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Description:   After a pretty good start following a 2015 merger of food giants Kraft and Heinz, it looks as if now the bloom may be off the rose. Company shares recently dropped twenty percent with concern in the market about slow growth and changes in consumer tastes. Some have wondered if the cost-cutting regime imposed by one of the controlling companies, Brazil’s 3G Capital, may have gone too far. The theory is that too much cost cutting may have tarnished the marquee food brands.

Date:  February 22 , 2019

Source:  financialpost.com

Link: https://business.financialpost.com/news/retail-marketing/kraft-heinz-write-down-puts-focus-on-years-of-cost-cuts-shares-slump

Discussion points: 

1) The article notes how consumer choices are switching, with customers moving to fresh products,”hipper brands” and private label brands. Do you have a bottle of ketchup in your fridge? If so, who made it?

2) Have you ever thought as an aspiring accountant how advice to cut costs could adversely affect your company? What would be a good way to teach the principle that sometimes cutting costs can be exactly what a company does not need?

3) In the article, it mentions that the company recorded a $15 billion write-down in its intangible assets. If an intangible asset is impaired and is written down, can the write-down ever be reversed? (Hint: See page 483 in Wiley’s Financial Accounting: Tools for Business Decision-Making.)

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