In a consolidation that will birth the fifth largest food company in the world, H.J. Heinz Company announced on Wednesday its plan to purchase Kraft Foods.
The mega-merger, which was engineered by Warren Buffet's Berkshire Hathway and the Brazilian investment firm 3G Capital, brings under one roof products ranging from the ubiquitous Heinz Ketchup and Kraft Mac n' Cheese to the companies' other brands including: Oscar Mayer lunch meats, Planters nuts, Bagel Bites, Maxwell House Coffee, Jell-O, Kraft Singles, Ore-Ida potato products, Weight Watchers brand frozen dinners, and Kool-Aid.
The expected annual revenue of Kraft Heinz Co. is expected to be about $28 billion.
The Associated Pressreports that the $40 billion buyout reflects pressures facing packaged food makers as consumers are increasingly interested in purchasing less processed food.
However, healthy food advocates are concerned that the merger will dramatically reduce consumer choice and give even more power to a handful of food industry giants. As noted by Food & Water Watch senior policy advocate Patrick Woodall, the deal largely escaped the scrutiny of federal anti-trust authorities because very few of Kraft and Heinz products compete head-to-head.
"Even when mergers do not join companies that sell identical kinds of foods, they give big food processing companies more economic power and leverage over other companies and consumers," Woodall wrote.
This is problematic for new food companies that will have a harder time competing for shelf space, he adds, as well as for consumers trying to avoid purchasing from particular corporations.
"The expanding tentacles of companies like Kraft can limit choices by pushing consumers to buy Kraft brands in multiple grocery categories," Woodall continued. "For example, the proposed merger would join Kraft's Grey Poupon mustard and Heinz Ketchup, which make it easier to promote both brands together, increasing the control that just one company has over a bigger piece of that grocery aisle."
According to AP, the boards of both Kraft and Heinz, which is privately owned, have unanimously approved the deal, though it still needs a final nod from federal regulators and shareholders of Kraft Foods Group Inc. The deal is expected to close later this year.
Company executives who discussed details of the merger in a conference call on Wednesday say that Kraft, under the guidance of 3G, will undergo $1.5 billion in cost-cutting measures that will likely threaten many company jobs, Bloomberg reports.
