MEGA Heinz-Kraft Food Company Merger – Is This A Good Thing?

March 25, 2015, by Ken Jorgustin

is-the-heinz-kraft-merger-good-for-the-consumer

The mega food company merger of Heinz and Kraft will result in the third largest food and beverage company in the United States, the fifth largest in the world.

Question: How often are the results of any merger – good for the consumer? or the employees?

Is the systemic risk that is associated with increasingly putting all of our ‘eggs in one basket’ (our food), a good thing?


 
The food industry is about to become even more concentrated than it already is, as the giant combined company will be named The Kraft Heinz Company.

H.J. Heinz Company and Kraft Foods Group, Inc. (NASDAQ: KRFT) today announced that they have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America with an unparalleled portfolio of iconic brands.

The transaction is subject to approval by Kraft shareholders, receipt of regulatory approvals and other customary closing conditions and is expected to close in the second half of 2015.

-Press Release

 
Thoughts:

How long until things merge to just one food company? Would that be even better? (sarcasm)

I don’t know about you, but I have a problem with these enormous mergers (in nearly any industry). The merger is always solely about money, Wall Street, stock holders, and the pockets of the corporate leaders. Of course it is. While I have nothing against capitalism and making a profit, I do know that following any merger – there are slashes and cuts to budgets, a cheapening of the product(s), and often layoffs. This is in an effort to line the pockets of the merger principals and of course, the stock holders. But as a consumer, are we getting the short end of the stick?

I believe that (generally) as a consumer, we get an inferior product and/or a product that costs more (often cleverly). For example, who’s to say that the bean counters over at the new Kraft Heinz Company won’t find a way to cheapen the food product in some way? Who’s to say they won’t trim another half ounce off the size of the ‘package’? Or maybe my 38 ounce bottle of Heinz ketchup will become 34 ounces sometime after the merger? Or maybe they will ‘adjust’ their secret ketchup formula to trim off some cost – will it still be ‘ketchup’? (Time to start making my own ketchup?)

If you think that much of our existing ‘processed’ food supply is less than nutritionally ideal today, then how will it be tomorrow when even more focus is put upon cost cutting for profits? Will the food always be ‘food’? In my opinion, much of it already is not ‘food’! (at least in a traditional sense of the word food).

In addition to knowing that as a consumer I will probably get ‘screwed’ somehow because of the resulting ‘watering down’ or price increases or package reductions, even more concerning to me is the notion of just a few giant food companies controlling our food supply! I just don’t like that. As a preparedness-conscious person, my instinct tells me that there is MORE risk when there are fewer choices (or companies in control of our food supply).

It is so very difficult for small and medium size businesses (even some ‘large’ businesses) to successfully compete in a food industry of mega giants – especially with an overburdening of regulations that only they can afford – and the results are fewer and fewer ‘local’ or regional sources within the food industry chain (including farming and supply, processing, independent products, distribution, and locally owned grocery stores or chains).

The corporate profits from the mega giants do not end up in your town or region. The only exception that someone will argue is that if you own that company in your 401K (for example) then you may reap the reward of a stock price going up. But I would argue that you and your community or region will lose more by shifting profits to the mega giants who are not loyal to your community, and who are not loyal to any nation, and who will only EXTRACT dollars from you, me, and our community. That’s just my general opinion…

What say you??