Maybe the pizza burger
wasn't such a good idea. Struggling fast food giant Burger King is
selling itself to 3G Capital for approximately $3.26 billion. The buyer
is an investment firm that owns stakes in Anheuser-Busch InBev, a large
retailer in Latin America and a sizable railroad company also in Latin
America. According to Reuters
"The company is struggling with weak demand amid a sluggish economic
recovery and persistently high unemployment." What happened to BK and
where is it headed?
- Here's BK's Problem, writes The Economist:
"Among other things, BK has always had a higher proportion of sales to
young men, who have been hit especially hard by the recession.
McDonald's, by contrast, has for several years wooed women and older
people with relatively healthy salads and drinkable coffee. BK has
struggled to follow suit. At the same time, it has had to contend with
angry shareholders, as the rising cost of beef and other ingredients has
clobbered its profits. BK may also have cannibalised its existing sales
by offering value meals that were a bit too irresistible."
- They Paid to Much Attention to 'Super Fans,' writes The Wall Street Journal: "Franchisees
and analysts blame the chain's problems on scant menu development,
flawed pricing and an overworked strategy of focusing on so-called super
fans, people aged 18 to 34 years old who account for half of all visits
to Burger King outlets but have been disproportionately hurt by the
economic slump." Catering to those fans resulted in the "creepy king"
advertisements attempting to convey hipness, notes Frank James at NPR.
- Could Be a Big Opportunity, writes Jenara Nerenberg at Fast Company: "3G previously had a 6.7 percent stake
in Wendy's, and 3G's principals (a trio of wealthy Brazilians) are also
largely responsible for the merger of InBev and Anheuser-Busch. The
buyout is viewed by Burger King as a 'turnaround opportunity, one that
draws upon the operational expertise gained in its beer and retail
investments.'" The Associated Press
agrees: "Being acquired by an owner with deep pockets could give Burger
King some financial breathing room to refresh its restaurants and
expand internationally after years of playing follow-the-leader with
- BK Leadership Has Been Constantly Shifting, adds
The Economist: "BK is used to changes in ownership. It went from being
part of Pillsbury, a food company, to Grand Metropolitan, a British
conglomerate, then to Diageo, a drinks giant. In 2002 it was sold to a
group of private-equity investors: TPG, Bain Capital and Goldman Sachs.
They did a fair job, improving sales with better marketing. They also
helped turn around the most troubled of the franchisees who operate most
BK restaurants. In 2006 BK floated its shares again. Its bosses may
hope that going private once more will protect them from short-term
stockmarket pressures while they ponder how to beat McDonald's."
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