Lemann Says 3G Has to Focus on Consumers After Kraft Heinz Rout

(Bloomberg) -- Brazilian billionaire Jorge Paulo Lemann is trying to change the perception that his private equity firm, 3G Capital Partners Ltd., leans too heavily on cost cutting and doesn't do enough to nurture consumer brands.

“Our culture is under attack because of the results of Kraft Heinz,” Lemann told students this week at an event ahead of the Brazil Conference at Harvard & MIT, referring to the packaged-food giant that took a $15.4 billion writedown in February. “They say we came from the finance business, we are traders, we didn't think much about what clients want. We were more conscious about cutting costs.”

Kraft Heinz Co. tumbled 27 percent on Feb. 22 after it announced the writedown, a subpoena from the Securities and Exchange Commission and a dividend cut. Critics pounced on Lemann's 3G, which along with Warren Buffett created Kraft Heinz in a 2015 merger. They argued that in the investors' zeal to cut costs, the company ignored consumers' changing tastes for its products, which include Oscar Mayer hot dogs and Kraft macaroni and cheese.

“Now we are changing that,” Lemann told the students. “We are getting more and more consumer focused, and we also want to embrace new technologies, because consumers are changing. We are hiring more technology people.”

“Now we must create our own platform and talk directly to consumers,” he said. “Globalization is here to stay.”

Brittany Weissman, an analyst at Edward Jones & Co., said that kind of shift is needed at 3G. “They got a pass for a long time, but now you have to question the strategy,” Weissman said after Kraft Heinz released its results in February. “You can't just cut and buy, cut and buy. It's a packaged-food company -- all you have is the value of your brands.”

Lemann, 79, told students at the conference that he's “lost many times” in his life as an entrepreneur, and learns from his love of tennis how to deal with those disappointments. “I am in one of those phases now, thinking what we are going to do, what we are going to change.”

And he offered the students another tennis lesson: “I learned to play to win, not to play for the crowd,” said Lemann, who added that tennis great Roger Federer is his neighbor in Switzerland. “He plays at my house before Wimbledon. Once in a while he'll hit a few with me,” the billionaire joked.

--With assistance from Craig Giammona.

To contact the reporter on this story: Cristiane Lucchesi in Boston at clucchesi5@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Alan Goldstein