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Berkshire and 3G Capital to Buy Heinz for $23 Billion
- filvdg 14y agoEvery dev needs Ketchup ...
- dylangs1030 14y agoWell, he's not a developer, but I see your point.
- filvdg 14y agoBusiness development ?
- geraldchan 14y agoThe fundamentals of this transaction will be outside the scope of understanding of the HN crowd.
- ww520 14y agoWhat are the fundamentals of this transaction?
- jcampbell1 14y agoHeinz is a 100 year brand and generates about $1.3B a year in after tax cash.
- Retric 14y ago1.3 / 23 is less than 6 percent ROI, and buffet thinks this is a good investment. Granted, they may think the business can be streamlined, but I still think this says a lot about the capital glut that's driving down returns. Ps: Most of this deal is financed with debt, so there buying 6% ROI with debt.
- r4vik 14y agoas long as the debt costs them less than 6% then free money
- 3am 14y agoBerkshire Hathaway's biggest problem is finding productive investments on the scale of the cash they generate. There insurance float provides them with what is essentially interest free loans if they estimates losses well.
- mseebach 14y agoas long as (profit - cost of debt)/(invested capital) > (ROI on best alternative investment) then free money. Low risk, low volatility 6% ROI isn't a bad investment at all, but I think smart money is on Buffett having an idea or two for increasing that number.
- filvdg 14y agoUnderstanding value investing might be nice if you want to attract VC interest in your start up , taken that most start ups are bought by other companies and don't go IPO (if they don't fail)it might be interesting to understand the fundamentals ... this one if brand identity for sure
- Mvandenbergh 14y agoValue investing and venture capital are about as different as investment strategies could be. Value investors don't usually companies that don't pay regular dividend streams, most tech companies (let alone start-ups) never pay revenue.
- Keyframe 14y agoWhy the blanket statement?
- coob 14y agoI think that's a little unfair. BH is buying Heinz for the same reason it buys as much Coca-Cola as possible.
- AlexMuir 14y agoOver the last few months I've been noticing a lot of adverts for Heinz products on the radio. They go like this: "When I was younger dad would take us out for fish and chips. We'd walk along the canal and feed the ducks, even in the rain. Then I'd unwrap the bag, with the steam rising, and squirt on a dollop of ketchup. And, like always, it has to be Heinz." I'm always amazed at the ability of brands to sell £0.20 products for £2.00, and the supermarkets who then sell £0.16 products for £1.00 and claim it's value. I worked for Lucozade (UK Gatorade) for a while. Our total cost, delivered to retailer, of a bottle was 12p. We sold it to them for min 50p and they sold it for at least £1. Ultimately this is a bet on the longevity of consumer brands, which I think is probably a wise one.
- erock 14y agoliving in the town where Heinz was founded (Pittsburgh, PA) brand loyalty can get a little over the top, we look down on anyplace that doesn't have Heinz ketchup, and years ago when I live in the bay area, I chastised a restaurant because i knew (I just knew!) they watered down the ketchup. Come on, I'm from Pittsburgh, I know my Heinz
- AlexMuir 14y agoI suppose one interesting thing about brands (or perhaps just Heinz) is that we assume they're local. I would have said Heinz was a British company, no question. Likewise with Kelloggs.
- DanBC 14y agoWhich has interesting results when the parent company changes a name from Marathon to Snickers. (I agree about the Britishness of Heinz and Kelloggs. It's only in the past ten years that I realised they weren't.)
- erock 14y agowell, we can't get spotted dick here (really we can if you look hard enough(also, i only take pictures of the can to send to friends)), but heinz was founded in Pittsburgh. https://en.wikipedia.org/wiki/H._J._Heinz_Company https://en.wikipedia.org/wiki/H._J._Heinz_Company
- pathdependent 14y agoCheck out the call options yesterday. Either Buffet's traders were implementing some hedge strategy, or someone made a fat insider trade. Zero hedge covered it: http://www.zerohedge.com/news/2013-02-14/so-who-leaked-heinz-deal http://www.zerohedge.com/news/2013-02-14/so-who-leaked-heinz...
- filvdg 14y agohttp://en.wikipedia.org/wiki/Heinz_57 http://en.wikipedia.org/wiki/Heinz_57 has the list of the 57 varieties
- WillyF 14y agoI've heard stories that Heinz is so defensive of their brand that they send out "Ketchup Inspectors" to make sure restaurants aren't refilling Heinz bottles with lesser ketchup. This is the only somewhat legitimate source that I could find: http://www.freerepublic.com/focus/f-news/1067133/posts http://www.freerepublic.com/focus/f-news/1067133/posts
- erock 14y agoSometimes people do it themselves https://news.ycombinator.com/item?id=5219485 https://news.ycombinator.com/item?id=5219485
- adestefan 14y agoWhy shouldn't they? Heinz ketchup has a specific flavor profile. If a restaurant is filling Heinz bottles with a different ketchup the consumer could be lead to believe that Heinz is changing their flavor and may never buy it again. I don't even like ketchup and I could pick out Heinz in a blind taste test.
- nicholassmith 14y agoI'm sure there was a reddit where someone said they'd worked in a restaurant and they'd seen the ketchup checks happening.
- Evernoob 14y agoWhat's the penalty if you get caught? Restaurants usually just say it's "ketchup" without mentioning that it's Heinz. What can Heinz actually do to you if you buy a bottle of their stuff and fill it with something else?
- nicholassmith 14y agoWell that's the interesting thing, I'd imagine that there is some kind of penalty but I have no idea what. Misrepresentation of a food product to consumers? Maybe. It's tenuous, but I'd imagine it's very possible for them to spin it like that.
- tribeofone 14y agoGreat article about Buffet and his strategy in the economist a while back: http://www.economist.com/node/21563735 http://www.economist.com/node/21563735