Miguel Patricio: a new broom at Kraft Heinz
Food giant Kraft Heinz’s stock has slumped by almost 60% in the past four years. Will a new boss revive its fortunes?
Food giant Kraft Heinz's stock has slumped by almost 60% in the past four years. Will a new boss revive its fortunes? Matthew Partridge reports.
Two months after Kraft Heinz "shocked" investors by announcing an annual loss, slashing its dividend and revealing an investigation by America's securities watchdog, the world's fifth-largest food and drinks producer has unveiled a new chief executive officer (CEO), reports James Dean in The Times. Miguel Patricio, the former chief marketing officer at Anheuser-Busch Inbev, will replace Bernado Hees, who has been in the job for the past four years. This change comes as the shares in the company have fallen 57% since the merger between Kraft and Heinz in 2015.
It's high time Kraft Heinz made "a new start", says Amanda Gomez on Breakingviews. In addition to a new CEO, Kraft Heinz should also recruit more external directors to diversify a board that is "neither as varied in sector experience as competitors like Nestl and Coca-Cola, nor as large as the board at Kellogg's or Mondelez International".
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The to-do list
Patricio clearly needs to improve Kraft Heinz's sales, says Lex in the Financial Times. However, Kraft Heinz's finances "are so bleak that deleveraging is as immediate a goal as innovation". Kraft has accumulated net debt worth approximately $30bn, four times its earnings before interest, tax and amortisation (Ebitda). If Patricio doesn't tackle this rapidly, Kraft Heinz will struggle to keep its bonds rated at investment grade. Even if it succeeds, "its debt resembles junk in many other respects".
Kraft Heinz's debt woes highlight the fact that its problems don't stem "from a single manager", says Tara Lachapelle on Bloomberg. Rather, they are the consequence of "an ethos brought to the company by its private-equity owner, 3G Capital, and championed by billionaire Warren Buffett". This approach is not only "obsessed with cutting costs", even when it hurts the wider company, but it also "deems debt-driven mega-mergers a better path to growth than investing more heavily in product innovation". What makes this "flawed business strategy" particularly puzzling is that it "seems entirely contradictory to what Buffett has nurtured at Berkshire and has looked for in its holdings".
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Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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