Kraft Heinz's new CEO looks beyond cost-cutting, big M&A

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Kraft Heinz Co's incoming chief executive, Miguel Patricio, is indicating a change in strategy for the packaged food company that could move it away from the aggressive cost-focused culture that has been in place since the company was created in 2015.

Patricio, a 52-year-old Portuguese native who will take over the helm of the world's fifth biggest food company from July 1, said he plans to focus more on efficiency, investing in brands and growing sales organically at a company that has been reeling from a 15.4-billion-U.S.-dollar writedown on some of its brands.

Kraft Heinz's focus on cost-cutting and interest in scoring a big acquisition have been key to the company's strategy under management installed by Brazilian private equity firm 3G Capital. 3G, along with Warren Buffett's Berkshire Hathaway, forged the 49-billion-U.S.-dollar merger of Kraft Foods with H.J. Heinz in 2015.

"I think the obsession for efficiency has to be much bigger than the obsession for cutting costs," Patricio, 52, told Reuters on Monday.

"Cost cutting should be a priority for any company. However, you cannot cut costs every year," said Patricio, who most recently was the global head of marketing for brewer Anheuser-Busch InBev's. He previously worked at Philip Morris, Coca-Cola Co, and Johnson & Johnson.

3G Capital, which is Kraft Heinz's second largest shareholder, behind Berkshire Hathaway, with a 22.15-percent stake, is known for scoring large M&A deals and using a controversial cost-cutting tool called zero-based budgeting to keep profit margins high.

Zero-based budgeting requires managers to justify their expenses annually from scratch, rather than use the prior year as a guide or pursue cost savings on an ongoing basis.

Kraft Heinz's outgoing CEO, Bernardo Hees, a 3G partner, told Reuters in September that he was considering M&A to fuel growth.

Asked on Monday if Kraft Heinz was still considering big acquisitions, Patricio said he was sure the company would do so one day, but that his focus, for now, was on growing existing brands.

"At this moment, I'm really focused on the organic part of it. I think we can – and we need – to get organic growth and I'm going to put a lot of my time figuring that out."

Source(s): Reuters