Running head: KRAFT HEINZ MERGE
Group Members
Shirley Moore
Jordan Lavallee
Dai Nguyen
Robert Warren
Liberty University Online
BMAL 504
Leading Organizational Change
Professor Brumfield
August 23, 2022
Running head: BMAL 504/Organizational Change
The Kraft Heinz Merge
Part 1
Implementation and Why
Kraft Heinz merger was designed to create an organization that was more cost-effective,
its objective was to decrease the cost of running the business while creating one of the world's
fifth-largest food and beverage company at the time. “The combination of Pittsburgh-based
Heinz and Kraft earlier this year was engineered by Warren Buffett's Berkshire Hathaway and
Brazilian investment firm 3G Capital, which has become known for its tight cost controls.”
(Metairie, 2015, pp.8) It did not come as a surprise, that because of this merger over 2500 job
positions within Canada was cut. The job cut largely affected employees from the Kraft side of
the business. The investors' focus and motivation for the merger was to reduce the operating cost,
to this end they appointed Bernardo Hees as CEO to oversee cost-cutting projects. Avoiding
unnecessary spending was one of the cost-saving implementations that came after the merge.
Also, other cost-saving measures that came under the merge consisted of employees being
instructed to print on both sides of the paper, reusing office supplies such as binders and pens,
and turning off lights and computers before leaving the business place. Additionally, all charities
and donation had to be routed for proper approval and the Kraft snack such as Jell-O was no
longer provided for free. “Executives say they expect to save $1.5 billion in annual costs by
2017” (Metairie, 2015, pp. 13).
The merger was extremely effective in reducing the organization’s spending cost. Within
a few weeks, the operating margins increased, and Heinz's operating margins have leap from
18% to 26% since 3G and Buffett's Berkshire Hathaway took over two years ago (Kraft Heinz,
2020). When reviewing Kraft-Heinz employment posture and recruitment website, it highlights
Running head: BMAL 504/Organizational Change
the vision, expectation, and desire for employees within Kraft Heinz or individual looking for
employment.
The new vision for the Kraft Heinz Company’s culture can be best summarized in one word:
Ownership. We think and act like owners of our business, treating every dollar as if it were our
own.” (Kraft Heinz, 2020)
In short, the organization wanted employees who are resourceful and good at keeping a
low budget while having a high productivity rate. Kraft Heinz aimed to get top-line supplies
through the use of limited-resource. Their objective was to create a longer-lasting, cheap, and
sustainable business. The newly founded Kraft Heinz secondary focus was on long-term value
The Kraft Heinz Company is committed to investing in world-class brands and long-term value
creation (Kraft Heinz 2020). Kraft Heinz wanted to strive for a long sustaining operation with
minimum maintenance and operational cost.
This merger objective was to save operation cost and reduce spending. To this end, Kraft
Heinz reduces many employees and job positions. It made Bernardo Hees the CEO to oversee
projects for reducing operations costs, such as budgeting office supply, reducing free give away
and donation. Lastly, Kraft Heinz reorganizes its culture, vision, and recruitment to target
employees who values resource management and innovative ideas for cost-saving.
The Kraft Heinz Merge
In an official press release issued on 25 March 2015, Kraft Foods Group, Inc. “announced
that they have entered into a definitive merger agreement to create The Kraft Heinz Company,
forming the third largest food and beverage company in North America with an unparalleled
portfolio of iconic brands” (Kraft Heinz Company, 2015). This merger came to be when
Berkshire Hathaway, who had controlling interest in Heinz, teamed with 3G Capital to buy Kraft.
Running head: BMAL 504/Organizational Change
Initially, this deal was met with some criticism from economists and investors as it seen to be an
attempt to further enhance the processed food industry in a time where consumers were actively
making more health-conscious decisions about their food purchases. This merger was in fact an
expansion of Berkshire Hathaway and 3G Capital’s acquisition of Heinz in 2013. The union of
these “iconic food companies joins together two portfolios of beloved brands, including Heinz,
Kraft, Oscar Mayer, Ore-Ida and Philadelphia” (Kraft Heinz Company, 2015) and earns them the
title of “the world's fifth-biggest food and beverage company” (Calamur, 2015).
To even the scales of this deal, “Kraft shareholders will own a 49% stake in the combined
company” (Kraft Heinz Company, 2015). Additionally, Kraft shareholders received stock in the
combined company and a cash dividend of more than $16 per share. This deal introduced an
exciting new earning potential to both Kraft and Heinz shareholders as these two companies
were expected to experience significant growth as a result of their combined efforts and synergy.
Almost three months after the announcement of the merger, the specific terms of the deal
were finalized in June of 2015. To pave the way for this new powerhouse organization, it was
agreed that the board of directors would be comprised of members from Kraft, Heinz, Berkshire
Hathaway, and 3G’s. Longtime 3G Capital partner Bernardo Hees, who was named CEO of
Heinz after the 2013 acquisition, was once again entrusted to run the now merged Kraft Heinz
Company as its CEO. After finalizing the terms of the deal and aligning the board of directors
and executive leadership positions the all-new super company shifted its focus to establishing a
new vision for its future.
Kraft and Heinz cultures before the merge
When merging, much time and effort should be put into culture. Corporate culture as a
linking force creates stability for the organizations. It strengthens organization’s integrity thanks
Running head: BMAL 504/Organizational Change
to the employees' commitment to a coherent system of agreed values (Valkanova, A., 2019).
