Warren Buffett said Wednesday said Kraft Heinz Co. (KHC) , which is backed by the billionaire investor, was not interested in buying Mondelez International Inc., a U.S. food and beverage company that has a few high-profile activist investors in its midst.
Buffett, speaking on CNBC TV, was quizzed on whether the recent industry-transforming acquisition of Whole Foods Market Inc. by Amazon.com (AMZN) was putting pressure on Kraft Heinz to grow bigger through an acquisition so its food and beverage brands could get some leverage in their battle with retailers.
"That doesn't help you much in the fight," Buffett said. "It helps to have a group of powerful brands when you are negotiating with a retailer but what they really care about is the strength of the specific brand. If you have 5 items served at dinner that doesn't really make it a lot stronger than one. There is not the additive factor if you have 10 big brands vs. one."
Buffett acknowledged that some big retailers were getting an upper hand of late in their battle with consumer goods products over price, adding that now Amazon can be added to a list of mega-retailers that includes Wal-Mart and Costco. "When you get strong retailers a Walmart, a Costco and now an amazon and they keep getting stronger their position improves. Packaged foods have had more trouble," Buffett said.
When pressed on whether one might see a Kraft Heinz acquisition of Mondelez, Buffett said "I think the answer is no on that."
The comments were a big blow to Mondelez, whose share price dropped about 3% to $40.78 a share on the news. It also was a blow to activist investors who have accumulated significant positions in Mondelez, including Pershing Square's Bill Ackman, who reported holding a 1% stake, and Trian Fund Management's Nelson Peltz, who has a 2.8% stake. Peltz also holds a position on Mondelez's board.
Buffett's comments also suggest that Kraft Heinz may not be so interested in making other major acquisitions in the food or personal-care products space. Some big activist fund managers had previously speculated that Kraft Heinz could be intereste din buying personal care products maker Colgate-Palmolive Co. (CL) after its spectacular but ultimately unsuccessful $143 billion acquisition of Unilever failed earlier this year.
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