting but a form of self-affirmation for the successful....Being acquired by JAB is appealing. The group turns up, says it will not take part in an auction but offers a good price (it bought Pret for more than its former owner Bridgepoint could get by floating it). It often keeps the existing executives, telling them they have to plough their own money into the company, and invests in long-term growth provided the business is efficiently run.

This is more congenial than heading a public company and contending with a huge variety of shareholders, including short-term and activist investors. It is also less risky than being bought by 3G Capital, the cost-cutting private equity group with which Mr Buffett teamed up to acquire Kraft Heinz. While 3G is expert at eliminating expenses it is less so at encouraging growth.
coffee  dynasties  high_net_worth  holding_periods  investing  investors  JAB  long-term  Nestlé  Pritzker  private_equity  privately_held_companies  Unilever  unusual  Warren_Buffett  family  cafés  Pret_A_Manger  3G_Capital  discretion  entrepreneur  boring  family_business  heirs 
may 2018 by jerryking
3G Capital’s rigorous diet of cost cutting is weighing down Tim Hortons owner RBI, Kraft Heinz
APRIL 18, 2018 | The Globe and Mail | by IAN MCGUGAN.

Tough, cost-conscious management is a vital ingredient at any good company. But right now, shareholders in Restaurant Brands International Inc. and Kraft Heinz Co. should be asking whether a lean and mean operating style is hitting its limits when it comes to peddling doughnuts and ketchup.

In recent months, RBI, the parent of Tim Hortons, and Kraft Heinz, maker of your favourite burger condiment, have disappointed investors....... the 3G approach is beginning to show some flaws. Critics argue that managers who focus on streamlining existing operations can create a temporary bump in earnings, but have less time to spend on product development, corporate innovation and brand building. The danger, skeptics say, is that efficiency increases but sales and earnings per share don’t.

“We harbor serious doubts about the management team’s ability to generate sufficient product innovation to grow its collection of ‘retro’ brands in highly commoditized categories,” Robert Moskow of Credit Suisse wrote this week in a report that downgraded Kraft Heinz to “underperform” status.....But softer measures suggest the profits are coming at a cost. Consider a survey of 1,501 Canadian adults published this week by Angus Reid Institute. Thirty five per cent of respondents said their opinion of Tim Hortons had worsened in recent years. While Tim Hortons’ advertising campaigns have tirelessly promoted the chain’s deep roots in Canadian communities, the reality on the ground appears to be shifting.

At Kraft Heinz, signs of stress are also becoming apparent, according to Mr. Moskow. The company’s Oscar Mayer cold cuts and Kraft natural cheese brands are losing market share to private labels, while Canadian retailers recently reduced their inventories, he said.

Employees may not be all that happy, either. Mr. Moskow said industry sources have expressed concern about growing turnover rates among Kraft Heinz staffers.
3G_Capital  Tim_Hortons  cost-cutting  product_development  innovation  Kraft_Heinz 
april 2018 by jerryking
Big brands lose pricing power in battle for consumers
Save to myFT
Anna Nicolaou in New York and Scheherazade Daneshkhu in London 2 HOURS AGO

The product manufacturers are being squeezed by the big retailers — notably, Amazon and Walmart, which together sell $600bn worth of goods a year. Walmart has long put pressure on suppliers to cut prices. Amazon’s rise has exacerbated the “deflationary impact”, Société Générale says, creating a “much tougher environment in the US”. After Amazon bought Whole Foods in June, the price war grew more intense in groceries, pushing prices to historic lows that punished producers. 

Brand loyalty has suffered in the process. Equipped with the tools to compare prices online instantly, and bombarded with more choices, shoppers are growing more likely to opt for cheaper and discounted products — particularly in categories such laundry detergent and shampoo. To keep their spots on store shelves, brands are having to accept lower prices......Former Amazon employees say the company’s algorithms scan prices across competitors in real time, automatically adjusting its own so it can offer the lowest price. While most big brands have wholesale agreements with Amazon, third-party sellers are prolific on the site, complicating price control further. A 34oz bottle of P&G’s Pantene Pro-V Shampoo & Conditioner was listed by 10 different sellers — nine of them third parties — on the shopping site.

Amazon’s dominance makes it difficult for brands to abandon the platform, or try to sell directly on their own websites. “You have 200m customers on Amazon. If you walk away, there’s 200m people who are going to just buy from your competitors,” says James Thomson, a former Amazon manager who consults brands. “You’re probably not going to win.”

