Who is Miguel Patricio, and what is he getting himself into?
When Miguel Patricio, former Anheuser-Busch InBev global chief marketing officer, was announced as the next CEO of Kraft Heinz earlier this year, you’d be forgiven for assuming job cuts were coming. After all, both companies are affiliated with penny-pinching Brazilian investment firm 3G Capital, which has a reputation for shuffling executives between its companies.
But this time could be different. Those who know him say Patricio is more obsessed with marketing excellence than number-crunching. Kraft Heinz declined to make Patricio, who assumes the role on July 1, available for an interview.
“Where I saw Miguel really change the conversation inside of ABI is he looked at creativity as an investment,” says Jason DeLand, founding partner at Anomaly, which has worked on the global Budweiser account for years. “I never saw him sacrifice creativity in the name of cost, never saw him once do it.”
If Patricio takes that attitude to Kraft Heinz, it could signal a new day at the company, which in recent years has been more synonymous with wringing out costs—from job cuts to limiting how much employees can use office printers—than stellar marketing that drives sales gains.
From staples to stumbles
The marketer of Oscar Mayer meats, Planters nuts, Heinz ketchup and Kraft macaroni and cheese is due for a serious course correction. The company has stumbled since 3G took partial control in 2015, when H.J. Heinz owners 3G and Berkshire Hathaway teamed up to buy Kraft Foods Group. The company’s brands, longtime staples in American kitchens, have suffered as consumers increasingly replace them with a smattering of smaller start-up brands that often enjoy a reputation of being healthier than the processed food lineup Kraft Heinz is known for.
The situation became dire in February, when the company rocked investors by taking a $15.4 billion charge to write down the value of assets including the Kraft and Oscar Mayer trademarks. It also posted weak quarterly results, disclosed an investigation by U.S. regulators into certain accounting practices, and slashed its dividend.
Two months later, Kraft Heinz excitedly announced Patricio’s appointment. Notably, the press release emphasized his marketing success at AB InBev, which last year took home 20 Lions, including two Grand Prix awards, at the prestigious Cannes Lions International Festival of Creativity. Marcel Herrmann Telles, a 3G co-founder and now former Kraft Heinz board member who sits on AB InBev’s board, gushed in the press release that “Miguel has one of the best brand-building minds in the industry.”
To spend or not to spend
All that praise suggests Kraft Heinz is poised to make a major investment in brand-building under Patricio’s watch.
“We find it hard to believe that the new ‘marketing’ CEO Miguel Patricio will view the company’s existing capabilities and investments as sufficient,” Credit Suisse analyst Robert Moskow wrote in a note to clients this month. He pointed out that outgoing CEO Bernardo Hees’ promises to boost marketing investment were never quite fulfilled.
Kraft Heinz’s advertising spending fell 7 percent last year, Moskow stated, citing the company’s annual report. Meanwhile, Kraft Heinz has tumbled 29 spots in Ad Age’s annual ranking of the largest U.S. advertisers over the past two years. It is now the 119th biggest, with $403 million in total U.S. ad spending in 2018, according to Ad Age Datacenter.
Still, one observer questions just how much change will come under Patricio. “He’s completely a 3G cultural artifact,” says this person, an executive at AB InBev during Patricio’s tenure there who spoke on the condition of anonymity. “Going from Bernardo to him is not a change, it’s more like continuity.”
But there are stark differences in the backgrounds of the two men, with Patricio coming aboard with years of marketing experience under his belt.
By contrast, Brazilian-born Hees, who is a partner in 3G, spent a dozen years at America Latina Logistica, Latin America’s biggest railroad and logistics company, including five as CEO. He then became CEO of Burger King Worldwide after 3G acquired it in 2010, and went on to become CEO of H.J. Heinz when 3G and Berkshire Hathaway bought it in 2013, and then got the CEO spot at the combined Kraft Heinz.
Patricio, 53, who hails from Portugal, joined the brewer now known as AB InBev in 1998 after working in marketing at Philip Morris International, Coca-Cola Co. and Johnson & Johnson. He held various roles at AB InBev, including president of its Asia-Pacific unit, from 2008 until 2012, when he was tapped for the global CMO role. In 2018, the brewer elevated Pedro Earp to the CMO spot and Patricio continued in a role overseeing global marketing projects.
People who know Patricio say he has a way of reading the room that shows he’s in charge while gently pushing people to make their decisions. They say he’s the kind of leader who, rather than issue directives, seems to ask questions almost to have the people answering hear their own responses and solidify their thoughts.
The ‘Dilly Dilly’ factor
“He was always very supportive whenever I was considering taking risks,” says Marcel Marcondes, CMO of AB InBev’s U.S. division, who credits Patricio with green-lighting Bud Light’s creatively praised “Dilly Dilly” campaign when there was some early skepticism about it.
Marcondes said different ideas were tested before the “Dilly Dilly” campaign from Wieden & Kennedy launched in 2017. The team wanted to bet on “Dilly Dilly” even though “that was not one of the most promising routes, from a consumer perspective,” Marcondes says. “‘Let’s just go,’” Marcondes recalls Patricio saying.
Inside the brewer’s walls, Patricio is credited with building a culture that values creativity, a
major shift for a company that had long been pigeonholed as a shrewd financial operator. For instance, he was influential in launching an internal marketing rewards program modeled after Cannes.
Patricio will bring “new eyes on the business, a great track record from building the business in China, great marketing instincts, willingness to take risks, and a lot of energy” to the CEO role, says Robert Ottenstein, who headed investor relations at AB InBev in 2009 and 2010 and now tracks the industry for investment advisory firm Evercore ISI. Ottenstein gives Patricio an “overall an A+ rating in China” for the work he did to invest and expand the brewer’s business there.
But getting American parents to buy Kraft mac and cheese, Heinz ketchup and the company’s other staples, while launching new products that appeal to changing tastes, is a lot different than marketing Budweiser in Asia. Patricio also joins Kraft Heinz amid turnover in the marketing department. Eduardo Luz, who held the dual roles of global brand officer and CMO, U.S., left in May. Adam Butler, the company’s president of beverages, snacks and desserts, has assumed CMO responsibilities on an interim basis.
The $20 million man
Patricio is betting on his own success: He is personally doling out $20 million to buy Kraft Heinz shares that he’ll need to hold onto for four years, Kraft Heinz said earlier this month. If Patricio can lead Kraft Heinz to growth, he’ll recoup that $20 million and then some. If Kraft Heinz’s stock price rises to $45 to $55 during his first three years there, he stands to receive from 200,000 to 600,000 shares.
Moskow, the food analyst, remains bearish, with an “underperform” rating on shares of Kraft Heinz, which are hovering around $30. In Kraft Heinz’s first day of trading in July 2015, the shares opened at $71.
Patricio already has one skill down that will serve him well at the food company: He knows his way around the kitchen. “He cooks amazing meals for everybody,” says Marcondes, who was invited over by Patricio for breakfast one Saturday morning in 2017 after his promotion to CMO. They ate the omelets Patricio prepared, and Patricio gave Marcondes a cookbook of Portuguese recipes. The inscription, Marcondes recalls, read something like “Marcel, congratulations! You now need to become the new king of beers.”