Implementing a cross-culture environment is not the easiest task; in fact, most of the time it is an
overlooked facet during a merge. Unfortunately, one of the main issues that Kraft and Heinz
failed to focus on was differences in culture. After making their decision to merge, it appears that
they considered three major thoughts: increased investments in marketing, innovation and
opportunities for shareholders, and substantial profit. The leaders of both companies lacked
integrating cultures; rather they thrived on building an altogether new culture. However, is
difficult to build a new culture if one does not understand how a lack in culture directly affected
them prior to merging. Leaders who are culturally invested in an organization are to have
success. Yet, those who are culturally incompatible with their friends at work tend to experience
dissatisfaction with their jobs (Goldberg, A., Srivastava, S. B., Manian, V. G., Monroe, W., &
Potts, C.,2016). This really creates an unwanted environment from both sides. Heinz started its
brand with ketchup. Kraft started with cheese. Both became iconic, booming businesses. Each
had its own culture. A company’s culture is based on the shared values, beliefs, and assumptions
that influence behavior, expectations and attitudes. Therefore, each company had its pride and so
did the individuals who worked for them. To Kraft, culture was everything; to Heinz culture was
even more. When merging, chaos is inevitable because their developed culture was significant to
their growth; in that, their decisions, leadership styles, adaptations, and beliefs were all centered
around their culture
Kraft’s creativity has always centered around the family. This concept has evolved
through many generations, and they have done this with efficiency. Employees felt like a family
who worked hard and diligently to create style and innovation to drive success of their company.
Leaders and employees had established trust relations regardless of the many challenges they
Running head: BMAL 504/Organizational Change
met. Kraft greatly respected their laborers and worked diligently to maintain their jobs. Kraft
depended on the ideas and creativeness of employees who were committed to excellence.
Employees were passionate about their work because e they had had a high level of trust in their
leaders. Cultural factors promote or undermine trust, with a view of supporting business leaders
and managers (Thanetsunthorn, N., & Wuthisatian, R., 2020). They were recognized for their
achievements. Also, merging is within the culture of Kraft, they were created from its first
merger with National Dairy in 1969. They later took over with General Foods in 1985; after
which becoming Kraft Foods, Inc., a fully independent public corporation in 2007. Since that
time, they have been aggressive in merging with several other companies. This history defines
the Kraft’s culture with employees who are innovative and creative as well as extremely hard-
driven workers.
Also, Kraft became the basis for families; its mac-n-cheese was a hot commodity because
kids loved it. Kraft’s centered its culture around families; in that, workplace was also family
oriented as the company committed itself to not only the community, but Kraft also cultivated
their employees’ family into their annual goals and activities. Family and kids were another
reason why Kraft considered lower prices. Somehow, they begin to fail the attention of the new
generations; thusly, leading to a merge with Heinz.
Heinz, being famous tomato ketchup, expanded its food selection rising to the top.
Eventually they merged with Starkist tuna and Ore-Ida and was bought by Berkshire Hathaway
in 2013. Heinz being already established doing international trading was threatened by the
internet market. Needless to say, Heinz has a history of changing leaders and reducing jobs
during any challenges they had to face. Whereas, Kraft tried to make cuts in every way to avoid a
reduction in payroll, whenever Heinz felt threatened, seemingly, cutting cost in payroll appeared
Running head: BMAL 504/Organizational Change
at the top of their list. After several restructuring periods, Heinz closed plants and reduced their
workforce without much regard for employees’ livelihood.
The new vision of the Kraft Heinz merger.
In 2014-2015 Kraft Heinze merged to expand as a fortune 500 company. Due to an
increase in production and a decrease in overall cost spending, timing was perfect to create an
expansion into the new markets. Our company, Kraft Heinz, was one of many to attempt this
course in 2014. Both corporations were exceptionally profitable, with $10.9 billion for Heinz
and $18.2 billion for Kraft in net profit, and combined, there was great potential.
Most of Kraft's products…would not compete with Heinz's main products, such as
sauces. Heinz international distribution networks saved them 1.5 billion, and due to lower
supply and distribution cost allowed a negotiation with vendors and would help to
leverage a better pricing structure to the customer (Chaboud, I., 2016)
Their new vision was the mastermind of two very differently measured firms. First, there
was Berkshire Hathaway Inc., and they took the more cautious approach to find the
underestimated real value, to slash costs and thus boost productivity, "the all-important factor in
America's economic growth over the past 240 years," (Das, A., 2016) but still allowing the
organization to manage the day to day with little directed changes. Hathaway represented very
prominently leadership such as Warren E. Buffett CFO, Howard G Buffett President, Stephen B.
Burke board director, William H. Gates III board director, to name a few. Whereas 3G Capital,
their counter-part in this venture were known as operating by "aggressive streamlining"
(Hamstra, Mark 2016 ) and are known to "introduce a zero-based budget" (Chaboud, I., 2016)
Any purchases that would be required had to be justified. They based the books as if it were there
the first year of business and had no history of helping offset any potential expenses.
Running head: BMAL 504/Organizational Change
References
Calamur, K. (2015). NPR Choice page. Npr.org. Retrieved 5 August 2020, from
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merger.
Chaboud, I. (2016). The 100 billion dollar heinz-kraft deal. Strategic Direction, 32(6), 5-7.
doi:http://dx.doi.org.ezproxy.liberty.edu/10.1108/SD-03-2016 -0035.
Das, A. (2016, Feb 29). Warren buffett defends berkshire's 2015 moves; buffett praises 3G
partnership; 2015 profit buoyed by investment gain tied to kraft-heinz deal. Wall Street
Journal (Online) Retrieved from http://ezproxy.liberty.edu/login?qurl=https%3A%2F
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Running head: BMAL 504/Organizational Change
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