Assignment Prompt & Instructions
[>Management homework help](https://www.sweetstudy.com/fields/business-finance-management)
TUTOR ASSIGNMENT DISCUSSION
**files (5)**
– ## WEEK4MTGGK600.docx
– ## WEEK5MKTG600.docx
– ## WEEK5HEINZThe_100_billion_dollar_Heinz-K.pdf
– BRANDING2Woke-washing_intersectional.pdf
– BRANDINGEBSCO-FullText-05_28_20262.pdf
**## WEEK4MTGGK600.docx**
CREGO {NO MORE THAN 100-150 WORDS)
My final marketing plan focuses on creating a pricing strategy for Tesla that targets more affordable vehicles for long-term sustainability. Tesla continues to pride itself on being a premium luxury vehicle company equipped with up-to-date technology. Features such as self-drive features, and the over-the-air (OTA) updates give Tesla that premium feeling that draws customers attention. This alone proves that consumers often pay more for perceived innovation and sustainability (International Energy Agency [IEA], 2024).
I have previously commented that Tesla has an extremely loyal customer database, and analytics and surveys show that customers will continue to return to Tesla (Statista, 2024). That’s why Tesla should continue to use premium pricing because consumers associate the brand with innovation and advanced technology. One thing they should be careful about is pricing products significantly higher than customers’ expectations. A perfect example was the Cybertruck I used last week, and the issues related to its release.
With all asking prices comes backlash usually needing some type of validation. If Tesla is going to come in with premium pricing, they need to have the ability to prove it. Where other brands have focused on cheaper solutions that have never been Tesla’s motive. By adding up- to-date technology and sustainability, that has a larger message to utilize clean energy ecosystem, enables customers to remain loyal to Tesla. This pricing strategy supports Tesla’s reputation as a leader in the EV market while remaining competitive against companies such as Rivian, Lucid, and Ford’s electric vehicle lineup. I hope you all enjoyed it and as always look forward to your discussions! Thanks!
RAMIRO {NO MORE THAN 100-150 WORDS}
Class,
My final marketing plan is again for Starbucks. Since Starbucks is already a premium coffeehouse shop, I would not recommend implementing either of the low-price strategies discussed in class. I would use value-based premium pricing because Starbucks consumers are paying not only for their coffee but also for the convenience, customization, experience, mobile ordering, rewards, and the “Starbucks Experience.”
I would recommend that Starbucks price its products around $6.25-$6.75 for a grande specialty beverage (flavored latte, cold brew, seasonal drink, etc.). This price would allow Starbucks to stay above lower-cost competitors like Dunkin’ while remaining affordable for consumers who value product quality, convenience, and brand loyalty. I arrived at this price by analyzing Starbucks' current position as a premium coffee shop, competitors' prices, and what consumers perceive they are getting from Starbucks (e.g., a revitalized rewards program that promotes repurchases with no expiration).
The price I recommend supports the company’s positioning because Starbucks is more than a typical coffee shop to grab a cup before work. If they priced their products too low, it would cheapen their premium brand, and consumers would wonder about the quality of the product or experience. If the price were too high, consumers would switch to cheaper competitors. By positioning at mid- to premium levels, they can maintain their brand equity while targeting students, young professionals, remote workers, and consumers who are loyal to Starbucks and willing to pay extra for the convenience and customization of their drinks.
Starbucks should continue to price its products by keeping its brand, customer loyalty, and positioning in mind. Starbucks should not pick a number out of thin air. Prices should be based on research, demand, competitor prices, and what customers feel they are receiving.
Please let me know what you think, or if you have any ideas on how Starbucks can improve its prices.
**## WEEK5MKTG600.docx**
WEEK5 MKTG600 BRANDING (NO MORE THAN 250 WORDS)
Branding has been a heavy marketing focus in recent years. As you shop for products, branding can influence your shopping behavior. You may recognize a familiar brand that is known for its quality. Other times, you may recognize a brand that is more environmentally conscious. Branding can help you to decide which product to buy in a competitive market.
**Research**
This week do some research on branding as well as marketing channels. Consider the relationship between these two as you reflect on the following questions.
**Discuss**
· How important is branding or brand image for marketers?
· Marketers have many channels to consider as they decide on placement. Should channel images be consistent with brand images? Why or why not?
· What type of effect has online availability had on branding?
References
Swaminathan, V., Sorescu, A., Steenkamp, J.-B. E. M., O’Guinn, T. C. G., & Schmitt, B. (2020). Branding in a Hyperconnected World: Refocusing Theories and Rethinking Boundaries.
_Journal of Marketing_,
_84_(2), 24–46. https://doi-org.ezproxy2.apus.edu/10.1177/0022242919899905
Sobande, F. (2020). Woke-washing: “intersectional” femvertising and branding “woke” bravery.
_European Journal of Marketing, 54_(11), 2723-2745. https://doi.org/10.1108/EJM-02-2019-0134
WEEK 5 ASSIGNMENT MTG600 ( NO MORE THAN 500 WORDS)
**Objective:** You are tasked with evaluating the website used by
**Kraft Foods** as part of their marketing strategy. After reviewing the website, you will write a 2-page paper discussing how effective the site is as a marketing tool.
**Step-by-Step Instructions:**
1.
**Visit the Website:**
· Go to
[Kraft Heinz](https://www.kraftheinz.com/)
· Take your time to explore the site thoroughly. Look at the different sections (recipes, product information, promotions, etc.) and pay attention to how the site is designed and how it presents information to the visitor.
2.
**Evaluate the Website:**
. Is the website hard to use or confusing in any way?
. Are there any sections that feel outdated or unnecessary?
. Could the website be more engaging or user-friendly?
. Does the website load quickly and work well on mobile devices?
· Use known criteria in your evaluation as you begin evaluating what is working well
· What could be better?
3.
**Write Your Paper:**
. Discuss
**both** what you think works well on the site and what could be improved.
. Back up your opinions with specific examples from the website (e.g., "The recipe section is easy to navigate because it includes a search feature for ingredients").
. Be specific in your evaluation. Instead of just saying something is "good" or "bad," explain
**why** you think it is effective or not effective.
·
**Length:** Your paper should be 2 pages long.
·
**Content:** In your paper, make sure to: Support your evaluation with specific examples from the website, using recognized criteria .
4.
**Formatting Your Paper:**
·
**Word Document:** Your paper must be typed and submitted as a Word document (no PDF or other formats).
·
**File Name:** Name your file like this:
**lastnamefirstinitial-MKTG600-assignment#** (For example, if your name is John Doe and this is Assignment 1, the file should be named
**doej-MKTG600-assignment1.docx**).
5.
