Dream Big by Cristiane Correa is a quick easy 200-something pages book to read. If you want to know more about the Brazilian trio behind 3G Capital that bought American icons Budweiser, Burger King, and Heinz, this is your book. The mostly focus on beginning and rise of Jorge Paulo Lemann, Marcel Telles and Beto Sicupira. Jim Collins, the author of Good to Great, provides the foreword.
At the 2021 SALT New York conference, which was held earlier this week, one of the panels on the main stage discussed the best macro shifts coming out of the pandemic and investing in value amid distress. The panel featured: Todd Lemkin, the chief investment officer of Canyon Partners; Peter Wallach, the managing director and Read More
Dream Big (Sonho Grande): How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira Acquired Anheuser-Busch, Burger King and Heinzis the story of three Brazilians that’s taking over the world. This is not a how-to guide. You are not going to be a management guru after reading this book. You will learn some stuff but you will have to look else where for a practical program and advice. Sure, you will read a little bit about zero-based budgeting but it’s not going to tell you how implement it. There are other books for that. Nevertheless, it’s a fascinating story.
In Brazil, Jorge Paulo Lemann, Marcel Telles and Beto Sicupira were well known for their success with Garantia, a Brazilian investment bank. Outside Brazil, notably in America, they were practically unheard of until they put their hands on Anheuser-Busch with its trademark brand Budweiser. Then they bought Burger King and Heinz not too long after. Three giant America icons now in the hands of some Brazilians investors. You can also add Kraft and Tim Hortons to the list. They took the corporate and financial world by storm. As you can imagine, a lot of questions were raised. How did this happened? Who are these guys? What’s going on? Who are they invading next? Why is Warren Buffett partnering up with these guys? The true is that these guys have been working at their craft for a really long time before they started swallowing American giants. The book walks you through the purchase of Anheuser-Busch.
What’s the secret to their success? There’s no secret or magic formula. Their method is a simple, straightforward business approach. They didn’t reinvent the wheel. They took the best management concepts and applied them. They preach one thing: Meritocracy. It’s all about performance. Status, credentials, age is irrelevant. Look for good people, train them, keep them, and reward the best. They have this 20-70-10 rule they got from Jack Welch’s GE. Make it rain on the top 20% of your employees. These are your money makers. Considerable rewards, in cash, equity, promotion, are available to those who hit tough targets at company, unit and individual level. The other 70% are good employees, so you maintain them. The bottom 10% are fired. This is similar to the 80-20 rule, where 20% of your employees are responsible for 80% of your results.
“Costs are like fingernails. You have to cut them constantly” – Beto Sicupira
One way to look at the future of recently acquired Kraft, is to see how the previous deals played out. You can’t bring up 3G Capital and not talk about job cutting. The first thing that pops into people’s mind if you mention 3G, it’s job losses. 3G doesn’t have a great reputation and I think they don’t care.
The reality is these guys wants to create long-term value. Yes they cut cost, but they also invest where it’s going to be productive. It’s the 2nd part that the media ignore. But it’s also not sexy and not as dramatic as closing a plant. 3G is not the slash-and-burn type. They keep their businesses for really long time. The true harsh reality is that you are not making society better by wasting money and not being efficient. A company that has too many employees and is bloated is not contributing as much as it should to society. 3G streamlines away a company’s inefficiencies and improves it. For example, when they bought Anheuser-Busch, one of the first thing that got eliminated was the board’s fleet of private jets called “Air Bud”. Executive are now flying coach. 5-star hotels also got the scrap. Now its 3-star hotels, sometime having to share a room. Once they are done they buy another company. We live in this wonderful high-tech world with never ending improving living standard because of focus on productivity and innovation. A small trip to the good old Soviet Union or Cuba will give you a glimpse at the opposite, and everyone has a job.
3G’s companies is popularizing zero-based budgeting, a system where, instead of basing budgets on the previous year’s, managers started at zero every 12 months and had to make a case for why they should get more. These guys are deadly efficient with their money. Managers are handed out this book: How to Double Your Profits in 6 Months or Less (brutal title). The books states that there’s 78 proven ways to cut costs dramatically. I haven’t read the book so I don’t know but it seems to work for 3G.
3G Capital’s method and culture is definitely not everyone’s cup of tea and they know it. There’s short-term social cost to their method but in the long-run I believe the benefits outweighs the cost. It remains to be seen what will be their next giant target.
Dream Big (Sonho Grande): How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira Acquired Anheuser-Busch, Burger King and Heinz