“This is a pretty dire situation,” he adds. “If brands are worried about meeting quarterly targets, they can’t afford to lose Amazon sales.”

Still, “the retailers have nothing to gain by pushing [consumer products makers] into bankruptcy”,
......Consumer goods companies have responded to the pricing pressures by aggressively cutting costs, led by the “zero-based budgeting” model of 3G Capital,
large_companies  Fortune_500  brands  CPG  pricing  price_wars  shareholder_activism  Amazon  P&G  Nestlé  win_backs  price-cutting  Nelson_Peltz  shifting_tastes  Colgate-Palmolive  upstarts  Unilever  zero-based_budgeting  3G_Capital  e-commerce  Mondelez  Big_Food 
february 2018 by jerryking
Daniel S. Schwartz of Restaurant Brands International on the Value of Hard Work
SEPT. 8, 2017 | The New York Times| By ADAM BRYANT.

When you think about your leadership style today, do you see their[his parent's] influence?

Probably the biggest influence they’ve had is about always being very respectful of other people. Neither of them led teams or organizations, but there was always this emphasis on kindness and manners and just being a good person.

I always have that in the back of my head, regardless of who I’m talking to. The world’s a small place, life’s short, and so you should only be nice to people. I don’t raise my voice at work. I don’t have tantrums.......Alex Behring, who heads up 3G, gave me some great advice early on. He said that you have to manage the people, not the business. .....What were other early lessons for you?

If you want to change something or if you want to really influence or impact someone, you need to be in that person’s market and be with them face to face. You can’t run a multinational business from your desk. You can’t just get on the phone and tell the people that you need to do things differently.

If you make the trip, that’s a big investment of time for you. People appreciate that, and they’re going to be more open to your feedback. You’ll also have more credibility because you’ve seen their business and been in their market......How do you hire?

I like people who are passionate, who have persevered and who are clearly humble and not arrogant. It’s O.K. to be confident, but not arrogant. I like people who genuinely are looking for a project and not a job.
CEOs  hard_work  Tim_Hortons  Popeyes  Burger_King  hiring  leadership  3G_Capital  RBI  Daniel_Schwartz  lessons_learned  humility 
september 2017 by jerryking
Hyena capitalism receives a swift kick from the Unilever giraffe
25 February/26 February 2017 | FT| Robert Armstrong.

the rise in hyena capitalism — broadly, the emphasis on squeezing the maximum present return out of assets — is an effect of low economic growth. When the number of US workers was increasing and innovation was delivering faster productivity growth, there were lots of reasons to invest. Today it just makes more sense to focus on cost.....More generally, it may be that, since the financial crisis, spooked managements and, in the case of public companies, investors have become increasingly risk averse — more so than the state of the economy would justify. So money piles up on balance sheets, is paid as dividends, or goes to repurchase shares. Investment falls, despite the availability of cheap credit to fund new projects.
It also looks increasingly likely that the change in management incentive structures, in particular the increase in share-based incentives and shortening tenures for top executives, have made company leaders less inclined to invest. there is a risk that it could become self-reinforcing. Lack of investment affects not just future productivity, but also demand. At the extreme, if no one invests, no one earns and there is no growth. If companies are forgoing opportunities to invest, they are depriving the economy of customers with money to spend.
More insidiously, it could be that hyena capitalism undermines trust in the institutions and mores that makes corporate capitalism possible in the first place. If workers know they are regarded as dispensable cost centres, why should they commit to learning company-specific skills and procedures? Why not shirk instead? If the gains from corporate transformations go overwhelmingly to investors and financiers, why should voters support free market policies?
Capitalism needs both giraffes and hyenas. But in a time of modest growth, low productivity growth and rising inequality, one must keep an especially close eye on the hyenas.
CPG  Unilever  3G_Capital  private_equity  public_companies  consumer_goods  Kraft_Heinz  inefficiencies  capitalism  sweating_the_assets  undermining_of_trust  deprivations 
march 2017 by jerryking
Can 3G Capital Keep Thriving on Acquisitions and Cost Cutting? - The New York Times
By STEVEN DAVIDOFF SOLOMON MARCH 7, 2017

the larger question about 3G is whether it is possible to keep creating value by acquisition. At some point, you might think, the music stops playing.