**Submission:**
· Upload your completed Word document to the
**ASSIGNMENT Container** (where you are submitting the assignment online).
· Double-check that your file is uploaded before the deadline.
**Important Reminder: Use Scholarly Research**
To strengthen your analysis, it’s important to support your evaluation with
**scholarly research**. Incorporate at least two academic sources that discuss digital marketing strategies, website design, or user experience. Scholarly research will provide a theoretical foundation for your assessment and demonstrate a deeper understanding of best practices in web design and marketing. Be sure to properly cite any sources using APA format.
**Important Notes:**
·
**Grading Criteria:** You’ll be graded on the clarity of your analysis, the quality of your writing, and how well you back up your opinions with examples from the website.
**Summary Checklist:**
1. Review the website thoroughly.
2. Write a 2-page paper evaluating its effectiveness as a marketing tool.
3. Discuss what works well and what could be improved.
4. Submit your paper as a Word document with the correct file name.
5. Upload it to the assignment container before the deadline.
Course Objectives:
1. Define channel strategy
2. Design a sales management plan
Chaboud, I. (2016). The 100 billion dollar Heinz-Kraft deal.
_Strategic Direction, 32_(6), 5-7. https://doi.org/10.1108/SD-03-2016-0035
**## WEEK5HEINZThe_100_billion_dollar_Heinz-K.pdf**
The 100 billion dollar Heinz-Kraft deal
Isabelle Chaboud
Isabelle Chaboud is
Professor at the
Department of
Accounting, Law and
Finance, Grenoble EM,
Grenoble, France.
Introduction
The merger of Heinz and Kraft, finalized on July 2nd, was one of the largest mergers to take
place in 2015. Warren Buffet via Berkshire Hathaway and the Brazilian, Jorge Paulo
Lemann, orchestrated the deal, at the headquarters of 3G Capital. What were the
motivations and objectives of this merger? A few months after the deal, what measures
have been introduced?
Marrying two American giants
Heinz and Kraft are two major brands in the American food and beverage industry. With
over a hundred years of history each, the brands have conquered markets around the
world thanks to products such as Heinz® Ketchup, Philadelphia Cream Cheese, Velveeta
and Maxwell House.
By merging HJ Heinz Co. and Kraft Foods, the group has a portfolio of highly recognized
brands (Heinz, Velveeta and Maxwell House each reported over 1 billion dollars of turnover
in 2014). Yet, the group will still be only a middleweight player in the food and beverage
industry. In 2014, Heinz’s turnover was 10.9[1] billion dollars for a net profit of 0.7 billion
dollars. Kraft had a turnover of 18.2[2] billion dollars and a net profit of 1 billion dollars.
Kraft Foods acquired HJ Heinz Co. to create The Kraft Heinz Company, a new giant in the
American industry. The group should report more than 28[3] billion dollars in turnover, be
valued at 97 billion dollars, and employ 46,000 people. The group is now the third largest
North American food and beverage industry player and the fifth worldwide in terms of
turnover (still far behind Nestlé, the number one Swiss giant with 91.6 billion dollars of
turnover in 2014 – followed by PepsiCo, Unilever and Mondelez).
Why merge?
Although both companies have widely recognized brand name products, they have
suffered from stagnating or even decreasing demand in the USA. As customers have
become aware of the artificial, fattening or sugary characteristics of the groups’ products,
they have turned towards more natural and healthier products. In this context, why merge
two slowing middleweight players?
Warren Buffet and 3G Capital are counting on Heinz’s international distribution network to
develop Kraft’s international sales. While Heinz sells more than 60 per cent of its products
outside of North America with 650[4] million bottles of Heinz Ketchup being sold across 140
countries every year, Kraft only distributes its products in the USA.
In addition, the two groups have different products and act in different market segments.
For example, Kraft’s main markets are meals, convenience foods, desserts and cheeses.
This is a translated and
adapted version of an article
originally published in Le
Cercle les Echos in French
March 27, 2015 www.
lesechos.fr/idees-debats/
cercle/cercle-129954-heinz-
kraft-le-deal-a-100-milliards-
de-dollars-1106149.php
DOI 10.1108/SD-03-2016-0035 VOL. 32 NO. 6 2016, pp. 5-7, © Emerald Group Publishing Limited, ISSN 0258-0543 STRATEGIC DIRECTION PAGE 5
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://dx.doi.org/10.1108/SD-03-2016-0035](http://dx.doi.org/10.1108/SD-03-2016-0035)
For Heinz, Ketchup and other sauces represent almost 10 per cent of turnover. The
complementary nature of the two groups’ products limits the risk of in-house competition.
By combining their brand portfolios, the new group will also have better bargaining power
with suppliers and therefore improve profitability. Warren Buffet and 3G Capital have
forecasted 1.5 billion dollars in savings by 2017 owing to lower supply costs, an optimized
distribution network and greater power to negotiate.
A change in Warren Buffet’s investment style
Warren Buffet is one of the richest investors in the world (ranked 2nd in 2014 according to
the Bloomberg billionaire ranking). Known as the “Oracle of Omaha”, Warren Buffet would
appear to have moved towards a new investment strategy. Up until now, his investments
have always been very diversified (except for new technologies which he avoids) and
guided by similar principles: invest in companies whose stock value is underestimated as
compared to real value (patents, assets [. . .]); make long-term investments; and in
particular, even if Warren Buffet participates in management, never force restructuring or
changes in management.
By partnering with 3G Capital, Warren Buffet has accepted a completely different kind of
investment. 3G Capital is particularly well known for its ability to implement operational
changes and reduce costs (in particular via restructuration and closing down locations
when necessary). Warren Buffet first engaged in “partner” investments with 3G Capital in
June 2013 when they bought Heinz. Jorge Paulo Lemann, the founder of 3G Capital, and
the new management team at the Heinz Company used managerial methods that are very
different from Warren Buffet’s usual approach.
For example, they chose to introduce zero-based budgeting. When applying zero-based
budgeting, managers start from scratch instead of using past year’s budget as a baseline.
They plan a budget in which they have to justify every single expense. If an expense does
not add value, it must be minimized or eliminated, which is why the method is seen as a
cost-cutting strategy. The measures implemented by 3G Capital have been successful in
mature and highly competitive markets. They allowed Heinz Co. to improve profitability.
In his letter to shareholders, published in February 2015, Warren Buffet stated:
I’m not embarrassed to admit that Heinz is run far better under Alex Behring, Chairman, and
Bernardo Hees, CEO, than would be the case if I were in charge. They hold themselves to
extraordinarily high performance standards and are never satisfied, even when their results far
exceed those of competitors.
