Heinz has announced the first significant job cuts since the Warren Buffett / 3G Capital takeover only last year. Given 3G’s track record with previous investments, the news the ketchup and soup company is “streamlining” its business should not be a huge surprise.
Some 600 jobs from Heinz’s operations in North America are to go – with 350 of them at its corporate HQ in Pittsburgh.
News of lay offs at the home of Heinz will make waves locally and understandably so – the US food giant has been present in the Steel City for 144 years.
However, the move to create a more “streamlined structure” in North America (jobs are also to be axed in Canada) is to be expected. 3G, like Buffett’s Berkshire Hathaway fund, owns 50% of Heinz but it has operational control of the business. The private-equity firm has a record of driving efficiency, as one look at its previous investments – including Brazilian brewer Ambev (a legacy company behind what is now Anheuser-Busch InBev) and fast food chain Burger King will demonstrate.
On the day in February Heinz announced its board had agreed to the US$28bn 3G/Buffett takeover, at a media conference in Pittsburgh, 3G managing partner Alex Behring was asked repeatedly about cost cuts. One reporter referred to 3G’s record of “aggressive” cost cutting. Behring said then it was too early to comment. “We have several months ahead of us to get to understand the team and the people,” he said. “If you compare and contrast with some of the businesses we got involved with in the past this is a company that’s doing extremely well as it is and has been doing extremely well for a number of years prior to our involvement.”
In the last two years, Heinz has closed plants worldwide and shaken up its supply chain but clearly, 3G and its newly-appointed management team at Heinz (including new CEO Bernardo Hees, the former boss of Burger King) believed more could be done.
“The difficult actions we are taking now will better position the company to support and fund our next chapter of growth while further strengthening our world-leading brands,” a Heinz spokesperson said yesterday. “Our new organisational structure will simplify, strengthen and leverage the company’s global scale, while enabling faster decision making, increased accountability, and accelerated growth.”
And, to be fair to Heinz’s new owners, they have made repeated references about growth. Further expansion in emerging markets could be on the horizon and perhaps the company could look to M&A to drive synergies.
Nonetheless, the cuts announced yesterday are likely to, at least in the short term, prompt questions about what other savings could be made. Could Heinz’s new owners, for example, look to offload the company’s North American frozen operations?