Brazil’s burger king likes his companies lean

By Daniel Gallas
South America Business Correspondent

image captionJorge Paulo Lemann is head of 3G Capital

Brazil's richest man Jorge Paulo Lemann does not eat burgers.

A former tennis player, who competed in Wimbledon in the 1960s, he is an advocate of healthy eating.

But when it comes to business it appears he has a rather different appetite, one that stretches to ready meals and processed foods.

His company 3G Capital - which already owned Heinz and Burger King - bought the US food giant Kraft last month, in partnership with billionaire investor Warren Buffett.

The products may have a tendency to stretch your waistline, but Lemann, who was born in Rio de Janeiro, is obsessed with lean companies.

In late 2008, barely months after acquiring Anheuser-Busch, makers of Budweiser beer, Lemann and his associates overhauled the company, shedding 1,400 jobs, some 6% of its workforce.

In one year, 3G Capital found $10bn in savings and divestments.

Executives lost all sorts of privileges: walls were torn down and personal offices were joined together in open plan spaces.

The number of company Blackberries issued to employees fell from 1,200 to 720.

Freebies like free baseball tickets, free beer or first-class tickets were cut. Private jets belonging to Anheuser-Busch were sold.

"They take cost-cutting very seriously," says Cristiane Correa, a journalist and author of Dream Big, a book on the rise of Lemann and his two fellow countrymen and partners Marcel Telles and Beto Sicupira.

"Some people get really scared by that. Afterwards, of course, the company grows and they end up hiring again, but at start it is ugly."

Desire to get rich

Cost-cutting is one of 3G Capital's obsessions.

But there are others too, such as meritocracy and investing in the right people.

Some of 3G Capital's top executives that today are in charge of leading global brands have been with Lemann since the early days of Garantia - the bank he founded in the 1970s.

Back then, the magnate had already coined the term PSD to describes his ideal employees: "Poor, Smart, with a Deep Desire to Get Rich."

Marcel Telles, one of 3G's three strongmen and with a net fortune estimated upwards of $13bn, started out his career as a sort of office boy in Garantia.

One trait that is conspicuously absent in 3G Capital's business model is innovation.

image copyrightReuters
image caption3G Capital owns Burger King

The company makes its fortunes by finding optimum ways of producing something simple - like a burger or ketchup - and repeating that formula on a larger scale, without requiring much creativity.

"This model is well-suited to the food industry, where you can make a lot of money if you are disciplined enough to avoid waste when producing," says Leni Hidalgo, a professor at Brazil's Insper business school, who worked in one of Lemann, Telles and Sicupira's businesses in the 1990s.

Last month's Heinz-Kraft merger turned Lemann into a food tycoon, now leading the third largest food and beverage conglomerate in the US.

Brazil - from hype to slowdown:

In the 2000s:

Massive offshore oil discovered

20 million people lifted from poverty

Achieved investment grade rating in credit agencies

Won bids to host Olympics and World Cup


Austerity measures and spending cuts

Large scale Petrobras corruption scandal

0.1% GDP growth in 2014

Rising inflation (7.7% compared with a target of 4.5%) and unemployment (5.9% up from 4.8% in January 2014)

Currency close to its lowest point in 12 years - $1 is worth almost twice as much as five years ago

It has been almost a decade since the business world saw the rise of another ambitious Brazilian - mining tycoon Eike Batista.

For much of the past 10 years, Batista - a flashy maverick with an extravagant lifestyle - was the world's seventh richest billionaire, and seen by many as the international face of Brazil's then vibrant economic growth on the world stage.

Much of Batista's wealth was made during a cycle of high commodity prices.

But once that cycle came to an end, a mixture of economic downturn and bad decisions meant he lost much of his lustre and fortune.

Discreet lifestyle

In a way, Batista's story is a chronicle of Brazil's journey from hype to economic downturn, in which the fortunes of South America's largest country roughly followed the same timescale.

Now the subject of a series of criminal charges his fall from grace was absolute, while Lemann claimed the post of Brazil's richest person.

Many commentators see him as the "anti-Batista" - a prudent manager with a low profile and discreet lifestyle who is not given to grandiose statements.

image copyrightAP
image captionThe maker of Budweiser is also owned by 3G Capital

But just as with Batista in the 2000s, Lemann now seems like an appropriate choice to be the "face" of Brazil's tougher economic reality in 2015.

His philosophy of cost-cutting and efficiency savings is currently in vogue in his home country - as the government turns to austerity measures in a bid to put the Brics nation back on a path of sustainable growth.

But Prof Hidalgo says 3G Capital is, in many ways, the opposite of the typical Brazilian industry.

Their firms have discipline, high productivity and low waste - qualities many companies in Brazil are still lacking today.

"Brazilian businesses have much to learn from them," says the professor.

image copyrightAP
image captionEike Batista has lost much of his fortune

Brazil's government must surely be hoping that the country's fortunes also mirror one of its most successful sons.

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