According to an article in the Financial Times (Brazil 3G Trio as Eager for USA Food as Beer,
March 26, 2015), these new management methods led to the closure of at least five
factories and cut 7,400 jobs, or around a quarter of the number of employees present when
3G Capital invested in Heinz.
First changes implemented after the merger
Top management for The Heinz Kraft Company (HKC) was primarily chosen by 3G Capital
with Bernardo Hees (a 3G Capital partner) as CEO. The group began trading on NASDAQ
on July 6th, 2015 at US$72.96 per share. On July 31st, the group paid out a dividend of
US$0.55 per share. Following a drop in sales of 4.5 per cent in the second quarter of 2015,
HKC announced on August 12th a plan to cut 2,500 jobs (mostly Kraft employees). In
addition, we can note that such a plan had already been implemented at the Heinz
Company after it was acquired by 3G Capital-Berkshire Hathaway.
While we may question the new group’s ability to grow, its portfolio of well-recognized
brands will certainly allow HKC to better negotiate deals with distribution networks and
even penetrate new markets. According to Crédit Suisse, Heinz’s net working capital in
June 2013 was evaluated at 12 per cent of sales (when 3G Capital acquired Heinz). By the
end of 2014, it only represented 3.5 per cent of revenue. The group managed to push back
PAGE 6 STRATEGIC DIRECTION VOL. 32 NO. 6 2016
supplier payments while collecting customer payments sooner. Crédit Suisse notes that if
the same practices are implemented with HKC, this should generate 650 million dollars in
additional operating cash flow. However, it is still a work in progress. The group also needs
to lower its debt. Berkshire and 3G Capital are aiming to reduce the group’s debt by two
billion dollars over the next two years which would allow it to restructure its balance sheet
and reduce its financing costs.
In the mean time, shareholders appear to expect substantial value creation, yet whether the
business will be worth almost 100 billion dollars is still to be determined. On January 29
2016, HKC shares traded at US$78.06 (7 per cent higher than its initial share value).
However, on February 18, 2016, share prices decreased to US$73.45 (only 0.7 per cent
above their initial listing price). It remains to be seen if the Berkshire Hathaway – 3G Capital
partnership will continue and manage to achieve their predicted 1.5 billion dollars in cost
reduction by the end of 2017. Such predictions should be taken with a grain of salt, given
the fact that even though Heinz has improved its profitability, it is not yet on a path towards
growth. In addition, it is worth asking whether or not customer demands for healthier
products will permit Kraft to develop its sales, in particular outside of the USA. In any case,
cost reduction will not be sufficient. The new group will have to invest part of its savings in
innovation to invent or reinvent future iconic products and brands.
Notes
1. Available at: http://ir.kraftheinzcompany.com/secfiling.cfm?filingID�1600508-15-11&CIK�
1600508
2. Available at: http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145
F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf
3. Available at: www.kraftheinzcompany.com/company.htm
4. Available at: www.heinz.com/our-company/press-room/trivia.aspx
Reference
Chaboud, I. (2015), “Heinz – Kraft: le ‘deal’ à 100 milliards de dollars”, Le Cercle les Echos, available
at: www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-
1106149.php (accessed 27 March 2015).
About the author
Isabelle Chaboud is a Professor at Grenoble Ecole de Management within the Accounting,
Law and Finance Department. Isabelle Chaboud can be contacted at: isabelle.
chaboud@grenoble-em.com
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
Keywords:
M&A,
Acquisition,
Merger,
Heinz,
Kraft,
Warren Buffet
VOL. 32 NO. 6 2016 STRATEGIC DIRECTION PAGE 7
[http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508](http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508)
[http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508](http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508)
[http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf](http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf)
[http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf](http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf)
[http://www.kraftheinzcompany.com/company.htm](http://www.kraftheinzcompany.com/company.htm)
[http://www.heinz.com/our-company/press-room/trivia.aspx](http://www.heinz.com/our-company/press-room/trivia.aspx)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[mailto:isabelle.chaboud@grenoble-em.com](mailto:isabelle.chaboud@grenoble-em.com)
[mailto:isabelle.chaboud@grenoble-em.com](mailto:isabelle.chaboud@grenoble-em.com)
[mailto:permissions@emeraldinsight.com](mailto:permissions@emeraldinsight.com)
Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.
– The 100 billion dollar Heinz-Kraft deal
– Introduction
– Marrying two American giants
– Why merge?
– A change in Warren Buffet’s investment style
– First changes implemented after the merger
– Reference
**BRANDING2Woke-washing_intersectional.pdf**
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**BRANDINGEBSCO-FullText-05_28_20262.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/brandingebsco-fulltext-05-28-20262-pdf)
**BRANDINGEBSCO-FullText-05_28_20262.pdf**
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**## WEEK4MTGGK600.docx**
CREGO {NO MORE THAN 100-150 WORDS)
My final marketing plan focuses on creating a pricing strategy for Tesla that targets more affordable vehicles for long-term sustainability. Tesla continues to pride itself on being a premium luxury vehicle company equipped with up-to-date technology. Features such as self-drive features, and the over-the-air (OTA) updates give Tesla that premium feeling that draws customers attention. This alone proves that consumers often pay more for perceived innovation and sustainability (International Energy Agency [IEA], 2024).
I have previously commented that Tesla has an extremely loyal customer database, and analytics and surveys show that customers will continue to return to Tesla (Statista, 2024). That’s why Tesla should continue to use premium pricing because consumers associate the brand with innovation and advanced technology. One thing they should be careful about is pricing products significantly higher than customers’ expectations. A perfect example was the Cybertruck I used last week, and the issues related to its release.
With all asking prices comes backlash usually needing some type of validation. If Tesla is going to come in with premium pricing, they need to have the ability to prove it. Where other brands have focused on cheaper solutions that have never been Tesla’s motive. By adding up- to-date technology and sustainability, that has a larger message to utilize clean energy ecosystem, enables customers to remain loyal to Tesla. This pricing strategy supports Tesla’s reputation as a leader in the EV market while remaining competitive against companies such as Rivian, Lucid, and Ford’s electric vehicle lineup. I hope you all enjoyed it and as always look forward to your discussions! Thanks!
RAMIRO {NO MORE THAN 100-150 WORDS}
Class,
My final marketing plan is again for Starbucks. Since Starbucks is already a premium coffeehouse shop, I would not recommend implementing either of the low-price strategies discussed in class. I would use value-based premium pricing because Starbucks consumers are paying not only for their coffee but also for the convenience, customization, experience, mobile ordering, rewards, and the “Starbucks Experience.”
