It could soon become a classic Harvard Business School case study in how a new, highly-praised strategy for reviving slogging, slow-growing brands was exposed as disaster in a single earnings call.
Over the past several years, Brazilian investment firm 3G has deployed brutal cost-cutting to raise profits at Anheuser-Busch InBev, Burger King, and Kraft Heinz, using an approach called zero-based budgeting requiring that each expense be justified from scratch each year, as opposed to the traditional approach of adding a couple of percentage points to last year’s line items. The strong implication is that managers should strive to lower all costs from one period to the next, at all costs. A Harvard Business School article in 2016 warned that the technique is “not a wonder diet for companies.” That prophesy was confirmed by Thursday’s catastrophic announcement from Kraft Heinz. (Fortune)