Advertisement

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?

944_MW_P07_Shares_Top
Patricio: can he bolster Kraft Heinz's brands?

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.

Advertisement - Article continues below

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".

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".

Advertisement
Advertisement

Recommended

The British equity market is shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Should Big Tech be broken up?
Tech stocks

Should Big Tech be broken up?

The dominance of the big four technology giants has attracted the attention of politicians determined to humble them. But what real harm are they doin…
8 Aug 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
7 Aug 2020
BP has slashed its dividend – and markets love it
Income investing

BP has slashed its dividend – and markets love it

BP has bowed to the inevitable and cut its dividend in half – and its share price promptly rose. John Stepek explains what it means for shareholders …
4 Aug 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
UK house prices hit a new record high – can it last?
House prices

UK house prices hit a new record high – can it last?

Despite the pandemic, UK house prices have hit a new high. John Stepek looks at what’s driving the surge in prices, and what it means for house prices…
7 Aug 2020