Question

3G Capital arrived on the scene over a decade ago when it started buying old school American food companies like Heinz and Burger King. It became the darling of Wall Street when it was praised by Warren Buffet who ultimately invested heavily with 3G. 3G's crown jewel, Kraft Heinz, has been struggling with poor results over the last couple of years. What affect did their strategic approach have on the culture at Kraft Heinz and what role did that have in Kraft Heinz's string of disappointing financial results? How do you think it impacted employees at the company? Please include where you got the information.

Answer 1

In my opinion, the strategic approach of 3G Capital was to work on zero based budgeting model wherein at the start of every financial year, the company started cost allocation and budgeting from zero base and did not take into account the budget allocation and cost factorization of previous years. This was a big impact on the culture at Kraft Heinz which led to the company struggling with poor results over the last couple of years. The costs kept on spiralling upwards with no account of the same and entire focus was on sales, marketing and advertisement which led to a bubble burst and failure of operation model of the company. The company ultimately went into losses due to huge arrears and spiralling costs which were not taken into account due to zero based budgeting model. The employees at the company were also affected since it was a different strategic approach for them to adapt to and was not a part of the culture at Kraft Foods, which was acquired by 3G Capital to form Kraft Heinz. The culture at Kraft Foods did not promote such strategies of unaccounted costs and as a result of it, the company suffered string of disappointing financial results.