Buffett's Berkshire Hathaway on Saturday turned in a $25.4 billion loss in the fourth quarter, weighed down in part by a $3 billion write-down, largely connected to its investment in the food giant. Last year, Kraft, one of Berkshire's largest holdings, pulled the conglomerate's results down with a $2.7 billion loss, compared with the $2.9 billion in earnings it added in 2017.
Berkshire, along with private equity firm 3G Capital helped finance H.J. Heinz Company's merger with Kraft Foods Group in 2015. But the union has been rocky, underlined this week when ketchup maker delivered earnings and revenue sharply lower than estimates, slashed its dividend by 36 percent and took a $15 billion write-down on two of its biggest brands, Kraft and Oscar Mayer. The news sent Kraft Heinz's stock down about 30 percent on Friday and slashed the value of Berkshire's stake in the company by more than $4 billion.
Buffett has wanted to do a large acquisition, but he has said he has viewed such deals as pricey and he has moved cautiously. Lessons from the Kraft Heinz deal and how it has compared to other similar transactions may illustrate why he has moved so slowly in spending Berkshire's massive cash pile, which had grown to $112 billion by the end of last year. He last year remarked to CNBC it is "very hard" to offer a premium for a packaged food company, noting the industry is more difficult than it was ten years ago.
In the past when Buffett has put his money where Americans' mouths are, he has seen success. His bet on candy and gum raked in millions. Berkshire helped finance M&M-owner Mars' acquisition of Wm. Wrigley Jr., the maker of Extra gum and Altoids mints, for $23 billion in 2018. By the time he sold out of the company in 2016, he had earned at least $680 million from the deal and roughly $840 million dividends from its preferred shares in it, according to media reports.
The parallel to draw between the two deals is simple: both offered iconic brands Americans liked to eat.
"These are brands I liked 30-plus years ago, and I like them today. And I think I'll like them 30 years from now," Buffett told CNBC's Becky Quick shortly after the Kraft Heinz deal was announced.