I would recommend that Starbucks price its products around $6.25-$6.75 for a grande specialty beverage (flavored latte, cold brew, seasonal drink, etc.). This price would allow Starbucks to stay above lower-cost competitors like Dunkin’ while remaining affordable for consumers who value product quality, convenience, and brand loyalty. I arrived at this price by analyzing Starbucks' current position as a premium coffee shop, competitors' prices, and what consumers perceive they are getting from Starbucks (e.g., a revitalized rewards program that promotes repurchases with no expiration).
The price I recommend supports the company’s positioning because Starbucks is more than a typical coffee shop to grab a cup before work. If they priced their products too low, it would cheapen their premium brand, and consumers would wonder about the quality of the product or experience. If the price were too high, consumers would switch to cheaper competitors. By positioning at mid- to premium levels, they can maintain their brand equity while targeting students, young professionals, remote workers, and consumers who are loyal to Starbucks and willing to pay extra for the convenience and customization of their drinks.
Starbucks should continue to price its products by keeping its brand, customer loyalty, and positioning in mind. Starbucks should not pick a number out of thin air. Prices should be based on research, demand, competitor prices, and what customers feel they are receiving.
Please let me know what you think, or if you have any ideas on how Starbucks can improve its prices.
**## WEEK5MKTG600.docx**
WEEK5 MKTG600 BRANDING (NO MORE THAN 250 WORDS)
Branding has been a heavy marketing focus in recent years. As you shop for products, branding can influence your shopping behavior. You may recognize a familiar brand that is known for its quality. Other times, you may recognize a brand that is more environmentally conscious. Branding can help you to decide which product to buy in a competitive market.
**Research**
This week do some research on branding as well as marketing channels. Consider the relationship between these two as you reflect on the following questions.
**Discuss**
· How important is branding or brand image for marketers?
· Marketers have many channels to consider as they decide on placement. Should channel images be consistent with brand images? Why or why not?
· What type of effect has online availability had on branding?
References
Swaminathan, V., Sorescu, A., Steenkamp, J.-B. E. M., O’Guinn, T. C. G., & Schmitt, B. (2020). Branding in a Hyperconnected World: Refocusing Theories and Rethinking Boundaries.
_Journal of Marketing_,
_84_(2), 24–46. https://doi-org.ezproxy2.apus.edu/10.1177/0022242919899905
Sobande, F. (2020). Woke-washing: “intersectional” femvertising and branding “woke” bravery.
_European Journal of Marketing, 54_(11), 2723-2745. https://doi.org/10.1108/EJM-02-2019-0134
WEEK 5 ASSIGNMENT MTG600 ( NO MORE THAN 500 WORDS)
**Objective:** You are tasked with evaluating the website used by
**Kraft Foods** as part of their marketing strategy. After reviewing the website, you will write a 2-page paper discussing how effective the site is as a marketing tool.
**Step-by-Step Instructions:**
1.
**Visit the Website:**
· Go to
[Kraft Heinz](https://www.kraftheinz.com/)
· Take your time to explore the site thoroughly. Look at the different sections (recipes, product information, promotions, etc.) and pay attention to how the site is designed and how it presents information to the visitor.
2.
**Evaluate the Website:**
. Is the website hard to use or confusing in any way?
. Are there any sections that feel outdated or unnecessary?
. Could the website be more engaging or user-friendly?
. Does the website load quickly and work well on mobile devices?
· Use known criteria in your evaluation as you begin evaluating what is working well
· What could be better?
3.
**Write Your Paper:**
. Discuss
**both** what you think works well on the site and what could be improved.
. Back up your opinions with specific examples from the website (e.g., "The recipe section is easy to navigate because it includes a search feature for ingredients").
. Be specific in your evaluation. Instead of just saying something is "good" or "bad," explain
**why** you think it is effective or not effective.
·
**Length:** Your paper should be 2 pages long.
·
**Content:** In your paper, make sure to: Support your evaluation with specific examples from the website, using recognized criteria .
4.
**Formatting Your Paper:**
·
**Word Document:** Your paper must be typed and submitted as a Word document (no PDF or other formats).
·
**File Name:** Name your file like this:
**lastnamefirstinitial-MKTG600-assignment#** (For example, if your name is John Doe and this is Assignment 1, the file should be named
**doej-MKTG600-assignment1.docx**).
5.
**Submission:**
· Upload your completed Word document to the
**ASSIGNMENT Container** (where you are submitting the assignment online).
· Double-check that your file is uploaded before the deadline.
**Important Reminder: Use Scholarly Research**
To strengthen your analysis, it’s important to support your evaluation with
**scholarly research**. Incorporate at least two academic sources that discuss digital marketing strategies, website design, or user experience. Scholarly research will provide a theoretical foundation for your assessment and demonstrate a deeper understanding of best practices in web design and marketing. Be sure to properly cite any sources using APA format.
**Important Notes:**
·
**Grading Criteria:** You’ll be graded on the clarity of your analysis, the quality of your writing, and how well you back up your opinions with examples from the website.
**Summary Checklist:**
1. Review the website thoroughly.
2. Write a 2-page paper evaluating its effectiveness as a marketing tool.
3. Discuss what works well and what could be improved.
4. Submit your paper as a Word document with the correct file name.
5. Upload it to the assignment container before the deadline.
Course Objectives:
1. Define channel strategy
2. Design a sales management plan
Chaboud, I. (2016). The 100 billion dollar Heinz-Kraft deal.
_Strategic Direction, 32_(6), 5-7. https://doi.org/10.1108/SD-03-2016-0035
**## WEEK5HEINZThe_100_billion_dollar_Heinz-K.pdf**
The 100 billion dollar Heinz-Kraft deal
Isabelle Chaboud
Isabelle Chaboud is
Professor at the
Department of
Accounting, Law and
Finance, Grenoble EM,
Grenoble, France.
Introduction
The merger of Heinz and Kraft, finalized on July 2nd, was one of the largest mergers to take
place in 2015. Warren Buffet via Berkshire Hathaway and the Brazilian, Jorge Paulo
Lemann, orchestrated the deal, at the headquarters of 3G Capital. What were the
motivations and objectives of this merger? A few months after the deal, what measures
have been introduced?
Marrying two American giants
Heinz and Kraft are two major brands in the American food and beverage industry. With
over a hundred years of history each, the brands have conquered markets around the
world thanks to products such as Heinz® Ketchup, Philadelphia Cream Cheese, Velveeta
and Maxwell House.
