Examining the Heinz-Kraft Merger

March 27, 2015
Frost and Sullivan sees more coming; 'How do we make our brands work together?'

This week's proposed blockbuster merger of Heinz and Kraft (see earlier story) should not come as a surprise, according to one group of analysts, and it may presage other mergers and acquisitions as large companies try to respond to changing market conditions.

"The food and beverage industry will most likely experience more mergers of this sort as companies strategically respond to increasing competition combined with changing consumer patterns, in order to achieve various objectives such as increasing revenue growth and or market share," say the analysts at London-based Frost & Sullivan.

"For these two companies it is no longer about 'how do we perform better than each other,' but now about 'how do we make our brands work together to achieve our objectives as a company?' says a report authored by Tosin Jack, Frost's senior industry analyst for chemicals, materials & food.

"It does not mean competition within the whole industry has been reduced but it means two companies can now experience growth despite industry challenges. It is expected that there will be improved efficiency across brands, as the company now has the prospect of seeing how its various brands complement each other, thus generating sales. Also, there is the increase in market presence from the combination of growth opportunities in North America and a global expansion as Kraft combines with Heinz’s worldwide base.

"Lastly, consumer patterns change frequently and they will remain at the core of the decision making process of food and beverage companies, given that there will always be winners and losers. But mergers such as this will help ensure a strong coping strategy to the less favorable impacts. Furthermore, as the industry faces challenges such as the growing demand for safer products and adhering to regulations attached to them, mergers like this will help improve the efficiency of dealing with these challenges."

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