Brazilian private equity firm 3G Capital has quietly sold its 16.1% stake in Kraft Heinz in the fourth quarter, nearly nine years after Warren Buffett masterminded the merger of blockbusters Kraft Foods and Heinz.
The sale marks the end of an era for 3G. The company’s influence over Kraft Heinz had declined in recent years, with the number of its board seats reduced from three to none by July 2022.
“3G has not been involved in the management of Kraft Heinz, nor has it been on the board for several years. They continued to be investors and were treated like we other investors,” Kraft Heinz said in a statement to CNBC. “We learned from their recent filing that 3G has fully exited Kraft Heinz stock in 2023.”
The company added that Buffett’s Berkshire Hathaway, its largest shareholder with a 26.8% stake, is a committed long-term owner.
3G did not immediately respond to a request for comment from CNBC.
Heinz Kraft Ketchup held in Hastings-on-Hudson, New York, USA on Tuesday, July 25, 2023.
Tiffany Hagler-Geard | Bloomberg | Getty Images
Berkshire and 3G’s doomed romance began on Valentine’s Day 2013, when the two companies announced they were teaming up to take Heinz private. A merger with Kraft Foods followed two years later.
The new company initially pleased investors with its earnings growth, thanks to the cost-cutting approach favored by 3G. The company already had success with this strategy when it created beer giant Anheuser-Busch InBev through a series of major mergers and took Burger King private and revived its sales.
But the packaged food business presented new challenges. Consumers began to eat more fresh food. In addition, retailers’ private label brands and new entrants are advertised as a Big Food shoppers were being robbed of the healthier option. Kraft Heinz tried to drive inorganic growth through a takeover bid for Unilever, but Popsicle owner turned down his offer.
Then came a disastrous quarter for Kraft Heinz in 2019. In a single earnings report, the company cut its dividend, disclosed an investigation by the Securities and Exchange Commission into its accounting practices and wrote down its brands by $15 billion.
Several months later, Buffett told CNBC that Berkshire and 3G overpaid for Kraft Heinz, fueling optimism that its brands were more valuable than they actually were. However, he sided with both 3G and Kraft Heinz. Other investors blamed 3G’s aggressive cost-cutting for the company’s problems.
To reverse the company’s downward spiral, 3G tapped the food giant’s new CEO, an AB InBev veteran, and Kraft Heinz went into turnaround mode. The company announced plans to increase marketing and advertising spending and change its strategy to produce new products. To reduce its exposure to private label competition, it also sold its cheese business to Lactalis, a French dairy giant, and its Planters nuts brand to Hormel.
In 2021, 3G founding partner Jorge Paulo Lemann resigned from the Kraft Heinz board. The following year, founding partner Alexandre Behring stepped down from the board. And two months after Behring’s departure, 3G’s last board member, former AB InBev CEO Joao Castro-Neves, also resigned. Kraft Heinz disclosed its departure in a regulatory filing, but no press release — or fanfare — accompanied it.
3G has periodically reduced its stake in Kraft Heinz since 2018. When it sold 25 million shares in 2019 at the height of the company’s troubles, the stock fell 4% in response to the disclosure. In 2022, it distributed about 7% of Kraft Heinz to its fund investors, which According to reports included tennis star Roger Federer.
Last year, Kraft Heinz tapped Carlos Abrams-Rivera as its new CEO. While he has been with the company since 2020, he is notably the company’s first CEO without ties to 3G.