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.

Photo: Getty
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.