Brazil’s Richest Man
For those who study the financial history of Brazil, it would be logical to conclude that the easiest way to get rich here is through corruption. The biggest corruption scandal to date, Lava Jato, has already produced almost 100 arrests, all of them businessmen and politicians – men of wealth and power. Furthermore, with the plea bargains (deleção premiada) now being arranged between federal prosecutors and the Odebrecht corporation, which allow Odebrecht to once again bid on government contracts after being suspended, the Lava Jato scandal will grow even bigger in 2017.
It’s a commonly held belief in Brazil that some men seek the career of politician specifically with the hopes of getting rich, and that the price of doing business in Brazil is bribes and kickbacks from businessmen to politicians. Today, with this history of corruption being confronted by the workings of a young and strong judiciary, the career trajectories of some of Brazil’s wealthiest men, such as Eike Batista, are on the decline and may never recover.
However, there are wealthy businessmen in Brazil whose names have never appeared in newspaper scandals or Lava Jato plea bargains, and one of them is Jorge Paulo Lemann, the world’s richest Brazilian.
Lemann was born in Rio in 1939. His father was a Swiss immigrant who founded the dairy manufacturer, Leco. His mother was Brazilian of Swiss origin. Lemann attended the American School of Rio de Janeiro. His father died in a bus accident when Lemann was only 14. Later, he received a bachelor’s degree in economics from Harvard University. He won the Brazilian national tennis championship five times. He played for both the Swiss and Brazil Davis Cup teams and played at Wimbledon. He ranks today as the richest Brazilian and 26th richest man in the world. His personal fortune is estimated at U$29 billion.
In the past few years, Mr. Lemann’s investment firm, 3G Capital, has teamed up with the American Warren Buffett, who is the third richest man in the world and equally free of corruption scandals. Mr. Lemann’s 3G Capital, and Warren Buffett’s firm, Berkshire Hathaway, are the architects of some of the biggest mergers in the American food and drink industry.
Mr. Lemann and Mr. Buffett met when they both served on the Board of the Gillette company years ago. In the 1970s, Mr. Lemann founded an investment bank in Brazil and later sold it to Credit Suisse before starting 3G Capital in 2004.
The first big deal for 3G and Berkshire came when Mr. Lemann’s team of Brazilian deal makers and Mr. Buffett joined forces to buy the ketchup king, H. J. Heinz, in 2013. Following this mega-purchase, Lemann and Buffett led Heinz’s merger with Kraft Foods in 2015.
Kraft Foods is a huge American food conglomerate, operating in 170 countries. Forty of its brands are more than 100 years old. Twelve of its most popular brands, including Oreo, Nabisco, and Philadelphia earn more U$1 billion worldwide.
In the same year, 2015, 3G Capital also put the American fast-food chain Burger King together with the Canadian coffee and doughnut chain Tim Hortons — with financing from Berkshire Hathaway.
However, the two billionaires didn’t stop there. Then the Brazilians assembled a brewer that merged with the Budweiser beer producer Anheuser-Busch to become the global beer giant Anheuser-Busch InBev. AB InBev now produces more than a quarter of the world’s beer.
In October 2015, Anheuser-Busch InBev struck an agreement to acquire SABMiller, the maker of Miller Lite, for about U$104 billion. Hostile corporate takeover situations do not bother 3G. Throughout 2015, Anheuser-Busch InBev made several unsuccessful approaches to SABMiller before the two beer makers merged, offering to bring Miller Lite into growing markets in Africa and Latin America. SAB at first declined the purchase offers, but eventually the deal was made.
Now, the deal makers are preparing for what could be their biggest deal yet. Last week, February 17, Kraft Heinz disclosed that it had made a U$143 billion offer for Unilever, the maker of Hellmann’s mayonnaise, Lipton tea and Dove soap, among other products. Should Unilever and Kraft Heinz merge, it would create a global combination that would be one of the world’s largest food companies. Unilever immediately turned down the offer by Kraft Heinz, but this could just be the opening shot from the two capitalist giants.
Lemann and Buffett share a similar investment philosophy: patience. Instead of selling his portfolio after he has cut and remodeled companies, Mr. Lemann has used Anheuser-Busch InBev and now Kraft Heinz as base camps for further global expansion. They have also focused on buying major consumer brands rather than on diversifying.
Lemann and his partners at 3G Capital have developed over the years what many call a “guidebook” for extracting costs from companies by eliminating frivolities like corporate-owned aircraft and expensive office space while revamping management. They instill strict austerity that forces managers to justify expenses beyond basic operating needs. Additionally, their growth model makes expansion overseas crucial for increasing returns.