Warren Buffett once observed that, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” So what happens when an investor with a holy reputation tackles an unholy task?
One answer was given this week by Kraft Heinz, in which Mr Buffett’s Berkshire Hathaway is a leading investor. It withdrew a $143bn attempt to take over Unilever amid hostility to its relentless approach to cutting costs and jobs. Mr Buffett, who sits on Kraft Heinz’s board, clearly wanted his reputation for saintliness to remain intact.
Paul Polman, Unilever’s Dutch chief executive, runs the multinational as an exemplar of sustainability and stakeholder capitalism rather than the pure shareholder variety, and the abortive bid pitched two of Mr Buffett’s instincts against each other. One is to invest in processed food and drink companies such as Coca-Cola and Kraft Heinz with reliable global brands; the other is to be liked.