INSUBCONTINENT EXCLUSIVE:
Warren Buffett spoke after Kraft Heinz took a $15.4 billion writedown for Kraft and Oscar Mayer brandsWarren Buffett said on Monday his
Berkshire Hathaway Inc overpaid in the 2015 merger that created Kraft Heinz Co, but he had no plans to flee the struggling packaged foods
company.Mr Buffett spoke four days after Kraft Heinz took a $15.4 billion writedown for its Kraft and Oscar Mayer brands and other assets,
slashed its dividend, and said the US Securities and Exchange Commission was probing its accounting.Kraft Heinz's share price sank 27.5
per cent on Friday, wiping out more than $16 billion of market value, and causing Berkshire to lose $4.3 billion on its stake
Berkshire owns 26.7 per cent of Kraft Heinz."I was wrong in a couple of ways on Kraft Heinz," Mr Buffett said on CNBC television
"We overpaid for Kraft."Mr Buffett did not say by how much Berkshire overpaid, but said the market reacted "probably quite properly" to the
news.He also said he has "absolutely no intention" of adding to or subtracting from Berkshire's stake in Kraft Heinz, saying the company
had "very, very strong" brands and that he would be happy to own it a decade from now.The comments were a rare admission of error by the
88-year-old billionaire on a major investment at his Omaha, Nebraska-based conglomerate.Berkshire and Brazilian private equity firm 3G
Capital combined the former Kraft Foods with H.J
Heinz, which they bought in 2013, and own about half of the merged company.Mr Buffett said he may have learned about the SEC probe seven to
10 days before it was announced.Greg Abel, a Berkshire vice chairman widely considered a candidate to succeed Mr Buffett as Berkshire's
chief executive officer, is a Kraft Heinz director.Mr Buffett also said he would continue to do business with 3G and its co-founder Jorge
Paulo Lemann, calling him "an absolutely outstanding human being".'Toe to toe'Kraft Heinz's disclosure raised questions about 3G's
financial strategy for the company, whose brands include Jell-O, Kool-Aid and Philadelphia cream cheese, and whether it is out of step with
consumers seeking healthier, fresher alternatives to processed food.Mr Buffett acknowledged the changes, but said greater pressure is coming
from retailers such as Amazon.com Inc, Walmart Inc and Costco Wholesale Corp, saying the latter's Kirkland brand outsells all Kraft Heinz
products.Stronger brands can "go toe to toe with Walmart or Costco" but weaker brands "tend to lose out," Mr Buffett said
"The ability to price has changed, and that's huge."Still, Mr Buffett added: "If I had to bet one way or another, I think people will eat
more of our products this year than last year."Berkshire's own $3 billion writedown related to Kraft Heinz contributed to a $25.39 billion
fourth-quarter net loss for Berkshire."He monumentally overpaid for Kraft," said Doug Kass, founder of the hedge fund Seabreeze Partners
"Increasingly, the moats he initially saw in his investments have been damaged."The bad news also called into question 3G's signature
business model of zero-based budgeting, which requires managers to justify their expenses annually from scratch, rather than use last year
as a guide or pursue cost savings on an ongoing basis.Kraft Heinz's belt-tightening resulted in more than $1.7 billion in annual savings,
including the loss of thousands of jobs, mirroring 3G's similar efforts at such companies as Anheuser-Busch InBev and Tim Hortons.The
strategy has resulted in leaner companies, but could backfire if the companies lacked products that people wanted, or failed to spend enough
to develop and market those products.Mr Buffett said he did not believe 3G underinvested in Kraft Heinz, but it was hard for him to tell
Berkshire is not involved in day-to-day operations.