By merging HJ Heinz Co. and Kraft Foods, the group has a portfolio of highly recognized
brands (Heinz, Velveeta and Maxwell House each reported over 1 billion dollars of turnover
in 2014). Yet, the group will still be only a middleweight player in the food and beverage
industry. In 2014, Heinz’s turnover was 10.9[1] billion dollars for a net profit of 0.7 billion
dollars. Kraft had a turnover of 18.2[2] billion dollars and a net profit of 1 billion dollars.
Kraft Foods acquired HJ Heinz Co. to create The Kraft Heinz Company, a new giant in the
American industry. The group should report more than 28[3] billion dollars in turnover, be
valued at 97 billion dollars, and employ 46,000 people. The group is now the third largest
North American food and beverage industry player and the fifth worldwide in terms of
turnover (still far behind Nestlé, the number one Swiss giant with 91.6 billion dollars of
turnover in 2014 – followed by PepsiCo, Unilever and Mondelez).
Why merge?
Although both companies have widely recognized brand name products, they have
suffered from stagnating or even decreasing demand in the USA. As customers have
become aware of the artificial, fattening or sugary characteristics of the groups’ products,
they have turned towards more natural and healthier products. In this context, why merge
two slowing middleweight players?
Warren Buffet and 3G Capital are counting on Heinz’s international distribution network to
develop Kraft’s international sales. While Heinz sells more than 60 per cent of its products
outside of North America with 650[4] million bottles of Heinz Ketchup being sold across 140
countries every year, Kraft only distributes its products in the USA.
In addition, the two groups have different products and act in different market segments.
For example, Kraft’s main markets are meals, convenience foods, desserts and cheeses.
This is a translated and
adapted version of an article
originally published in Le
Cercle les Echos in French
March 27, 2015 www.
lesechos.fr/idees-debats/
cercle/cercle-129954-heinz-
kraft-le-deal-a-100-milliards-
de-dollars-1106149.php
DOI 10.1108/SD-03-2016-0035 VOL. 32 NO. 6 2016, pp. 5-7, © Emerald Group Publishing Limited, ISSN 0258-0543 STRATEGIC DIRECTION PAGE 5
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://dx.doi.org/10.1108/SD-03-2016-0035](http://dx.doi.org/10.1108/SD-03-2016-0035)
For Heinz, Ketchup and other sauces represent almost 10 per cent of turnover. The
complementary nature of the two groups’ products limits the risk of in-house competition.
By combining their brand portfolios, the new group will also have better bargaining power
with suppliers and therefore improve profitability. Warren Buffet and 3G Capital have
forecasted 1.5 billion dollars in savings by 2017 owing to lower supply costs, an optimized
distribution network and greater power to negotiate.
A change in Warren Buffet’s investment style
Warren Buffet is one of the richest investors in the world (ranked 2nd in 2014 according to
the Bloomberg billionaire ranking). Known as the “Oracle of Omaha”, Warren Buffet would
appear to have moved towards a new investment strategy. Up until now, his investments
have always been very diversified (except for new technologies which he avoids) and
guided by similar principles: invest in companies whose stock value is underestimated as
compared to real value (patents, assets [. . .]); make long-term investments; and in
particular, even if Warren Buffet participates in management, never force restructuring or
changes in management.
By partnering with 3G Capital, Warren Buffet has accepted a completely different kind of
investment. 3G Capital is particularly well known for its ability to implement operational
changes and reduce costs (in particular via restructuration and closing down locations
when necessary). Warren Buffet first engaged in “partner” investments with 3G Capital in
June 2013 when they bought Heinz. Jorge Paulo Lemann, the founder of 3G Capital, and
the new management team at the Heinz Company used managerial methods that are very
different from Warren Buffet’s usual approach.
For example, they chose to introduce zero-based budgeting. When applying zero-based
budgeting, managers start from scratch instead of using past year’s budget as a baseline.
They plan a budget in which they have to justify every single expense. If an expense does
not add value, it must be minimized or eliminated, which is why the method is seen as a
cost-cutting strategy. The measures implemented by 3G Capital have been successful in
mature and highly competitive markets. They allowed Heinz Co. to improve profitability.
In his letter to shareholders, published in February 2015, Warren Buffet stated:
I’m not embarrassed to admit that Heinz is run far better under Alex Behring, Chairman, and
Bernardo Hees, CEO, than would be the case if I were in charge. They hold themselves to
extraordinarily high performance standards and are never satisfied, even when their results far
exceed those of competitors.
According to an article in the Financial Times (Brazil 3G Trio as Eager for USA Food as Beer,
March 26, 2015), these new management methods led to the closure of at least five
factories and cut 7,400 jobs, or around a quarter of the number of employees present when
3G Capital invested in Heinz.
First changes implemented after the merger
Top management for The Heinz Kraft Company (HKC) was primarily chosen by 3G Capital
with Bernardo Hees (a 3G Capital partner) as CEO. The group began trading on NASDAQ
on July 6th, 2015 at US$72.96 per share. On July 31st, the group paid out a dividend of
US$0.55 per share. Following a drop in sales of 4.5 per cent in the second quarter of 2015,
HKC announced on August 12th a plan to cut 2,500 jobs (mostly Kraft employees). In
addition, we can note that such a plan had already been implemented at the Heinz
Company after it was acquired by 3G Capital-Berkshire Hathaway.
While we may question the new group’s ability to grow, its portfolio of well-recognized
brands will certainly allow HKC to better negotiate deals with distribution networks and
even penetrate new markets. According to Crédit Suisse, Heinz’s net working capital in
June 2013 was evaluated at 12 per cent of sales (when 3G Capital acquired Heinz). By the
end of 2014, it only represented 3.5 per cent of revenue. The group managed to push back
PAGE 6 STRATEGIC DIRECTION VOL. 32 NO. 6 2016
supplier payments while collecting customer payments sooner. Crédit Suisse notes that if
the same practices are implemented with HKC, this should generate 650 million dollars in
additional operating cash flow. However, it is still a work in progress. The group also needs
to lower its debt. Berkshire and 3G Capital are aiming to reduce the group’s debt by two
billion dollars over the next two years which would allow it to restructure its balance sheet
and reduce its financing costs.
In the mean time, shareholders appear to expect substantial value creation, yet whether the
business will be worth almost 100 billion dollars is still to be determined. On January 29
2016, HKC shares traded at US$78.06 (7 per cent higher than its initial share value).
However, on February 18, 2016, share prices decreased to US$73.45 (only 0.7 per cent
above their initial listing price). It remains to be seen if the Berkshire Hathaway – 3G Capital
partnership will continue and manage to achieve their predicted 1.5 billion dollars in cost
reduction by the end of 2017. Such predictions should be taken with a grain of salt, given
the fact that even though Heinz has improved its profitability, it is not yet on a path towards
growth. In addition, it is worth asking whether or not customer demands for healthier
products will permit Kraft to develop its sales, in particular outside of the USA. In any case,
cost reduction will not be sufficient. The new group will have to invest part of its savings in
innovation to invent or reinvent future iconic products and brands.
