Merger of Kraft and Heinz puts more pressure on manufacturers

The imminent merger of Kraft Foods Group Inc. with the H.J. Heinz is increasing pressure on other food manufacturers to improve their performance or run behind their own acquisitions.
The two food giants are combining to create the third-largest food and beverage company of North America in a deal supported by 3 g Capital and by Berkshire Hathaway Inc., of Warren Buffett.
The 3 g comes shaking the food industry with his penchant for acquisitions and reputation of relentless cost cuts. To monitor, the packaged food industry rivals will have to follow its model.
The Mondelez International Inc. and Campbell Soup Co. are among the companies that are already adopting measures to reassess their budgets and it is likely that other companies do the same. The next step, for some of them, may be the joining of forces.
Nestle SA, which will face a tougher competitor to the new Heinz Co., Kraft could decide the time is right to present an offer by General Mills Inc., maker of Cheerios breakfast cereal, valued at $ 32 billion, said Kevin Dreyer, of the Gabelli Funds. The transaction of Kraft, announced on Wednesday, also increases the benefits of combination snack Division of PepsiCo Inc. with Mondelez, according to Sachin Shah, of Albert Fried co., based in New York.
"Everyone in the industry to think ' we could be next, let's exhaust the possibilities to increase our value as an independent company, '" said Dreyer in an interview by phone, of Rye, New York.
The Gamco Investors Inc., Gabelli's parent company, manages shares of Kraft, General Mills and many other manufacturers of consumer products. "If they cannot do this independently, so there must be other strategic options for many companies," he said.
On alert
The producer of soymilk WhiteWave Foods Co. and the Diamond Foods Inc., manufacturer of trademark Emerald Nuts, are also ready for an acquisition, said Alexia Howard, of Sanford c. Bernstein Co. Buffett and the 3 g probably will close deals, although they may need a hiatus to digest the Kraft. General Mills, Mondelez and Kellogg Co. are among its possible next targets.
"This puts the whole group on alert," said Brian Yarbrough, an analyst in St. Louis from Edward Jones co.
"There are many players in the food sector and there is very little growth if the company does not manufacture natural, organic products or proteins. So, how to grow? Buying. I think this is just the beginning ".
The transaction of Kraft, which assesses the manufacturer of pasta and cheeses at about $ 46 billion before the net debt, is the biggest deal of the food industry in history. Overcomes the acquisition of Heinz for Buffett and by 3 g Capital in a deal worth more than $ 23 billion in 2013.
Berkshire also offered funding for the acquisition of Burger King Worldwide Inc., which belonged to the Tim Hortons Inc. and today is owned by 3 g last year.
Becoming 3 g
When performs an acquisition, the 3 g reduces expenses on target.
The investment firm of Brazilian leadership was able to increase profitability even in companies that were quite efficient to begin with, said Yarbrough, of Edward Jones. Kraft and Heinz seeking a reduction of $ 1.5 billion in annual costs by the end of 2017.
Nestlé has been considered an obvious buyer of General Mills by some analysts and investors because the two companies already have a joint venture for the sale of cereals.
Now, the manufacturer of chocolates Switzerland can finally feel the pressure to make an approach.
Kraft's business may be the largest food industry in history, but certainly won't be the last.
The food manufacturers ' need to move forward, "said Shah, the Albert Fried. "To do nothing would be a hard thing to swallow".