Strong brand value drives big returns for Heinz shareholders
The $28 billion acquisition of H.J. Heinz Company, the biggest ever take-over in the global food sector, reinforces Warren Buffett’s love affair with everyday food brands.
The billionaire has made no secret of the fact he personally loves processed food and drink brands, regularly chewing Wrigley’s gum, eating Kraft cheese and drinking Coke. And he has a consistent track record of investing in all three of these companies, getting a tasty return from each.
The audacious deal with partner 3G will see Buffet gobble up some of the world’s most famous household brands including Heinz, Complan, HP, Lea & Perrins, Farley’s, Quero and TGI Friday. Fast growing brands are present in ketchup and sauces, meals and snacks and infant and nutrition product areas and all seem to be growing on the back of global demand for processed and fast foods, particularly in the developing world.
Brand Finance, the world’s leading independent brand valuation and strategy consultancy estimates the value of the acquired brand portfolio at US$12 billion (a staggering 42 per cent of the total acquisition price).
“The whole Heinz deal is being driven by the brands and Warren Buffett’s belief that brands are one of the key intangibles driving investment returns. Many investors refer politely to brands but Warren Buffett really puts his money where his mouth is,” remarks David Haigh, CEO of Brand Finance.
The Heinz brand alone is worth $5.7 billion or 21% of the acquisition price, demonstrating beyond doubt that careful brand stewardship is the necessary ingredient for commercial success and massive investment returns for Heinz shareholders.
Only last month, Oxford Street department store Selfridges carried out a retail promotion where the labels of Heinz Baked Beans and Heinz Tomato Ketchup products omitted to use the Heinz brand name – which is testament to the power of the iconic Heinz family of brands.
The Weight Watchers brand is another significant ‘nutrition’ brand in the H.J. Heinz portfolio. “It’s not known whether this reflects Warren Buffett’s interests in dieting,” wryly remarks David Haigh.
What is certain, however, is that Warren Buffet hasn’t lost his appetite for big meal deals.
Ardi Kolah is author of High Impact Marketing That Gets Results (£19.99), published by Kogan Page. Click on the book to your order your copy today!