Notes
1. Available at: http://ir.kraftheinzcompany.com/secfiling.cfm?filingID�1600508-15-11&CIK�
1600508
2. Available at: http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145
F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf
3. Available at: www.kraftheinzcompany.com/company.htm
4. Available at: www.heinz.com/our-company/press-room/trivia.aspx
Reference
Chaboud, I. (2015), “Heinz – Kraft: le ‘deal’ à 100 milliards de dollars”, Le Cercle les Echos, available
at: www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-
1106149.php (accessed 27 March 2015).
About the author
Isabelle Chaboud is a Professor at Grenoble Ecole de Management within the Accounting,
Law and Finance Department. Isabelle Chaboud can be contacted at: isabelle.
chaboud@grenoble-em.com
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
Keywords:
M&A,
Acquisition,
Merger,
Heinz,
Kraft,
Warren Buffet
VOL. 32 NO. 6 2016 STRATEGIC DIRECTION PAGE 7
[http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508](http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508)
[http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508](http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508)
[http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf](http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf)
[http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf](http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf)
[http://www.kraftheinzcompany.com/company.htm](http://www.kraftheinzcompany.com/company.htm)
[http://www.heinz.com/our-company/press-room/trivia.aspx](http://www.heinz.com/our-company/press-room/trivia.aspx)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[mailto:isabelle.chaboud@grenoble-em.com](mailto:isabelle.chaboud@grenoble-em.com)
[mailto:isabelle.chaboud@grenoble-em.com](mailto:isabelle.chaboud@grenoble-em.com)
[mailto:permissions@emeraldinsight.com](mailto:permissions@emeraldinsight.com)
Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.
– The 100 billion dollar Heinz-Kraft deal
– Introduction
– Marrying two American giants
– Why merge?
– A change in Warren Buffet’s investment style
– First changes implemented after the merger
– Reference
**BRANDING2Woke-washing_intersectional.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/branding2woke-washing-intersectional-pdf)
**BRANDINGEBSCO-FullText-05_28_20262.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/brandingebsco-fulltext-05-28-20262-pdf)
**## WEEK4MTGGK600.docx**
CREGO {NO MORE THAN 100-150 WORDS)
My final marketing plan focuses on creating a pricing strategy for Tesla that targets more affordable vehicles for long-term sustainability. Tesla continues to pride itself on being a premium luxury vehicle company equipped with up-to-date technology. Features such as self-drive features, and the over-the-air (OTA) updates give Tesla that premium feeling that draws customers attention. This alone proves that consumers often pay more for perceived innovation and sustainability (International Energy Agency [IEA], 2024).
I have previously commented that Tesla has an extremely loyal customer database, and analytics and surveys show that customers will continue to return to Tesla (Statista, 2024). That’s why Tesla should continue to use premium pricing because consumers associate the brand with innovation and advanced technology. One thing they should be careful about is pricing products significantly higher than customers’ expectations. A perfect example was the Cybertruck I used last week, and the issues related to its release.
With all asking prices comes backlash usually needing some type of validation. If Tesla is going to come in with premium pricing, they need to have the ability to prove it. Where other brands have focused on cheaper solutions that have never been Tesla’s motive. By adding up- to-date technology and sustainability, that has a larger message to utilize clean energy ecosystem, enables customers to remain loyal to Tesla. This pricing strategy supports Tesla’s reputation as a leader in the EV market while remaining competitive against companies such as Rivian, Lucid, and Ford’s electric vehicle lineup. I hope you all enjoyed it and as always look forward to your discussions! Thanks!
RAMIRO {NO MORE THAN 100-150 WORDS}
Class,
My final marketing plan is again for Starbucks. Since Starbucks is already a premium coffeehouse shop, I would not recommend implementing either of the low-price strategies discussed in class. I would use value-based premium pricing because Starbucks consumers are paying not only for their coffee but also for the convenience, customization, experience, mobile ordering, rewards, and the “Starbucks Experience.”
I would recommend that Starbucks price its products around $6.25-$6.75 for a grande specialty beverage (flavored latte, cold brew, seasonal drink, etc.). This price would allow Starbucks to stay above lower-cost competitors like Dunkin’ while remaining affordable for consumers who value product quality, convenience, and brand loyalty. I arrived at this price by analyzing Starbucks' current position as a premium coffee shop, competitors' prices, and what consumers perceive they are getting from Starbucks (e.g., a revitalized rewards program that promotes repurchases with no expiration).
The price I recommend supports the company’s positioning because Starbucks is more than a typical coffee shop to grab a cup before work. If they priced their products too low, it would cheapen their premium brand, and consumers would wonder about the quality of the product or experience. If the price were too high, consumers would switch to cheaper competitors. By positioning at mid- to premium levels, they can maintain their brand equity while targeting students, young professionals, remote workers, and consumers who are loyal to Starbucks and willing to pay extra for the convenience and customization of their drinks.
Starbucks should continue to price its products by keeping its brand, customer loyalty, and positioning in mind. Starbucks should not pick a number out of thin air. Prices should be based on research, demand, competitor prices, and what customers feel they are receiving.
Please let me know what you think, or if you have any ideas on how Starbucks can improve its prices.
**## WEEK5MKTG600.docx**
WEEK5 MKTG600 BRANDING (NO MORE THAN 250 WORDS)
Branding has been a heavy marketing focus in recent years. As you shop for products, branding can influence your shopping behavior. You may recognize a familiar brand that is known for its quality. Other times, you may recognize a brand that is more environmentally conscious. Branding can help you to decide which product to buy in a competitive market.
**Research**
This week do some research on branding as well as marketing channels. Consider the relationship between these two as you reflect on the following questions.
**Discuss**
· How important is branding or brand image for marketers?
· Marketers have many channels to consider as they decide on placement. Should channel images be consistent with brand images? Why or why not?
· What type of effect has online availability had on branding?
References
Swaminathan, V., Sorescu, A., Steenkamp, J.-B. E. M., O’Guinn, T. C. G., & Schmitt, B. (2020). Branding in a Hyperconnected World: Refocusing Theories and Rethinking Boundaries.
_Journal of Marketing_,
_84_(2), 24–46. https://doi-org.ezproxy2.apus.edu/10.1177/0022242919899905
Sobande, F. (2020). Woke-washing: “intersectional” femvertising and branding “woke” bravery.
