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The Kraft and Heinz Merger & Acquisition
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The merger & acquisition of Kraft and Heinz was finalized on Thursday July 2, 2015
with both board of directors unanimously voting for the merge. The merger & acquisition
between Kraft and Heinz is trying to drive international expansion. The Kraft Heinz Company
has now officially become the fifth largest food company in the world and the third largest in the
United States, now making this company a huge competitor internationally.
The synergies/benefits that Kraft and Heinz companies are expecting to gain from this
deal is international growth since Heinz is already an international contender, by joining forces
Kraft will now be international as well. There are limitations due to an agreement between Kraft
and Mondelez International, whom acquired rights to sell many of their shared brands in
international markets. These brands that are shared are off limits so the new company that
emerges from this deal will have to work around these brands and choose the iconic brands that
are not shared with Mondelez International. A-1, Velveeta, Planters, MiO and Lunchables are
some iconic brands that do not fall under the previous agreement and will help assist in the new
firms’ revenue growth.
The Kraft Heinz Company is expecting to benefit by economies of scale, which is the
cost advantages that a domestic company can obtain when combining forces with an
international company. The Kraft Heinz Company is expected to save $1.5 billion in annual costs
by the end of 2017. Kraft brands being sold only in the North American market limited their
suppliers and costs, but now that Kraft and Heinz have combined forces there will be a larger
volumes of sales. This will help the new firm have more bargaining power with clients and
hopefully in turn have more demand. Now that Kraft will be able to meet demand it should open
up more shelf space in the bigger stores.
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The Kraft Heinz Company will need to combine operations strategy due to the merging
of the two companies. The efficiency and effectiveness of each facility will be evaluated and the
less efficient will be shut down, which in turn will reduce the number of employees. Starting
from scratch is a hardship every new company has to go through and The Kraft Heinz Company
is no different. Starting with a Zero-based budget putting more responsibility onto the middle
