Graeme Hart and son tipped as possible buyer as Kraft Heinz explores sale of Australasian operations

Potential sale of Wattie's to a local owner would facilitate growth, an FMCG expert says.

Warren Buffett-backed global food and beverage giant Kraft Heinz is said to be in talks to sell its New Zealand and Australian operations.

Its Australasian assets are estimated to be worth around $1 billion and global executives are understood to be exploring an exit of the local market, according to Australian media reports.

The company's Heinz Wattie's business, with processing plants in Hastings, is understood to be its most lucrative asset in Australasia. Heinz Watties is one of the largest processed food firms operating in New Zealand.

While Kraft Heinz declined to comment when contacted by the Herald, FMCG brand strategist Mike Kotlyar, director of @Consult, said the company last year put asset sales on its agenda as it looked to downsize its business.

He said the company was likely looking to shed certain brands globally.

Its move follows those of other global consumer companies selling out of regional markets.

Kotlyar said a potential sale of Wattie's in New Zealand and Golden Circle in Australia to local buyers in the market would facilitate growth, given a renewed appreciation for locally-owned businesses and local made goods following the Covid-19 crisis.

Wattie's was founded more than 85 years ago and later merged with Goodman Fielder, before being acquired by H. J. Heinz Company for $565 million in 1992.

Heinz Kraft was later formed by the merger of Kraft Foods and Heinz.

Today, the North American company is the world's fifth-largest food and beverage company with an annual turnover of US$25b ($41b).

Kotlyar said Kraft Heinz had a good first quarter in 2020, which could largely be attributed to a surge in supermarket spending brought about by the pandemic, but had experienced tough trading conditions in 2018, albeit slightly better in 2019.

"The challenge for Kraft Heinz is a lot of their brands are in a slight decline and struggling for profitability. They are struggling profit-wise and I think it's the complexity and width and depth of their brands globally."

This was the case for a number of large multinationals in the consumer space as they grappled with competition, he said.

Kotlyar said it would be beneficial for Kraft Heinz to sell off the New Zealand and Australian assets separately.

Harts in the mix?

New Zealand's richest man Graeme Hart, and his son Harry, who have acquired a string of consumer brands over the past couple of years, could be a good fit as potential owners of Heinz Wattie's assets, he said.

In 2018, Harry Hart's company Walter & Wild acquired pies and baking brand I Love Food Co, which operates brands I Love Pies and I Love Baking, for an undisclosed sum.

This followed an acquisition in June where the father and son duo purchased cereal company Hubbard Foods, having previously acquired Kiwi food company Hansells.

Walter & Wild purchased the licences for the supply of Gregg's tomato, barbecue and steak sauces and ketchup, as well as the F. Whitlock & Sons Worcestershire sauce in New Zealand, as part of a required divestment undertaking from Heinz Wattie's.

The Walter & Wild portfolio also includes the Aunt Betty's brand, Alfa One, Vitafresh, Vitasport and Coconut Collaborative.

"I think it is definitely a good fit based on the brand portfolio - historically strong Kiwi brands," Kotlyar said.

"Local patriotism is certainly playing a lot now and I think there is a real advantage in having local and possibly even Australasian brands being supported locally; it makes sense. It could be quite beneficial because a lot of these multinational brands are managed from North America or an Asian base, and so they do tend to treat them in other markets very generically.

"Having a local owner could potentially be really good for iconic Kiwi brands."

Representatives from Walter and Wild were not immediately available for comment.

While it may seem like an uncertain time for acquisitions given global uncertainty, Kotlyar said it was an attractive time for global brands to return to local ownership, a time where the brand could sell for less than what it is worth.

"Now is probably a good time to acquisition if you do have the money because you'll be buying assets at anything from 20 to 40 per cent of their value.

"As New Zealand brands get bigger and they get acquisitioned they [often] lose that connection with the local market which makes them strong. [Bringing Kraft Heinz Australasian brands back to local ownership] would be a real positive for Australia and New Zealand workers, with the right level of management, engagement and investment it could be really positive."

Often when a brand was acquired by a multinational it removed the uniqueness of the brand, Kotlyar said.

Any sale of local Kraft Heinz brands would be driven by "desperation", he said.

"It's interesting to see that their turnover is increasing but their profitability is stable to declining, which indicates there is a lot more costs in that business."