Were that to happen, it would become clear how much long-term value is actually being created, and how much of the gains are short-term lifts from acquisitions and cost cuts. Restaurant Brands, for example, has reduced costs but revenue has remained relatively flat. Last quarter, Kraft Heinz’s revenue fell 3.7 percent.

In other words, with flat revenue, income has to come from somewhere, and you can only slash so much.

It’s a model that private equity firms don’t follow. To be sure, they also cut costs, but private equity also prides itself on revenue expansion and innovation. And the reason is simple: If the merger and acquisition pipeline dries up, so does the growth.....one has to wonder if a firm can succeed simply by cutting. To be sure there will be some gains and value made from the cuts, but eventually part of running a business means actually building something.

Like it or not, that will require spending on new products and the business itself, something 3G’s managers appear to hate above all else, as opposed to simply acquiring more companies.
3G_Capital  mergers_&_acquisitions  cost-cutting  new_products  private_equity 
march 2017 by jerryking
Inside the brutal transformation of Tim Hortons - The Globe and Mail
MARINA STRAUSS
THE GLOBE AND MAIL
LAST UPDATED: WEDNESDAY, FEB. 22, 2017

Since taking over the iconic chain in 2014, its new Brazilian owner, 3G Capital, has purged head office, slashed costs and squeezed suppliers. Shareholders are happy, but is 3G tearing the heart out of Timmy’s?.....3G is regarded as ultra-disciplined owners who are sticking to the same playbook they have followed at companies including Burger King, Anheuser-Busch, Kraft Foods and Heinz: massive layoffs, replacing legacy managers with hungry youngsters and, above all, a fanatical devotion to financial benchmarks and cost-cutting. (It remains to be seen whether this will also be the approach for RBI’s latest acquisition, Popeyes Louisiana Kitchen.)....Will 3G's analytics-driven overhaul of Tim Hortons—using the same template the private equity firm’s founders have deployed at railroads, brewers and food makers—succeed in the long run, or is it in danger of cutting the heart out of a Canadian icon? ......Suppliers are also feeling the squeeze. From the get-go, RBI made it clear it would be reviewing vendor relationships. And the company pushed for better terms, including extensions on bill payments to as much as 120 days from 30 days or less. Maple Leaf Foods, a major partner that supplied meat to Tim Hortons, declined to accept the new terms, and walked away....
Former employees also say RBI has cut back on product research and development spending at Tim Hortons, offloading some of that work to suppliers. That’s not uncommon in the fast-food world, but it can be risky. “Suppliers can do a great job with innovating and R&D, but you’re limited to what the supplier is trying to develop,” ......3G has never encountered a brand quite like Tim Hortons. It isn’t just another coffee company. It is a Canadian destination, an integral part of many Canadians’ day and a brand that defines us, to some degree, around the world.......“The risk, in looking at Tim Hortons through the lens of efficiency alone, is to miss the greatest value of the asset, and that is the Tim’s brand and its deep connection to the fabric of the country,” says Joe Jackman, founder of strategic retail consultant Jackman Reinvents, whose clients have included Old Navy, Hertz, Rexall and FreshCo. “You can’t cost-cut your way to retail nirvana.”
3G_Capital  Tim_Hortons  Marina_Strauss  cost-cutting  head_offices  iconic  brands  organizational_culture  private_equity  layoffs  data_driven  franchising  transformational  fast-food  supply_chains  R&D  Canadiana  goodwill  JWT  community_support  downsizing  efficiencies  coffee  staying_hungry  cultural_touchpoints  restructurings  supply_chain_squeeze  RBI  playbooks 
february 2017 by jerryking
The ‘Warren Buffett of Brazil’ Behind the Offer for Unilever
FEB. 17, 2017 | The New York Times | by LIZ MOYER.
Profile of Jorge Paulo Lemann.

Mr. Lemann, 77, a Harvard-educated former Brazilian tennis champion, ranks 19th on the Forbes list of world billionaires, with a fortune estimated at $29 billion. He and his partners at 3G have developed over the years what many call a playbook for extracting costs from companies by eliminating frivolities like corporate-owned aircraft and expensive office space, revamping management and slashing jobs.

They instill strict austerity that forces managers to justify expenses beyond basic operating needs. Their model makes expansion overseas crucial for increasing returns.

