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What happens when the shark runs out of water for the feeding frenzy?
For many, Kraft Heinz/3G Capital’s business model is old news – though not for the thousands who have lost their jobs due to the company’s aggressive cost cutting. 3G loads up on debt to acquire a company, wrings out all possible costs to boost profitability, and once this has been completed, borrows again to fund a new acquisition and repeats the cycle. Referred to as the “the shark that can’t stop swimming” in a 2016 Fortune Article, 3G Capital has been very effective in implementing the borrowing and cost cutting aspect of its business model. But the central weakness of its model has become clear — its inability to grow organic revenues (sales not as a result of mergers and acquisitions) i.e. expand its business through innovation and create products that respond to changing consumer consumption patterns. This is reflected in KHC increasing its organic revenues in November 2017 by only 0.3 percent -the company’s first increase since the company’s creation in 2015. KHC’s weaknesses are also discussed in today’s Wall Street Journal article on the company.
Most financial analysts now predict another large acquisition for Kraft Heinz because the shark is running out of water. This will undoubtedly be an acquisition where numerous workers stand to experience what has already happened at companies where 3G Capital is a majority shareholder.
Strong union organization and international coordination is the only means to fight back against this type of behaviour. Get involved by contacting the IUF Secretariat.