By Jonathan Stempel and Trevor Hunnicutt
OMAHA, Neb. (Reuters) - Ketchup, bologna and Jell-O don't excite Wall Street. But a big deal might whet its appetite for Kraft Heinz Co (O:KHC).
Many analysts believe Kraft Heinz, controlled by Brazil's 3G Capital and Warren Buffett's Berkshire Hathaway Inc (N:BRKa), needs a blockbuster acquisition to foster growth.
And its energetic chief executive, Bernardo Hees, is under pressure to manage Street expectations.
While he says he is in no rush to do deals, does not need a big acquisition now, and is not talking much with investment bankers, opportunities may be coming.
"Our M&A framework has not changed," Hees, 48, said in an interview at Berkshire's recent annual shareholder weekend in Omaha, Nebraska. "We continue to like big brands. We continue to like businesses that can travel. We continue to like businesses that we can find synergies that we can reinvest behind growth.
"The relative and absolute valuations are more attractive today than they were six months ago, or a year ago," Hees added. "If more consolidation would happen in the food and beverage industry, we want to be a force."
Hees (pronounced "Hess") is a partner at 3G, which is known for engineering big mergers, such as the creation of Restaurant Brands International Inc (TO:QSR) by combining Burger King with Canada's Tim Hortons, and then imposing draconian cost cuts.
That reputation helped prompt Dove soap and Ben & Jerry's ice cream maker Unilever Plc (AS:UNc) to rebuff 3G's $143 billion Buffett-backed takeover approach last year.
Kraft Heinz decided to walk away, and Hees is not dwelling on the rejection.
INVESTORS HAVE DOUBTS
For now, his challenge is to create buzz for familiar brands such as Oscar Mayer and Velveeta, and not just for products capable of riding the newest food trends.
The company eliminated $1.7 billion of costs, including six factories and about 4,900 jobs, following the 2015 merger of Kraft Foods with H.J. Heinz. The combined company is co-headquartered in Chicago and Pittsburgh.
"Big brands have scale, they have profitability, they allow you to grow when you have the right product offerings, and it's relevant," said Hees, who previously led Heinz and Burger King.
So as Kraft Heinz takes celebrity chef David Chang's Momofuku Ssam Sauce national, and partners with Food Network on "globally inspired" salad dressings, cooking sauces and meal kits, so too it must inspire consumers to fill their pantries with Planters Signature nuts and Philadelphia cheesecake cups.
At Berkshire's annual meeting, Buffett praised 3G's and Hees' ability to cut unnecessary costs.
"The people at 3G are great, great managers, and they are wonderful partners," Buffett said.
Investors aren't as convinced they will succeed at Kraft Heinz.
Since peaking on Feb. 17, 2017, Kraft Heinz's share price had fallen 40 percent through Tuesday. The S&P 500 (SPX) rose 14 percent in the same period.
"We believe the stock market will take care of itself if we deliver upon our commitments," Hees said. "The stock price today is not in the way of anything we want to achieve in the mid- or long-term."
Rivals' stock prices have also taken hits.
Through Tuesday, the S&P 500 Packaged Foods & Meats index <.SPLRCFOOD> had fallen 9.9 percent in the last six months. Mondelez International Inc (O:MDLZ) dropped 7.3 percent, while Campbell Soup Co (N:CPB) and General Mills Inc (N:GIS) lost a respective 12.4 percent and 19 percent.
'MAYOCHUP'
Last week, Kraft Heinz reported better-than-expected first quarter profit, even though organic sales fell 1.5 percent.
"We maintain our concern that the management team lacks the marketing acumen necessary to adapt to the dynamic changes in the market and grow its collection of 'retro' brands in highly commoditized categories," Credit Suisse (SIX:CSGN) analyst Robert Moskow wrote.
Kraft Heinz is trying.
Two months ago, Kraft Heinz launched Springboard, a brand incubator to develop natural and organic, specialty and craft, healthy and what it called "experiential" foods.
And in April, Kraft Heinz created a viral frenzy when it took to Twitter to gauge whether consumers would buy "Mayochup," a hybrid of mayonnaise and ketchup.
Some called it similar to "fry sauce." Others noted that many people mix the two already.
"We truly believe that our brands need to be relevant, to the product offering, to the position, and to communicate it to consumers, wherever they are," Hees said.
"Pop culture is a great way to do that. Mayochup is a great example. We started, we have these two sauces, can you put them together, is that disgusting, is that good?"
With the Kraft Heinz integration "behind us," Hees said he is investing more into its businesses, armed with knowledge it has gained since the merger.
"Things move fast today, that's a good thing, but we're a young organization," he said. "So there are many things we need to learn. Learn from your mistakes. Don't repeat them. New mistakes are welcome."