Kraft Heinz reached a record low on Friday after the famous food company revealed a $15 Billion write-down on its marquee brands. This leads investors to question if years of meticulous and stringent cost cuts results to the company losing its value. Mainly on their marquee Oscar Mayer deli meats and Kraft cheese brands.
Kraft’s stock growth has gone to a standstill and gradually languished in the years after it merged with Heinz. This situation is due to consumers came to favor newer, cheaper and privately labeled brands. Choosing organic products over older, established and time-tested products.
Kraft Heinz’s shares opened lowly at 28 percent for $34.51 and wiped nearly $17 billion off the company’s market value. During the mid-afternoon trading, shares were down $13.10 at $35.07.
Rival companies and brands also fell as well. Conagra Brands, Unilever, General Mills, and Nestle all went down between 3 percent and 6 percent.
Kraft Heinz, which more than half of it is regulated by Warren Buffett’s Berkshire Hathaway and Brazil’s 3G Capital, has been coping with higher slow growth, commodity, and transportation costs by constricting overall company budget. Which leads to their current predicament.
Insights and Actions
JP Morgan analyst Ken Goldman said that investors are asking 3G if their budget tightening policy would result in dire consequences in the future. Investors, including Goldman, got their answers yesterday in the form of a $15 billion obscured asset write-down for the Oscar Mayer and Kraft brands.
Kraft also disclosed an announcement of a regulatory probe to its investors last Thursday. It also includes a chop in its dividend and a quarterly loss.
Warren Buffett, American business magnate, investor, and speaker, releases his yearly letter to shareholders on Saturday. This will give investors time to read through the document to look for any insight from Buffett himself. This will give out more information about Buffett’s stake and relationship with Brazil’s 3G Capital.