They have also focused on major consumer brands rather than on diversifying......Mr. Lemann and Mr. Buffett share a similar investment philosophy: patience. Instead of selling his portfolio after he has cut and remodeled companies, Mr. Lemann has used Anheuser-Busch InBev and now Kraft Heinz as base camps for further global expansion.
3G_Capital  private_equity  Brazilian  patience  Unilever  Kraft_Heinz  Harvard  moguls  high_net_worth  cost-cutting  Warren_Buffett  playbooks 
february 2017 by jerryking
Lean Recipe Fuels Food Deals - WSJ
By DAVID KESMODEL and ANNIE GASPARRO
March 25, 2015
Kraft  Heinz  3G_Capital 
march 2015 by jerryking
An expert at the quick flip cooking up a whopper deal - FT.com
August 29, 2014 | FT | By Neil Munshi.

It did not take long for Mr Schwartz’s confidence to bear fruit. In 2013, when he was only 32 years old, he was put in charge of Burger King by 3G Capital of Brazil, its private equity owners. This week, only 16 days after turning 34, Mr Schwartz unveiled one of the biggest deals in fast-food history – Burger King’s $11.4bn acquisition of Tim Hortons, the Canadian coffee-and-doughnut chain...As might be expected for a young man playing in a well-established game, Mr Schwartz’s forte at Burger King has been financial engineering. A native of Long Island, he focused on finance at university before honing his number-crunching skills during stints in the mergers-and-acquisition arm of Credit Suisse First Boston and Altair Capital Management, a Connecticut hedge fund. He joined 3G as an analyst in 2005 and made partner three years later. In 2010, he led 3G’s $4bn leveraged buyout of Burger King and became its chief financial officer. Two years later, he helped 3G sell a roughly 30 per cent stake in the second-largest US burger chain for about $1.5bn. He became chief executive last year.
Burger_King  CEOs  Cornell  alumni  dealmakers  Tim_Hortons  M&A  private_equity  Daniel_Schwartz  3G_Capital  financial_engineering 
august 2014 by jerryking
The Brazilian influence behind 3G’s Tim Hortons deal - The Globe and Mail
STEPHANIE NOLEN
RIO DE JANEIRO — The Globe and Mail
Published Monday, Aug. 25 2014

Cristiane Correa, is the author of Dream Big: How the Brazilian Trio behind 3G Capital – Jorge Paulo Lemann, Marcel Telles and Beto Sicupira – acquired Anheuser-Busch, Burger King and Heinz
Stephanie_Nolen  private_equity  Brazil  Brazilian  moguls  3G_Capital  books 
august 2014 by jerryking
3G Capital, the latest private equity darling - The Globe and Mail
Aug. 25 2014 | G&M | JACQUELINE NELSON.

“It is something that’s embedded in our culture is that we are going to continuously look for areas to find efficiencies and to operate our business in a smarter way,” said Josh Kobza, Burger King’s chief financial officer, discussing costs on a recent earnings call with analysts. “That’s another area that will continue to be focused on over the next few years, in trying to be the most efficient operator in our sector. And that is really how we think about driving underlying growth in our business and those are the big focuses for our model going forward.”
3G_Capital  cost-cutting  Berkshire_Hathaway  Burger_King  efficiencies  hedge_funds  private_equity  Tim_Hortons 
august 2014 by jerryking
Buffett's Berkshire Hathaway, 3G Capital to Buy Heinz - WSJ.com
February 14, 2013 | WSJ | By JULIE JARGON and SERENA NG.

Heinz agreed to be acquired by Warren Buffett's Berkshire Hathaway and private-equity firm 3G Capital for more than $23 billion, a deal the companies pegged as the largest-ever in the food industry...Fast growth in emerging markets has created a new class of well-heeled investors that are increasingly poring over American companies looking for targets. The Brazilian investors behind the Heinz deal, in particular, are pairing their money with hard-charging management styles that have shaken up comfortable American and European companies.
Warren_Buffett  Brazil  private_equity  food  brands  3G_Capital  hard-charging  Heinz  Brazilians 
february 2013 by jerryking
Brazil's New Global Deal Makers - NYTimes.com
September 2, 2010 | | L arry Rohter, a DealBook colleague,
is the author of “Brazil on the Rise: The Story of a Country
Transformed” (Palgrave Macmillan), which came out this week. He writes
about the symbolism of the buyout bid for Burger King:
3G_Capital  Brazil  deal-making  globalization  mergers_&_acquisitions  M&A  books  dealmakers 
september 2010 by jerryking

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