Kraft Heinz Power Play

The merger of Kraft Food Group and Heinz Company has led to the formation of Kraft Heinz Company. It is a major controlling player in the food and beverage industry. The major products of the company include sauces and condiments, dairy and cheese, and ambient meals (Platform of Performance). It controls a great market share in the packaged food industry and it is on the way to becoming the largest food and beverage company in the world.

Kraft Heinz Company has become the third largest food and beverage company in North America, behind PepsiCo and Nestle SA. It is the fifth largest food and beverage company in the world. Its major competitors include Nestle SA, Mondelēz International (MDLZ), Unilever Group, and PepsiCo. Before the merger, Kraft Food Group major market was in North America generating up to 98% of its sales (Team 2015). Meanwhile, Heinz had a global platform generating up to 61% of its sales outside North America. The merger sought to sell a higher number of brands in the international market, promoting revenue growth.

Fig 1. Stock market chart

The company purchases large quantities of raw materials for production, metals, and resins for packaging and gas to operate manufacturing plants. It monitors the cost and supply trends for these commodities. It has also centralized procurement of items to reduce cost ("Merger Progress" 2016). Through an inventory management technique, stock keeping units (SKU), the company uses analytical methods to retain only strategically important SKU. It increases its sales and profits by ensuring that the merchandise is moving and productive.

Fig 2. Inventory Proportions

The changes in operation strategy can reduce cost. Firstly, the introduction of zero-based budgeting helps top management realize cost saving. Secondly, the reduction of personnel and shutting down non-performing manufacturing facilities. Analyzing the advantages and disadvantages, the merger is mutually beneficial to both companies, and it is worth venturing into. The merger will result in a high market share and control of the market, considering that it is expecting an annual cost savings of $1.5 billion by end of 2017.

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“A Platform for Performance.” The Kraft Heinz Company, www.kraftheinzcompany.com/. Accessed 16 Sept. 2017.

Diana Key. “What Every Investor Needs to Know about Kraft Heinz: A Series Overview.” What Every Investor Needs to Know about Kraft Heinz: A Series Overview - Market Realist, marketrealist.com/2015/12/every-investor-needs-know-kraft-heinz-series-overview/. Accessed 16 Sept. 2017.

Pure Performance Long-term Horizon, Long Only, Value, Growth. “Kraft Heinz: Merger Progress.” Seeking Alpha, 22 Apr. 2016, seekingalpha.com/article/3967415-kraft-heinz-merger-progress. Accessed 16 Sept. 2017.

The team, Trefis. “Analysis Of the Kraft-Heinz Merger.” Forbes, Forbes Magazine, 30 Mar. 2015, www.forbes.com/sites/greatspeculations/2015/03/30/analysis-of-the-kraft-heinz-merger/. Accessed 16 Sept. 2017.