In an article published on Forbes online, Warren Buffett advised the shareholders of Berkshire Hathaway that 2012 was a "subpar" year. Buffett purchased Heinz for $23 billion dollars. Many industry people believe this is going to make executives of other companies work much harder. 3G Capital was Buffett's partner in the Heinz deal, a few of their people helped AmBev, a Brazilian brewer, gain notoriety and become the world's biggest beer maker. They used expansion and cost cutting as strategies to expand their business. They are planning to also do this with the Heinz brand. It is rumored that 3G Capital is trying to get Heinz to merge with Campbell Soup.
CNBC reported that Campbell Soups has been seen cutting costs, and closing down factories. Buffett explained that investors should not predict Berkshire to outperform any high numbers however their performance is likely to get better. Buffett also explained that he is excited about his two new hires he brought on board; he said they are both managing nearly $5 billion dollars each. He was reported stating, "The second disappointment in 2012 was my inability to make a major acquisition. I pursued a couple of elephants, but came up empty-handed. Our luck, however, changed early this year. In February, we agreed to buy 50% of a holding company that will own all of H. J. Heinz."
Investors believe the 3G Capital strategy of cost cutting to expand revenue is indeed a perfect way to hone a brand. Unfortunately, cost cutting means layoffs; 3G Capital is known for this. Buffett is proud of his new investment managers, Todd Combs and Ted Weschler he claims they have proven to be smart and demonstrate integrity. He also believes that over time, American business will start succeeding again. He is very enthusiastic about the Heinz deal and says the company could not be in better company.
"Jorge Paulo is a longtime friend of mine and an extraordinary manager," said Buffett. "His group and Berkshire will each contribute about $4 billion for common equity in the holding company. Berkshire will also invest $8 billion in preferred shares that pay a 9% dividend".
