LONDON — Unilever, the monolithic company behind the likes of Ben & Jerry’s ice cream, Hellmann’s mayonnaise and Dove, has rejected a takeover bid from fellow consumer goods giant firm Kraft Heinz, both companies confirmed on Friday.
On Friday afternoon, Kraft, which is backed by legendary investor Warren Buffett, confirmed that it had an approach to take over Unilever rejected, following a story from the Financial Times Alphaville blog earlier in the day.
Warren Buffett is worth $70 billion. He is the second-most wealthy person in the world. But he recognizes that the growing income inequality gap in the United States is a big problem. And it may have helped Donald Trump defeat Hillary Clinton.
“The Forbes 400 had $93 billion in 1982, and they got $2.4 trillion now. And that’s 25 times as much,” Buffett told CNN’s Poppy Harlow in an exclusive interview in Omaha on Thursday.
“If you’ve been working 40 hours a week, maybe holding a second job, and, you know, you work with the Little League and you’ve been a good parent, and you’re really struggling, you think, ‘What’s wrong with this picture?'” he added.
For decades, Kraft and other food behemoths offered convenience, comfort, and the promise of a modern lifestyle. But the compound annual growth rate of the packaged food industry in North America has been less than 1 percent for almost 10 years, with Big Food losing market share to smaller, healthier brands. Venerable Kraft Foods—whose Singles are a “processed cheese product,” and whose Cool Whip didn’t contain milk or cream until five years ago—has lost revenue for the past three years. “Now these big food brands are old-fashioned,” says Bob Goldin, chief executive officer at researcher Technomic. “Consumers don’t see them as relevant.”
But investors, well, that’s a different matter. Warren Buffett—who drinks Coke at breakfast and says he eats like a 6-year-old—teamed up with 3G Capital, the private equity firm founded by some of Brazil’s wealthiest men and known for its penny-pinching ways at Anheuser-Busch InBev and Burger King, to buy ketchup maker Heinz in 2013. In July, Heinz closed on its purchase of Kraft, with Buffett’s Berkshire Hathaway and 3G owning a 51 percent stake. Kraft Heinz instantly became the third-largest food company in North America, with global sales of $29 billion last year. The good news is it’s composed of big, profitable brands. The bad: They have little potential to grow. “What can they do with these brands?” says Bloomberg Intelligence analyst Kenneth Shea. “They’ll do the best they can, but mostly they’ll cut costs.”
Burger King is going to have it Tim Hortons’ way, and Warren Buffett will be their server today – or at least their financier.
The Burger King deal seems to be one part tax inversion and one part market diversification, but critics have focused mostly on the former. With the combined company moving its headquarters to Ontario, Burger King is set to join the ranks of corporate expatriates.
Democrats are none too pleased. “Burger King’s decision to abandon the United States means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders,” declared Sen. Sherrod Brown. “Burger King has always said ‘Have it Your Way’; well my way is to support two Ohio companies that haven’t abandoned their country or customers.”
Should the federal minimum wage be raised? It’s a tough question, even for business magnate Warren Buffett.
“I thought about it for 50 years and I just don’t know the answer on it,” Buffett told CNN Wednesday. “In economics you always have to say ‘and then what?’ And the real question is are more people going to be better off if it is raised,” he said.
Buffett also said that the current federal minimum of $7.25 is not a living wage. If raising it didn’t hurt employment he’d want it up significantly higher. “You do lose some employment as you increase the minimum wage, if you didn’t I would be for having it $15 an hour,” he said.
Many states and cities have recently raised their minimum wage rate above the federal minimum and President Obama is pushing for Congress to raise the nationwide rate to $10.10 an hour.
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