A Q.&A. With the Author of a Buffett-Praised Book on 3G Capital

A Q.&A. With the Author of a Buffett-Praised Book on 3G Capital

Warren Buffet’s $23 billion deal to buy H.J. Heinz was promoted at the exhibition hall of the Berkshire meeting.




May 5, 2014

Warren E. Buffett speaks about virtually anything at the annual Berkshire Hathaway meeting in Omaha, and this past weekend proved no different. But surprisingly, he took a fair amount of time to praise some of his newest business partners.

Several times during a Q. and A. session with investors, he talked up 3G Capital, a Brazilian-founded investment firm he joined forces with to buy H.J. Heinz for $23 billion last year. And he said he would like to work with them on another big deal.

To learn more, Mr. Buffett recommended that investors read “Dream Big,” a book about 3G written by Cristiane Correa, a Brazilian reporter who had followed the firm as it arranged ever-bigger acquisitions. Famously, its brewery rolled up numerous South American competitors, then Interbrew, and finally, in 2008, Anheuser Busch for $52 billion.

Though “Dream Big” was published last year in Portuguese (an edition that sold 200,000 copies in Brazil), it became available in an English-language version only last month. Primarily available in a Kindle version, the book was sold in the exhibition hall of the Berkshire meeting. And Mr. Buffett’s recommendation apparently carries great weight: Ms. Correa said that she had sold all 300 copies of the book on sale at the meeting.

“I nearly died,” she told DealBook. “I wasn’t expecting that at all.”

She spoke to DealBook about 3G Capital, its business approach and why one of its founders, the billionaire Jorge Paulo Lemann, gets along so well with the Oracle of Omaha. Here is a transcript of the conversation, which has been condensed and edited for clarity.

How did the book come about?

I’m a business journalist who worked at Exame magazine, one of the largest business publications in Brazil. While I was working there, I wrote about many of the companies in which Lemann had invested.

In 2007, I talked to them for the first time about writing a book. They are very low-key and said no. I tried for four years and failed. Then I decided to go by myself and started writing a book without their cooperation. They didn’t put themselves in the way, but they didn’t cooperate either.

What are the main principles of the 3G way?

Meritocracy is one. It’s very common in America but not in Brazil. They are looking for the best people – that’s what people say all the time, but they really do.

Cost-cutting, that’s very important. No expense is too little that it can’t be cut.

Have they always had those principles?

They always had those principles. Some companies change their culture over the years. They never have.

It goes back to the ’70s at Garantia, where cost-cutting was not that important. But when they went to retail, they used Sam Walton and Walmart as an example.

They’re a really sophisticated machine.

Has their growth surprised you?

“They have said they would love to be No. 1 in the world, as a brewery. They had been building it for 20 years.

They first started to consolidate Brazilian market, then buying regional breweries in South America and then Interbrew. When the Anheuser-Busch deal happened, everyone was surprised, but if you had been following them, it made sense.

I think the Heinz deal was more of a surprise. It was not a sector in which they were investing. But the partnership with Buffett put them on a whole other level.

Were you surprised by how much praise Buffett lavished upon them?

He is sort of in love with them. I talked to him two years ago, and he was impressed by how they had done the Anheuser-Busch deal. He didn’t realize they couldn’t find as much room for improvement as they did.

They have gotten closer and closer. He really likes what they’re doing.

What common threads are there between the two?

There aren’t that many things in common between 3G and Berkshire, but there are between Lemann and Buffett. Both are very modest, simple guys. They love what they do and are not in it for the money.

They’re both very rich and they just want to do big things. They also have a management style that is very similar. They trust in people and they let their teams work.

Mr. Lemann is 74 years old. Is he going to retire anytime soon?

I think he’ll do it as long as he can.

3G has a big team, and the companies it owns nowadays operate without Jorge Paulo Lemann. The C.E.O. of Heinz has been working with Lemann for 15 years. Carlos Brito [the chief executive of Anheuser-Busch InBev] has been with them almost 30 years. They operate the companies as Lemann would.

Lemann’s also letting his children occupy some places on the boards of those companies. He’s preparing companies for the time that he won’t be around. But I don’t think he has plans to voluntarily stop working.

What’s next for 3G?

There’s been a lot of talk about Coke or Pepsi – in Brazil at least. The Heinz deal, no one expected that. I think they can come up with something no one’s thinking of.

They’re going to do another big deal. I would bet on that, that something big’s going to happen.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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