Kraft Heinz & Unilever: Falling Sterling

Kraft Heinz & Unilever: Falling Sterling & Lack of Organic Growth

The world’s 5th biggest consumer food firm, Kraft Heinz had another attempt today to acquire the world’s 3rd biggest consumer food firm, Unilever. For now, we are safe, Unilever has refused, but this may be nothing but another tactic from their book - the art of making a deal.

We anticipate that this has a lot to do with Brexit as well. Theresa May has not triggered the Brexit yet, the effects of this have started to surface. Perhaps, predators see a lot of blood and opportunity and falling sterling has produced enough blood on the street for firms around the world to look and cash on opportunities. They are coming out with big bazookas and trying to make deals which we have not seen. You can not blame them because tt is cheap for them and the time is right. So we do not think Kraft Heinz is going to back down anytime soon.

If the deal does see the daylight, this simply mean more job loss for UK and more pain for consumers as competition will erode.

Less competition will result with bigger firms controlling the price and having more dictatorship role when it comes to price. We know that Kraft has drilled massively when it comes to cost after its merger with Heinz. The firm is on the path of saving nearly 1.7 bln in 2018. This is the result of reducing cost (cutting jobs) and improving efficiency.

The deal may bring more spotlight on the relationship between the UK and the US as well. The UK government may try to block the deal and Mr. Trump is all about making in America and inward America. So there could potentially be some sort of battle surfacing on the government level as well which can make the newly established relation between the UK and the US a bit sour.

At the same time, it is important to state that Unilever has its headquarters in Holland, so the risk of job loss in not only limited to the UK only but also in other countries.

If Kraft Heinz ( a Warren Buffet-backed firm) is able to complete this merger in the coming days/weeks, this will be the deal of all time. We have not witnessed a deal of this size.

Unilever is not in the best form as it is clear if you focus on their recent earning. The firm had nearly 1% decline in their revenue and blamed difficult trading conditions. The firm is battling really hard when it comes to markets like Brazil and India where cost is the biggest player.

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