_European Journal of Marketing, 54_(11), 2723-2745. https://doi.org/10.1108/EJM-02-2019-0134
WEEK 5 ASSIGNMENT MTG600 ( NO MORE THAN 500 WORDS)
**Objective:** You are tasked with evaluating the website used by
**Kraft Foods** as part of their marketing strategy. After reviewing the website, you will write a 2-page paper discussing how effective the site is as a marketing tool.
**Step-by-Step Instructions:**
1.
**Visit the Website:**
· Go to
[Kraft Heinz](https://www.kraftheinz.com/)
· Take your time to explore the site thoroughly. Look at the different sections (recipes, product information, promotions, etc.) and pay attention to how the site is designed and how it presents information to the visitor.
2.
**Evaluate the Website:**
. Is the website hard to use or confusing in any way?
. Are there any sections that feel outdated or unnecessary?
. Could the website be more engaging or user-friendly?
. Does the website load quickly and work well on mobile devices?
· Use known criteria in your evaluation as you begin evaluating what is working well
· What could be better?
3.
**Write Your Paper:**
. Discuss
**both** what you think works well on the site and what could be improved.
. Back up your opinions with specific examples from the website (e.g., "The recipe section is easy to navigate because it includes a search feature for ingredients").
. Be specific in your evaluation. Instead of just saying something is "good" or "bad," explain
**why** you think it is effective or not effective.
·
**Length:** Your paper should be 2 pages long.
·
**Content:** In your paper, make sure to: Support your evaluation with specific examples from the website, using recognized criteria .
4.
**Formatting Your Paper:**
·
**Word Document:** Your paper must be typed and submitted as a Word document (no PDF or other formats).
·
**File Name:** Name your file like this:
**lastnamefirstinitial-MKTG600-assignment#** (For example, if your name is John Doe and this is Assignment 1, the file should be named
**doej-MKTG600-assignment1.docx**).
5.
**Submission:**
· Upload your completed Word document to the
**ASSIGNMENT Container** (where you are submitting the assignment online).
· Double-check that your file is uploaded before the deadline.
**Important Reminder: Use Scholarly Research**
To strengthen your analysis, it’s important to support your evaluation with
**scholarly research**. Incorporate at least two academic sources that discuss digital marketing strategies, website design, or user experience. Scholarly research will provide a theoretical foundation for your assessment and demonstrate a deeper understanding of best practices in web design and marketing. Be sure to properly cite any sources using APA format.
**Important Notes:**
·
**Grading Criteria:** You’ll be graded on the clarity of your analysis, the quality of your writing, and how well you back up your opinions with examples from the website.
**Summary Checklist:**
1. Review the website thoroughly.
2. Write a 2-page paper evaluating its effectiveness as a marketing tool.
3. Discuss what works well and what could be improved.
4. Submit your paper as a Word document with the correct file name.
5. Upload it to the assignment container before the deadline.
Course Objectives:
1. Define channel strategy
2. Design a sales management plan
Chaboud, I. (2016). The 100 billion dollar Heinz-Kraft deal.
_Strategic Direction, 32_(6), 5-7. https://doi.org/10.1108/SD-03-2016-0035
**## WEEK5HEINZThe_100_billion_dollar_Heinz-K.pdf**
The 100 billion dollar Heinz-Kraft deal
Isabelle Chaboud
Isabelle Chaboud is
Professor at the
Department of
Accounting, Law and
Finance, Grenoble EM,
Grenoble, France.
Introduction
The merger of Heinz and Kraft, finalized on July 2nd, was one of the largest mergers to take
place in 2015. Warren Buffet via Berkshire Hathaway and the Brazilian, Jorge Paulo
Lemann, orchestrated the deal, at the headquarters of 3G Capital. What were the
motivations and objectives of this merger? A few months after the deal, what measures
have been introduced?
Marrying two American giants
Heinz and Kraft are two major brands in the American food and beverage industry. With
over a hundred years of history each, the brands have conquered markets around the
world thanks to products such as Heinz® Ketchup, Philadelphia Cream Cheese, Velveeta
and Maxwell House.
By merging HJ Heinz Co. and Kraft Foods, the group has a portfolio of highly recognized
brands (Heinz, Velveeta and Maxwell House each reported over 1 billion dollars of turnover
in 2014). Yet, the group will still be only a middleweight player in the food and beverage
industry. In 2014, Heinz’s turnover was 10.9[1] billion dollars for a net profit of 0.7 billion
dollars. Kraft had a turnover of 18.2[2] billion dollars and a net profit of 1 billion dollars.
Kraft Foods acquired HJ Heinz Co. to create The Kraft Heinz Company, a new giant in the
American industry. The group should report more than 28[3] billion dollars in turnover, be
valued at 97 billion dollars, and employ 46,000 people. The group is now the third largest
North American food and beverage industry player and the fifth worldwide in terms of
turnover (still far behind Nestlé, the number one Swiss giant with 91.6 billion dollars of
turnover in 2014 – followed by PepsiCo, Unilever and Mondelez).
Why merge?
Although both companies have widely recognized brand name products, they have
suffered from stagnating or even decreasing demand in the USA. As customers have
become aware of the artificial, fattening or sugary characteristics of the groups’ products,
they have turned towards more natural and healthier products. In this context, why merge
two slowing middleweight players?
Warren Buffet and 3G Capital are counting on Heinz’s international distribution network to
develop Kraft’s international sales. While Heinz sells more than 60 per cent of its products
outside of North America with 650[4] million bottles of Heinz Ketchup being sold across 140
countries every year, Kraft only distributes its products in the USA.
In addition, the two groups have different products and act in different market segments.
For example, Kraft’s main markets are meals, convenience foods, desserts and cheeses.
This is a translated and
adapted version of an article
originally published in Le
Cercle les Echos in French
March 27, 2015 www.
lesechos.fr/idees-debats/
cercle/cercle-129954-heinz-
kraft-le-deal-a-100-milliards-
de-dollars-1106149.php
DOI 10.1108/SD-03-2016-0035 VOL. 32 NO. 6 2016, pp. 5-7, © Emerald Group Publishing Limited, ISSN 0258-0543 STRATEGIC DIRECTION PAGE 5
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://dx.doi.org/10.1108/SD-03-2016-0035](http://dx.doi.org/10.1108/SD-03-2016-0035)
For Heinz, Ketchup and other sauces represent almost 10 per cent of turnover. The
complementary nature of the two groups’ products limits the risk of in-house competition.
By combining their brand portfolios, the new group will also have better bargaining power
with suppliers and therefore improve profitability. Warren Buffet and 3G Capital have
forecasted 1.5 billion dollars in savings by 2017 owing to lower supply costs, an optimized
distribution network and greater power to negotiate.
