Billionaire Dethrones Kings in Beer to Burgers as Batista Model
The Burger King hamburger chain made a dramatic decision in August. It dethroned the King -- the mascot who had danced through its advertising in various guises for more than 50 years. The marketing move was made by the struggling company’s new management, appointed after it was taken private in 2010 by 3G Capital Inc., a New York-based investment firm with roots in Brazil.
The takeover of Burger King Holdings Inc. by 3G Capital means the chain has a new monarch: Jorge Paulo Lemann, the founder of 3G. Lemann, 72, is an iconic figure in Brazilian finance. In 1971, when Brazil was under military rule, he founded the country’s first modern investment bank, Banco de Investimentos Garantia SA, Bloomberg Markets magazine reports in its November issue. In subsequent decades, he emerged as one of Brazil’s most prolific dealmakers.
Lemann’s biggest transaction: the $52 billion 2008 takeover of Anheuser-Busch Cos. by InBev NV.
InBev was itself formed from Belgium’s Interbrew SA and Brazil’s Cia. de Bebidas das Americas, or AmBev -- the biggest beer maker in South America and the source of much of Lemann’s fortune. His stake in Anheuser-Busch InBev NV (ABI) alone was valued at $8.9 billion as of mid-September, according to data compiled by Bloomberg. Burger King and his other holdings add several billion more.
AB InBev is the world’s largest beer maker, with more than 200 brands, including Budweiser, the best-selling beer in the U.S.; Brahma and Skol, the leading beers in Brazil; Beck’s; and Stella Artois. When he founded Anheuser Busch in the 19th Century, Adolphus Busch labeled his brew the King of Beers, a slogan that still appears on some Budweiser packaging.
New Management Culture
One of Lemann’s admirers is oil-and-mining magnate Eike Batista, who’s the richest man in Brazil, according to Bloomberg data.
“Jorge Paulo created a whole management culture in Brazil that is extraordinary,” Batista, 54, says. “He motivated employees by letting them share the profits -- aggressive, but that leads to results.”
Lemann is reclusive. He gave his last media interview in 2008 and declined to be interviewed for this story, as did his two longtime business partners, Marcel Herrmann Telles and Carlos Alberto da Veiga Sicupira.
Together, the three men run 3G and Stichting AK, a Netherlands-based firm that has a controlling stake in Anheuser- Busch InBev. Through 3G and other private companies, they also own stakes in Rio de Janeiro-based retailer Lojas Americanas SA (LAME4); Sao Paulo-based Sao Carlos Empreendimentos e Participacoes SA (SCAR3), a real-estate company; and Jacksonville, Florida-based CSX Corp. (CSX), one of the biggest U.S. freight-rail companies.
Telles’s AB InBev stake alone was worth $3.95 billion as of mid-September, and Sicupira’s stake was valued at $3.2 billion, according to Bloomberg data.
“They are not about beer,” says Tom Pirko, founder and president of Bevmark LLC, an adviser to the food and beverage industries. “And they are not about hamburgers. They are about money. They know how to cut costs. They know how to very aggressively push something.”
Lemann and his partners are known for their tough management style. That was felt right away at Burger King, which they bought for $24 a share from Texas-based private-equity firm TPG Capital Inc. and other investors and took private in October 2010.
At the time it was acquired, the company was a distant third in revenues and profits behind competitors McDonald’s Corp. (MCD) and Wendy’s Co. -- and losing ground. Bernardo Hees, a former chief operating officer of All America Latina Logistica SA (ALLL3), a firm Lemann and his partners once controlled, was named chief executive officer and quickly cut hundreds of jobs.
Most of the board members resigned, and the new management ended the company’s relationship with ad agency Crispin Porter & Bogusky LLC -- and then deposed the King mascot.
Pirko doesn’t think it’s a coincidence that Lemann and his partners first took control of a beverage company and then a restaurant chain. They’ve already moved to begin cross-selling between the two businesses. In April, Burger King signed up PepsiCo Inc. as the exclusive soft-drink provider for its restaurants in Latin America and the Caribbean. AmBev is the producer and distributor of Pepsi products in Brazil.
Hees has told investors and analysts that his plan is to make Burger King a top brand in Latin America during the next five years. He wants to open 1,000 restaurants in Brazil alone, up from 108 in mid-September.
Lemann, the son of a Swiss businessman who emigrated to Brazil, was a tennis pro before he moved into finance. He was Brazil’s top-ranked player five times from 1960 to 1972, according to the Brazilian Tennis Federation. He competed in the Davis Cup in 1962 for Switzerland -- he holds dual citizenship -- and for Brazil in 1973.
