"The break-up thinking comes back to bite them," said Ken Shea, an analyst at Bloomberg Intelligence. "They need to get their house in order."
When Kraft Heinz was created, analysts thought where the growth would bring a series of aging brands, which also include Jell-O and Kool-Aid. Changing consumer flavors and shopping practices has dropped sales in the largest food companies in the United States, as shoppers intensify more natural and organic options, rather than pre-packed and sugar-borne products. But that should not be a matter for Kraft.
It was 3G, with the support of Berkshire Hathaway Inc. Buffett, has produced industry leading edges after taking over Heinz in 2013 and cutting costs. That was the plan in Kraft, and worked for almost two years. The combined company broke $ US1.7 billion in expenses, beating the target released when the bargain was announced. And investors supported, with the shares rising to the north of $ US90 individually to trade in a premium for packaging peasants.
But after the fat was cut by Kraft Heinz, another management needed another treatment so that it could start again on improving profit margins. Two years ago, the company made the difficult offer for Unilever, and when news about the proposal was closed, the Kraft Heinz shares were closed on a high record. As Unilever has rejected the offer, however, the Buffett support company has been a steady decline.
Inability for Kraft Heinz to gain great acquisition under CEO, Bernardo Hees has addressed his failure to increase sales. The writer who reported at the end of Thursday was, in essence, an accusation to reduce the value of the goodwill of his biggest name trademarks, more proof that the company had not managed its brands well, said Shea.
The payments resulted in a net loss of $ US12.6 billion, or $ US10.34 a share. The company also breached its dividend and invested to investors received last year by the US Securities and Exchange Commission related to procurement practices. Kraft Heinz, as a result of an investigation with the help of an external solicitor, said he had recorded a "US $ 25 million increase to the costs of products sold".
On the back of that bad news, the pressure will be even higher to make an agreement. Over the years, speculation for potential targets has focused on food peers such as Mondelez International Inc., General Mills Inc., Campbell Soup Co. a Kellogg Co. There are also rumors that it could look outside the food space to diversify its portfolio and grow to developing markets with the procurement of consumer products company.
Hees mentioned the "combination of industry" on call earnings on Thursday, saying that Kraft Heinz is working to strengthen his balance sheet, so he can follow a bargain. Kraft Heinz said he would return to profit growth in 2020 and his strong operating edges give "the flexibility of the balance sheet for future merger."
If "Bank of Buffett" is still open, Kraft Heinz may still be able to get a transformational agreement. But with shares plummeting to low and large record questions that are emerging about the strategy, getting a big deal of acquisition – something that has already been difficult – perhaps It's even harder to do this.
The Berkshire Hathaway investment rejected from a price of around $ US15.7 billion to less than $ US11.4 billion as the stock entered to $ US34.95 closed in New York.
"Kraft Heinz needs to be a combination and have not been able to do," said Scott Mushkin, senior analyst at Wolfe Research, in an interview on Bloomberg Television. "You are in industry that has very structural headlines and one of the things that you can do to try to offset that is to give some of these companies together."