A change in Warren Buffet’s investment style
Warren Buffet is one of the richest investors in the world (ranked 2nd in 2014 according to
the Bloomberg billionaire ranking). Known as the “Oracle of Omaha”, Warren Buffet would
appear to have moved towards a new investment strategy. Up until now, his investments
have always been very diversified (except for new technologies which he avoids) and
guided by similar principles: invest in companies whose stock value is underestimated as
compared to real value (patents, assets [. . .]); make long-term investments; and in
particular, even if Warren Buffet participates in management, never force restructuring or
changes in management.
By partnering with 3G Capital, Warren Buffet has accepted a completely different kind of
investment. 3G Capital is particularly well known for its ability to implement operational
changes and reduce costs (in particular via restructuration and closing down locations
when necessary). Warren Buffet first engaged in “partner” investments with 3G Capital in
June 2013 when they bought Heinz. Jorge Paulo Lemann, the founder of 3G Capital, and
the new management team at the Heinz Company used managerial methods that are very
different from Warren Buffet’s usual approach.
For example, they chose to introduce zero-based budgeting. When applying zero-based
budgeting, managers start from scratch instead of using past year’s budget as a baseline.
They plan a budget in which they have to justify every single expense. If an expense does
not add value, it must be minimized or eliminated, which is why the method is seen as a
cost-cutting strategy. The measures implemented by 3G Capital have been successful in
mature and highly competitive markets. They allowed Heinz Co. to improve profitability.
In his letter to shareholders, published in February 2015, Warren Buffet stated:
I’m not embarrassed to admit that Heinz is run far better under Alex Behring, Chairman, and
Bernardo Hees, CEO, than would be the case if I were in charge. They hold themselves to
extraordinarily high performance standards and are never satisfied, even when their results far
exceed those of competitors.
According to an article in the Financial Times (Brazil 3G Trio as Eager for USA Food as Beer,
March 26, 2015), these new management methods led to the closure of at least five
factories and cut 7,400 jobs, or around a quarter of the number of employees present when
3G Capital invested in Heinz.
First changes implemented after the merger
Top management for The Heinz Kraft Company (HKC) was primarily chosen by 3G Capital
with Bernardo Hees (a 3G Capital partner) as CEO. The group began trading on NASDAQ
on July 6th, 2015 at US$72.96 per share. On July 31st, the group paid out a dividend of
US$0.55 per share. Following a drop in sales of 4.5 per cent in the second quarter of 2015,
HKC announced on August 12th a plan to cut 2,500 jobs (mostly Kraft employees). In
addition, we can note that such a plan had already been implemented at the Heinz
Company after it was acquired by 3G Capital-Berkshire Hathaway.
While we may question the new group’s ability to grow, its portfolio of well-recognized
brands will certainly allow HKC to better negotiate deals with distribution networks and
even penetrate new markets. According to Crédit Suisse, Heinz’s net working capital in
June 2013 was evaluated at 12 per cent of sales (when 3G Capital acquired Heinz). By the
end of 2014, it only represented 3.5 per cent of revenue. The group managed to push back
PAGE 6 STRATEGIC DIRECTION VOL. 32 NO. 6 2016
supplier payments while collecting customer payments sooner. Crédit Suisse notes that if
the same practices are implemented with HKC, this should generate 650 million dollars in
additional operating cash flow. However, it is still a work in progress. The group also needs
to lower its debt. Berkshire and 3G Capital are aiming to reduce the group’s debt by two
billion dollars over the next two years which would allow it to restructure its balance sheet
and reduce its financing costs.
In the mean time, shareholders appear to expect substantial value creation, yet whether the
business will be worth almost 100 billion dollars is still to be determined. On January 29
2016, HKC shares traded at US$78.06 (7 per cent higher than its initial share value).
However, on February 18, 2016, share prices decreased to US$73.45 (only 0.7 per cent
above their initial listing price). It remains to be seen if the Berkshire Hathaway – 3G Capital
partnership will continue and manage to achieve their predicted 1.5 billion dollars in cost
reduction by the end of 2017. Such predictions should be taken with a grain of salt, given
the fact that even though Heinz has improved its profitability, it is not yet on a path towards
growth. In addition, it is worth asking whether or not customer demands for healthier
products will permit Kraft to develop its sales, in particular outside of the USA. In any case,
cost reduction will not be sufficient. The new group will have to invest part of its savings in
innovation to invent or reinvent future iconic products and brands.
Notes
1. Available at: http://ir.kraftheinzcompany.com/secfiling.cfm?filingID�1600508-15-11&CIK�
1600508
2. Available at: http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145
F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf
3. Available at: www.kraftheinzcompany.com/company.htm
4. Available at: www.heinz.com/our-company/press-room/trivia.aspx
Reference
Chaboud, I. (2015), “Heinz – Kraft: le ‘deal’ à 100 milliards de dollars”, Le Cercle les Echos, available
at: www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-
1106149.php (accessed 27 March 2015).
About the author
Isabelle Chaboud is a Professor at Grenoble Ecole de Management within the Accounting,
Law and Finance Department. Isabelle Chaboud can be contacted at: isabelle.
chaboud@grenoble-em.com
For instructions on how to order reprints of this article, please visit our website:
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Keywords:
M&A,
Acquisition,
Merger,
Heinz,
Kraft,
Warren Buffet
VOL. 32 NO. 6 2016 STRATEGIC DIRECTION PAGE 7
[http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508](http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508)
[http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508](http://ir.kraftheinzcompany.com/secfiling.cfm?filingID=1600508-15-11&CIK=1600508)
[http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf](http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf)
[http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf](http://files.shareholder.com/downloads/ABEA-3QV6OO/1786544917x0x730413/145F2E19-6958-4EA2-9111-B31F2E8CEF47/filing_10K.pdf)
[http://www.kraftheinzcompany.com/company.htm](http://www.kraftheinzcompany.com/company.htm)
[http://www.heinz.com/our-company/press-room/trivia.aspx](http://www.heinz.com/our-company/press-room/trivia.aspx)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php](http://www.lesechos.fr/idees-debats/cercle/cercle-129954-heinz-kraft-le-deal-a-100-milliards-de-dollars-1106149.php)
[mailto:isabelle.chaboud@grenoble-em.com](mailto:isabelle.chaboud@grenoble-em.com)
[mailto:isabelle.chaboud@grenoble-em.com](mailto:isabelle.chaboud@grenoble-em.com)
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Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.
– The 100 billion dollar Heinz-Kraft deal
– Introduction
– Marrying two American giants
– Why merge?
– A change in Warren Buffet’s investment style
– First changes implemented after the merger
– Reference
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