By Tim Seymour
When I met with H. J. Heinz (HNZ) CEO Bill Johnson and featured him on Trading The Globe on CNBC, he made it clear that Heinz sees the emerging market consumer as key to the company's growth and ultimate success. The emerging market consumer has driven the multiple higher for Heinz as growth continues to outstrip its competition. Before the announcement was made to buy the stock at a 20% premium to yesterday's closing price, Heinz was just off all-time highs.
Heinz has spent the last 25 years making huge investments into infrastructure, manufacturing in places like Russia, Brazil, the Middle East, China, and India. Heinz is now operating 50 companies around the world and maintains No. 1 or No. 2 market share in these counties. And 73% of Heinz's pre-tax income in 2012 was international.
This deal is being carried out by an American investment legend in Warren Buffett, but his partner in the deal is arguably the best partner for execution within emerging markets. 3G Capital is an exceptional partner, especially for emerging market growth. 3G is made up of three individuals in Brazil who were behind the Anheuser-Busch InBev Budweiser deal, which was a huge success for shareholders.
I often refer to Budweiser as a Brazilian beer company, and its operational prowess will continue to add value. To hear Buffett wax lyrical about how simple this deal was and what he is buying tells you why investors large and small continue to seek core linkage with the emerging market demographic story. Consumer staples, food, and retailing are the core of this investment approach and will continue to trade at higher multiples until we see the growth is done.