Just before the 4th of July holiday in the United States, and after the blockbuster news announcement in March, HJ Heinz has now indicated that its proposed merger with Kraft Foods had been approved by Kraft Foods Group shareholders, forming what is to be called The Kraft Heinz Company, subject to certain customary closing conditions. A preliminary count of the voting results was noted as more than 98 percent of votes cast in favor of the transaction.
The transaction will reportedly create the third-largest Food and Beverage Company in North America and the fifth largest Food and Beverage Company globally. Business media previously reported that initial talks had begun in January, and now with half the year completed, the merger has moved to its transitional management stage. This is obviously, very swift action and perhaps a sign that planning was well underway.
As noted in previous Supply Chain Matters commentary, this Heinz-Kraft deal is backed by infamous private equity firm 3G Capital Partners, with financing from Warren Buffet’s Berkshire Hathaway. 3G Capital’s has a track record for aggressive cost-cutting, which has since sent further tremors among consumer product goods supply chain industry players. Since assuming operations management of HJ Heinz, upwards of 7000 jobs were eliminated in a 20 month span. New CEO Bernando Hees ultimately cut a third of the staff at Heinz’s headquarters including 11 of the company’s top 12 executives. The new combined Kraft-Heinz is seeking upwards of $1.5 billion in additional annual cost savings.
Further announced was the new senior leadership team for Kraft Heinz. The new senior leadership team will be headed by former Heinz and 3G Capital executive Bernardo Hees. The appointments are dominated by current Heinz executives, another indication of the aggressive cost-cutting practices to follow in the coming months. Of the 10 senior management roles, eight will be filled by Heinz executives. There is but one female executive as part of the new senior leadership team.
Included in these announcements is the appointment of Eduardo Pelleissone as Executive Vice President of Global Operations with direct global responsibility for supply chain, quality, and procurement and operations functions. Mr. Pelleissone joined Heinz in 2013 with the acquisition of 3G Capital, as Head of Operations. Before joining Heinz, the executive was heading operations at All America Latina Logistica S/A.
Noted in the announcement is that Robert Gorski, previous EVP, Integrated Supply Chain at Kraft Foods will depart upon completion of the merger. In a previous Supply Chain Matters 2013 commentary, we praised Gorski for his leadership style and efforts in transforming Kraft Foods supply chain business processes after its former split involving Mondelez International. Gorski exhibited an active and inclusive leadership style.
Melissa Werneck was appointed SVP Global Human Resources, Performance and IT. She also joined Heinz in 2013 and according to the announcement, led an Integrated Management System that included a Management by Objectives (MBO) Program. This appears to be an interesting mix of MBO and IT under a singular executive leader.
The new senior leadership team is further comprised of four Zone Presidents who will manage Europe, Russia, Asia Pacific and Latin America regions.
Newly appointed Kraft COO George Zoghbi has now been appointed COO of U.S. Commercial Business and will lead five commercial business units. Certain direct reports of Zoghbi will be part of Bernardo Hess’s termed Extended Leadership Team, and includes elements of corporate marketing, U.S. sales and budgeting.
As noted in a previous commentary, the new combined company will be driven by zero-based budgeting methods. Andre Maciel was promoted to head of U.S. Commercial Finance that includes U.S. Budget and Business Planning (BBP). Maciel directly reports to COO Zoghbi and is a member of the termed Extended Leadership Team.
Advertising Age was quick to note that the new Kraft-Heinz will not have a Chief Marketing Officer (CMO) in its senior leadership team. The top ranking marketing position will be a Vice President, Marketing Innovation role assumed by Kraft veteran Nina Barton who will report to COO Zoghbi and will also be designated as part of the Extended Management Team. Current Kraft CMO Jane Hilk will reportedly also leave the completion upon completion of the merger.
From our lens, this appears to be a sign that product and brand marketing will not take a lead presence in business strategy which has been the practice of CPG firms. Instead, revenue growth and increased profitability will take center stage.
The new combined Kraft-Heinz company will surely garner lots of business, supply chain and industry media attention in the months to come, from many different contexts. Of more interest, other industry players, suppliers and investors will be closely monitoring the actions taken as well as the results.
Business as usual no longer will suffice among CPG focused supply chains.