BRKA Berkshire Hathaway Inc (class A)

By Simon Clark and Matthew Dalton 

Anheuser-Busch InBev NV's bid for SABMiller PLC is just the latest bold move by three Brazilian private-equity tycoons who have already cut a wide swath across the world's global food and drinks industries.

Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Herrmann Telles were instrumental in building AB InBev into the world's biggest beer maker by volume. The trio are controlling shareholders of AB InBev and co-founders of 3G Capital Partners LP, based in Rio de Janeiro. More recently, they have invested in some of the biggest names in the global food trade, including Burger King Worldwide Inc., Canada's Tim Horton's, Kraft Food Group and H.J. Heinz Co.

The billionaires are known for targeting global consumer brands and working with management to cut costs. 3G is currently integrating the former Kraft Foods Group into the Heinz business that the Brazilian private-equity firm bought two years ago with Warren Buffett's Berkshire Hathaway Inc. for $23 billion.

In 2010, 3G took private fast-food restaurant Burger King. Last year, 3G bought Canada's coffee-and-doughnut retailer Tim Hortons Inc. through its Burger King holding.

Kraft Heinz owns many of the most recognized food names in America--including eight brands with more than $1 billion in annual sales, among them Kraft, Heinz, Oscar Mayer, and Velveeta. But many of the company's brands are struggling as consumers shift toward healthier eating habits.

Despite the deal frenzy, companies that 3G and its founders have already invested in showed impressive increases in profit margins, but mixed performances on sales growth--other than that which comes from more acquisitions.

Since 3G bought Heinz two years ago, the ketchup maker lost market share in 65% of the food categories in which it has brands, maintained share in 16%, and gained in less than 20%, according to a February report by McKinsey & Co.

The McKinsey report, while noting that 3G has "created tremendous operational value," warns that its "focus on short-term profitability and cash flows does pose risks to brand health, particularly to future growth."

3G is considered a private-equity firm but doesn't raise money the same way most private-equity firms do. Rather than getting a huge pot of money from a large number of investors, Mr. Lemann and his partners turn to roughly three dozen of the world's wealthiest families and individuals.

AB InBev was pieced together through a series of mergers and acquisitions engineered by the three Brazilian billionaires and a group of wealthy Belgian families. The first step came in 2004 when Interbrew, a brewer owned by the Belgian families, merged with AmBev, a Brazilian brewer and soft-drinks distributor, to create InBev. 3G's Mr. Telles is a former chairman and chief executive officer of AmBev.

In 2008, InBev paid $52 billion for the U.S. brewer Anheuser-Busch Cos., which rebuffed InBev's first approach. InBev decided to make a hostile bid; Anheuser relented weeks later. InBev placed billions of debt on the new company to fund the acquisition. In 2013, AB InBev bought the half of the Mexican brewer Grupo Modelo it didn't already own.

A diagram in AB InBev's 2014 annual report shows how the Brazilian trio own a large stake in AB InBev through a web of companies stretching from the Bahamas to Luxembourg and the Netherlands.

Write to Simon Clark at simon.clark@wsj.com and Matthew Dalton at Matthew.Dalton@wsj.com

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(END) Dow Jones Newswires

September 16, 2015 09:17 ET (13:17 GMT)

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