While pursuing his tennis career, Lemann attended Harvard University, receiving a degree in economics in 1961. For a few months after graduating, he worked as a financial columnist for the newspaper Jornal do Brasil. He left that post because he was pursuing a job as a broker at the same time, which his managing editor, Alberto Dines, saw as a conflict.
“If he had continued being a journalist, he was going to be a Joe Schmo,” says Dines, 79, who today runs Observatorio da Imprensa, a TV program and website. “I helped him become a billionaire.”
After 10 years at various financial firms, Lemann founded investment bank Garantia in 1971. The military was running the government at the time, and markets were volatile. Weeks after Lemann, then 32, founded his firm, the Brazilian stock market fell 60 percent -- and Lemann’s bank lost almost all of its capital.
Modeled on Goldman
The bank survived, with Lemann trying to fashion it after big Wall Street firms such as Goldman Sachs Group Inc. (GS), says Jose Olympio Pereira, who started his career at Garantia in 1985 as an investment analyst and left in 1998 as head of corporate finance. He’s now chief of investment banking for Credit Suisse Group AG (CSGN) in Brazil.
“Garantia was a paradise for ambitious, entrepreneurial people,” Pereira says. “This ‘virus’ of the Garantia culture infected the Brazilian corporate world. It is amazing the number of businessmen I work with who admire the Garantia model.”
Pereira is one of a dozen top business leaders and government officials who started their careers at Garantia. Another is Andre Lara Resende, who ran Brazil’s national development bank until 1998 and helped design the Plano Real, the 1994 economic scheme that broke the cycle of high inflation in Brazil.
Fraga an Admirer
Another is Arminio Fraga, who was chief economist at Garantia from 1985 to 1988 and went on to become head of Brazil’s central bank from 1999 to 2002. Fraga is now chairman of Sao Paulo-based BM&FBovespa SA (BVMF3), the operator of Latin America’s biggest stock exchange.
Fraga says Lemann made Garantia home to Brazil’s best and brightest.
“He always led by example,” Fraga says. “It was clearly a meritocracy, capable of attracting and keeping people with great talent and energy.”
Garantia landed assignments helping multinationals such as Colgate-Palmolive Co. and Philip Morris International Inc. (PM), both based in New York, make acquisitions in Brazil. In 1998, Garantia was acquired by Credit Suisse for almost $1 billion.
Interbrew and Ambev
Lemann, Sicupira and Telles went on to found an investment firm called GP Investimentos, which they sold in 2004 so they could concentrate their energies on the $11 billion merger of Belgium’s Interbrew and Brazil’s AmBev.
Though the new company was based in Leuven, Belgium, the Brazilians took control of what was then the world’s second- largest brewer. They quickly imposed cost controls. The productivity of InBev employees, who were afraid of losing their jobs, improved substantially, says a person who was an Interbrew executive at the time of the merger.
In the next and final move that created the world’s largest brewer, InBev bought St. Louis-based Anheuser-Busch in 2008. Some 1,400 people quickly lost their jobs. Perks ranging from business-class flights and BlackBerrys to free cases of beer were eliminated, according to a person familiar with the business who said he wasn’t authorized to speak publicly.
Even CEO Carlos Alves de Brito, a former AmBev chief executive who has run the bigger company since the merger, was asked to fly economy class.
Former colleagues say Lemann is a frugal executive who prizes simplicity. He doesn’t drive sports cars or collect expensive art, friends say.
“All that was not part of the Garantia culture -- the showing off, being high profile,” Pereira says.
The austere lifestyle paid off on one particular day in the mid-1980s. Lemann was driving his Volkswagen to a beach in Rio and stopped for gas, according to Claudio Haddad, president of Insper Institute of Education and Research in Sao Paulo and a former CEO of Garantia. As Lemann was pumping gas, bandits rolled up to rob the place, completely overlooking the billionaire in their midst.
“Since he was dressed casually and had an old Passat, they thought he was a nobody,” Haddad says.
Lemann’s three children by his current wife had a closer call. In 1999, a chauffeur was driving them to school in an armored car when kidnappers waylaid them on a Sao Paulo street. Eight gunshots at close range penetrated the window, wounding the chauffeur in the arm. He sped off, and the children escaped.
Few Public Appearances
Since then, Lemann and his wife, Susanna, have divided their time between Switzerland and Brazil, and Lemann has made few public appearances save for charity events. On those occasions, the still tennis-slim billionaire eats and drinks little.
The beer and burgers his companies sell are strictly for customers.
With assistance from Francisco Marcelino in Sao Paulo and Matthew G. Miller in New York. Editors: Michael Serrill, Robert Dieterich.
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