From May issue, NZ Manufacturer magazine

Ian Walsh, Partner, Argon & Co

While there are industries — car assembly, for example — where the economic case for local production can be debated, food is different. Producing food is something we should be doing. More than that, it is something we must do well.

The story of Heinz — and by association Wattie’s — is one that is very near and dear to my heart. I have worked in this business on and off since the 1990s, in the UK, the US, and across ANZ.

That lived experience matters, because this is not a theoretical discussion about ownership structures or ideology. It is a practical lesson in how value is built over decades — and how it can be lost just as surely.

Under the leadership of Tony O’Reilly, Heinz became one of the great global food companies of the late twentieth century.

Through the 1980s and early 1990s, the strategy was clear: disciplined international expansion, strong brand investment, and relentless focus on cost and productivity.

The acquisition of Wattie’s in 1992 — for approximately NZ$565 million — fit this pattern perfectly: a category‑leading local brand with deep trust and export potential.

Markets rewarded this approach. By the early 1990s, Heinz’s market value had grown to roughly US$10–15 billion. Scale, brand power, and operating discipline reinforced one another. But acquisition‑led growth is never free.

Each successive wave of M&A expanded the footprint and lifted shareholder expectations. With every deal came aging assets, capital‑intensive manufacturing plants, and increasing complexity.

To sustain growth and fund further acquisitions, the base business had to extract more productivity and cut costs. Over time, this narrowed the margin for error.

Many manufacturing sites were already under‑capitalised when acquired. They required sustained reinvestment simply to remain competitive. Too often, that investment was deferred.

Short‑term financial results were protected, but long‑term capability slowly eroded. Brand investment declined. Operational flexibility reduced. Vulnerability increased — not through one bad decision, but through many rational short‑term ones.

For a time, markets continued to look through these issues. By the mid‑2000s Heinz was still valued at around US$12 billion.

In 2013, Berkshire Hathaway and 3G Capital acquired Heinz for approximately US$23 billion, reflecting enduring confidence in its iconic brands and the belief that tighter financial discipline could unlock further value.

The 2015 merger with Kraft initially appeared to confirm that view. At its peak in 2016–2017, Kraft Heinz reached a market valuation of over US$100 billion.

The following decade, however, told a different story. Cost‑cutting without sufficient reinvestment weakened brands, slowed innovation, and undermined operational resilience. By 2026, Kraft Heinz’s market capitalisation had fallen back to roughly US$26–27 billion.

This trajectory is not simply about macroeconomics or financial engineering. It is a lesson in culture, capability, and time horizon.

There were parts of the Heinz system that achieved world‑class operational performance, but too many improvements proved temporary — undone by repeated restructuring, leadership churn, and short‑term pressures. Without continuity, performance cultures do not endure.

The lesson is broader than one company. It should be possible to compete in food manufacturing using products grown locally, at global standards of cost and quality. We have the capability and the people to do so.

Yet the evidence shows that only those organisations willing to invest consistently in long‑term capability develop the resilience that markets ultimately reward.

World‑class performance in food manufacturing is not aspirational — it is mandatory. Being “good enough” is not a strategy; it is a slow drift into irrelevance.

Leaders, boards, and owners face a clear choice: invest ahead of the cycle, align incentives to long‑term capability, and commit to operational excellence — or accept decline.

Markets eventually price capability, or the absence of it. The only real question is whether we act early, or learn late.