Money and Finance
Two years back, Buffett recommended the book "Dream Big", the story of 3G Capital, which I finally got around to reading. When Buffett recommended it he was referring to 3G's involvement in the Heinz deal and how much he liked doing business over the years with Jorge Paulo Lemann. Since then, 3G spearheaded deals with Tim Horton's and the Kraft Heinz merger. I figured it was finally time to read the book.
Its not an investing book, more of a business history and all the of the history leading up to 3G is covered in detail. Since they started in Brazil there was a lot I did not know about the founders, and I suspect it will be new to most US investors. 3G has a much bigger name now controlling so many well known North American and global brands, its a fair question to ask, how did a few people from Brazil with no particular advantage pull of this feat?
Its easy to see why Buffett appreciates doing business with 3G. They are at the same time quite successful and very focused on discipline and results. They are also modest. My favorite quote in the book is at the end. When the author approached Lemann with the idea to write a book, he did not think they were worthy. Lemann said "All we did was copy a little from Goldman Sachs and a bit from Walmart. Nothing more than that." That's a pretty big understatement from a firm that controls beer across Latin America, Anheuser-Busch, Kraft Heinz, Tim Horton's, Burger King, and a lot more besides.
One key to success is a major focus on costs and zero based budgeting, managers have to fight every year to justify budget items. The mantra is that costs are like fingernails, they have to be trimmed regularly. This mantra is playing itself out at Kraft Heinz right now, the cuts go way beyond jobs - no free cheese sticks for employees, employees can't bring competitors food for lunch, printing on both sides of the paper, and so on. The goal for Kraft Heinz is to take out $1.7B in costs by 2017. The book does a good job showing that this is not new to 3G, this playbook is their DNA and it has evolved for decades.
They have a strong culture where they look to find and empower PSDs - Poor, Smart, and Deep Desire to get rich. 3G's process has identified many of these folks over the years, such as Carlos Brito, and once they are able to find them, the recipe basically is to give them the playbook, keep costs way down, latitude to operate, and big incentives to deliver. Brito came from nothing, worked his way up to CEO of Anheuser-Busch and ended up with 0.18% of the company's shares after delivering on the aggressive performance metrics set for him.
The culture is high on meritocracy and low on formality. Beto Sicupira comes to the office in scruffy jeans and a backpack. "the simplest guy in the whole world." Like Berkshire and Walmart, results matter, puffery doesn't. People matter, Oscar Telles still is involved in the new employee orientation, to ensure the culture stays consistent.
Selecting the right kinds of businesses to invest in matters with this approach. 3G buys low cyclicality, low capital businesses like consumer staples firms. These companies are ideal for the 3G approach, if you tried the same playbook at another firm, it might not work nearly as well.
One criticism is that 3G does not do a lot of traditional innovation with product launches and such. I am not sure if that is that big a deal. Look at P&G, GE and other firms that spent the last decade acquiring, now they are shrinking brands as fast as they can. 3G has run this focused playbook for a long time. In reading the book I was left with the distinct impression that it would be no fun at all to compete against these guys. When your competition can sustain a cost advantage it probably means they also have an advantage in focus and in customer service. That's what Sam Walton and Hunter Harrison figured out.
Like Berkshire, 3G does not do grand strategic plans. When 3G originally started in the beer business they looked around Latin America. The richest guy in Venezuela was a brewer. Same with Colombia, same with Argentina. They thought - they can't all be geniuses, it must be the business model that is good. That is where the genius of 3G lies, finding simple, scalable businesses and focus on them. Then get the right people, give them room to operate, excellent incentives and give them room to run. Its a recipe that has delivered and should continue for years to come.
- “dream, People, Culture”: Carlos Brito, Ceo Of Anheuser-busch Inbev
Link to video .................. Related book: DREAM BIG: How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira - acquired Anheuser-Busch, Burger King and Heinz [H/T Santangel's Review] ...
- Burger King In Talks To Buy Tim Hortons In Canada Tax Deal
Link to article: Burger King in Talks to Buy Tim Hortons in Canada Tax Deal Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc., a deal that would be structured as a so-called tax inversion and...
- Santangel's Review On The Book "dream Big"
Link to: Book Review and Lessons From Dream Big: A Glimpse Inside the Strategies and Tactics of 3G CapitalThis book has long been on my list to read, but unfortunately it had only been published in Portuguese. Last week an English version was released...
- The Brazilian Billionaire Who Controls Your Beer, Your Condiments, And Your Whopper
Found via the Corner of Berkshire & Fairfax. After they sold H.J. Heinz to Warren Buffett and a bunch of Brazilians in June, the ketchup manufacturer’s outgoing board of directors met for dinner at Pittsburgh’s Duquesne Club to congratulate themselves...
