We sold our remaining holdings in Kraft Heinz (NASDAQ:KHC) after reducing our position last year, primarily on the elongated cadence of continued acquisitions. Our thesis for the remaining position in Kraft Heinz was reliant on the Company’s ability and tolerance for a steady cadence of inorganic growth - not unlike what we have seen at several companies where 3G Capital has a controlling stake. We expect Kraft Heinz to be an expandable platform for global brands, where the Company can acquire chronically under-earning branded consumer portfolios and implement a profit-oriented culture to drive long-term growth and value creation. While the Company can still execute this approach, we think the timeline and opportunity cost of waiting for this execution has extended and risen, respectively. We think a difficult industry backdrop has contributed to management’s trepidation for executing a deal, as well as potential targets that are less willing to cede control. As consumer brands continue to see pressure from private label and receive more pushback from an increasingly consolidated distribution channel, we believe it is inevitable that brands become more amenable to acquisition by Kraft Heinz. However, until that timeline becomes clearer, we decided to liquidate our remaining position in Kraft Heinz and allocate the proceeds to businesses that have more visible growth.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners 3rd quarter 2018 shareholder commentary.
