Brazilian private equity firm 3G Capital has quietly sold its 16.1% stake in the company Kraft Heinz in the fourth quarter, almost nine years after Warren Buffett masterminded the successful merger of 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, as the number of board seats had fallen from three to zero by July 2022.
“3G has not been involved in the management of Kraft Heinz, nor have they been on the Board of Directors for a number of years. They remained an investor and were treated as we treat any investor,” Kraft Heinz said in a statement to CNBC. “We learned from their recent filing that 3G was fully exiting Kraft Heinz shares in 2023.”
The company added that Buffett's Berkshire Hathaway, the 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 arranged in Hastings-on-Hudson, New York, USA, on Tuesday, July 25, 2023.
Tiffany Hagler-Geard | Bloomberg | Getty Images
The doomed romance between Berkshire and 3G began on Valentine's Day in 2013, when the two companies announced they were teaming up to take Heinz private. Two years later the merger with Kraft Foods followed.
The new company was initially pleased with investors' profit growth, thanks to the cost-cutting approach favored by 3G. The company had already achieved success with that strategy when it created beer giant Anheuser-Busch InBev through a series of mega-mergers, took Burger King private and revived sales.
But the packaged food sector brought new challenges. Consumers started eating more and more fresh food. Furthermore, private label brands from retailers and new entrants tout themselves as one healthier option were stealing from Big Food shoppers. Kraft Heinz tried to stimulate inorganic growth through a takeover bid for Unilever, but Popsicle's owner rejected his offer.
Then came a disastrous quarter for Kraft Heinz in 2019. In a single earnings report, the company cut its dividend, announced a Securities and Exchange Commission investigation into its accounting practices and wrote off its brands by $15 billion.
Several months later, Buffett told CNBC that Berkshire and 3G overpaid for Kraft Heinz, buoyed by optimism that their brands were more valuable than they actually were. Yet he backed 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 itself chose the food giant's new CEO, a veteran of AB InBev, and Kraft Heinz went into turnaround mode. The company announced plans to increase its marketing and advertising spending and change its strategy for creating 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, Jorge Paulo Lemann, founder of 3G, stepped down from the board of Kraft Heinz. The following year, fellow founder Alexandre Behring left 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 announced its departure in a filing with the regulator, but no press release – or fanfare – accompanied it.
3G had been periodically reducing 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 investors in its fund, which reportedly included tennis star Roger Federer.
Last year, Kraft Heinz tapped Carlos Abrams-Rivera as its new CEO. Although he has been with the company since 2020, he is notably the company's first CEO not to have any ties to 3G.