- Omaha Trip Report
The Berkshire Hathaway weekend is a lot of fun, its great to hang out with friends and talk and learn together. Every year there is something new. This year, I completed what I call the Omaha Triathlon part 1 - Berkshire Hathaway meeting, part 2- the...
Money and Finance
Sonho Grande (Dream Big)
Its not an investing book, more of a business history and all the of the history leading up to 3G is covered in detail. Since they started in Brazil there was a lot I did not know about the founders, and I suspect it will be new to most US investors. 3G has a much bigger name now controlling so many well known North American and global brands, its a fair question to ask, how did a few people from Brazil with no particular advantage pull of this feat?
Its easy to see why Buffett appreciates doing business with 3G. They are at the same time quite successful and very focused on discipline and results. They are also modest. My favorite quote in the book is at the end. When the author approached Lemann with the idea to write a book, he did not think they were worthy. Lemann said "All we did was copy a little from Goldman Sachs and a bit from Walmart. Nothing more than that." That's a pretty big understatement from a firm that controls beer across Latin America, Anheuser-Busch, Kraft Heinz, Tim Horton's, Burger King, and a lot more besides.
One key to success is a major focus on costs and zero based budgeting, managers have to fight every year to justify budget items. The mantra is that costs are like fingernails, they have to be trimmed regularly. This mantra is playing itself out at Kraft Heinz right now, the cuts go way beyond jobs - no free cheese sticks for employees, employees can't bring competitors food for lunch, printing on both sides of the paper, and so on. The goal for Kraft Heinz is to take out $1.7B in costs by 2017. The book does a good job showing that this is not new to 3G, this playbook is their DNA and it has evolved for decades.
They have a strong culture where they look to find and empower PSDs - Poor, Smart, and Deep Desire to get rich. 3G's process has identified many of these folks over the years, such as Carlos Brito, and once they are able to find them, the recipe basically is to give them the playbook, keep costs way down, latitude to operate, and big incentives to deliver. Brito came from nothing, worked his way up to CEO of Anheuser-Busch and ended up with 0.18% of the company's shares after delivering on the aggressive performance metrics set for him.
The culture is high on meritocracy and low on formality. Beto Sicupira comes to the office in scruffy jeans and a backpack. "the simplest guy in the whole world." Like Berkshire and Walmart, results matter, puffery doesn't. People matter, Oscar Telles still is involved in the new employee orientation, to ensure the culture stays consistent.
Selecting the right kinds of businesses to invest in matters with this approach. 3G buys low cyclicality, low capital businesses like consumer staples firms. These companies are ideal for the 3G approach, if you tried the same playbook at another firm, it might not work nearly as well.
One criticism is that 3G does not do a lot of traditional innovation with product launches and such. I am not sure if that is that big a deal. Look at P&G, GE and other firms that spent the last decade acquiring, now they are shrinking brands as fast as they can. 3G has run this focused playbook for a long time. In reading the book I was left with the distinct impression that it would be no fun at all to compete against these guys. When your competition can sustain a cost advantage it probably means they also have an advantage in focus and in customer service. That's what Sam Walton and Hunter Harrison figured out.
Like Berkshire, 3G does not do grand strategic plans. When 3G originally started in the beer business they looked around Latin America. The richest guy in Venezuela was a brewer. Same with Colombia, same with Argentina. They thought - they can't all be geniuses, it must be the business model that is good. That is where the genius of 3G lies, finding simple, scalable businesses and focus on them. Then get the right people, give them room to operate, excellent incentives and give them room to run. Its a recipe that has delivered and should continue for years to come.
- “dream, People, Culture”: Carlos Brito, Ceo Of Anheuser-busch Inbev
Link to video .................. Related book: DREAM BIG: How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira - acquired Anheuser-Busch, Burger King and Heinz [H/T Santangel's Review] ...
- Burger King In Talks To Buy Tim Hortons In Canada Tax Deal
Link to article: Burger King in Talks to Buy Tim Hortons in Canada Tax Deal Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc., a deal that would be structured as a so-called tax inversion and...
- Santangel's Review On The Book "dream Big"
Link to: Book Review and Lessons From Dream Big: A Glimpse Inside the Strategies and Tactics of 3G CapitalThis book has long been on my list to read, but unfortunately it had only been published in Portuguese. Last week an English version was released...
- The Brazilian Billionaire Who Controls Your Beer, Your Condiments, And Your Whopper
Found via the Corner of Berkshire & Fairfax. After they sold H.J. Heinz to Warren Buffett and a bunch of Brazilians in June, the ketchup manufacturer’s outgoing board of directors met for dinner at Pittsburgh’s Duquesne Club to congratulate themselves...
- Omaha Trip Report
The Berkshire Hathaway weekend is a lot of fun, its great to hang out with friends and talk and learn together. Every year there is something new. This year, I completed what I call the Omaha Triathlon part 1 - Berkshire Hathaway meeting, part 2- the...