Buffett made a splash, but the biggest Heinz story is yet to come

Reading the beans.

Warren Buffet’s Berkshire Hathaway and Brazilian billionaire Jorge Paulo Lemann have teamed up to buy Heinz for $28 m — making this the fourth largest food and beverage acquisition of all time.

As if this wasn’t enough to excite the M&A markets, Buffet has been dropping not-so-subtle hints that he’s planning some more big moves, telling CNBC that he was “ready for another elephant.” Shares of other food companies rose yesterday in anticipation of more merger activity.

Buffet, the so-called “sage of Omaha”, isn’t known for making bad calls and Heinz has had a good few years, largely on the back of rising sales in Asia, which increased by 15.6 per cent last year.

That said, there’s something peculiar and anachronistic about the enduring success of Heinz’s most famous products. I should mention that beans on toast is my comfort dinner of choice — and yet I find it bizarre that processed beans in gloopy, sugary sauce didn’t follow spam off our shelves to be replaced by new and funky exotic produce like pasta, hummous and avocados.

Not only have baked beans survived the UK’s culinary dark ages to the modern day, but unlike fish fingers and dreaded turkey twizzlers, they aren’t only fed to children too young to know better. According to the Heinz website, 1.5 million cans of Heinz baked beans are sold in the UK every day.

H J Heinz, who founded the company in 1869, bankrupted himself trying to sell horseradish to the American public before he stumbled upon his winning ketchup recipe. Heinz ketchup too has proved remarkably enduring, although our attitude towards it has changed — it was first designed to disguise the taste of rotting food, now it’s simply seen as the natural accompaniment to horse, I mean, beef burgers.

According to Forbes, Heinz’s CEO William Johnson smothers his broccoli in ketchup, which can only illustrate a scary level of commitment to the brand.

The first UK supplier of ketchup was Fortnum and Mason. Today if you were silly enough to head to the Knightsbridge store for ketchup, you’d probably have to make do with some kind of hand-squeezed Sicilian organic sun-blushed plum tomato relish priced its weight in gold. At the same time, the growing trend for posh burgers and a confused nostalgia for American-style diners (think of hip London joints like Dirty Burger, Burger & Lobster, Meat Liquor etc) means that Heinz is enjoying something of a revival among foodies too.

Not all of this is down to chance. Like Coco-Cola (also owned by Buffet) the recipe for ketchup varies according to each country’s palate — in the Philippines it contains banana. The company’s plans to expand in Asia and South America — its aiming to double sales to emerging markets in five years — was preceded by strategic acquisitions such as Food Star, a Chinese soy sauce manufacturer in 2010, and Brazilian tomato sauce maker Quero.

It will be interesting to see how the impressively adaptable brand weathers the transition back to private company and its global expansion — will Johnson be kept on as CEO? How hard will Buffet and Lemann seek to squeeze Heinz to cut costs? (Lemann has form here) How much will Heinz be affected by rising commodity prices? Will an ever-more global Heinz outgrow its Pittsburgh roots? And — most important for us here in the UK — are the 2,700 jobs at Heinz’s Wigan branch safe? Buffet’s takeover has made a big splash, but one senses there are bigger Heinz stories to come.

Sophie McBain writes for Spear's magazine.

Photograph: Getty Images

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

Getty Images.
Show Hide image

Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.