Investment firm 3G Capital's underlying philosophy of engagement with the companies it acquires is one of total commitment. But what does that mean, and how does it play out for the businesses that come under its wing?
3G Capital was founded in 2004 as a global investment firm and private partnership. Alex Behring is co-founder and co-managing partner alongside Daniel Schwartz the firm's other co-managing partner. Since its inception, 3G Capital has built a reputation as a hands-on investor focused on long-term growth, with notable successes such as Burger King, today dubbed Restaurant Brands International is one of the world's largest quick service restaurant companies which also owns Tim Hortons, Popeyes Louisiana Kitchen, and Firehouse Subs, Kraft Heinz and Hunter Douglas. For the team at 3G, its philosophy of total commitment can be encapsulated in three words: owners, operators, and investors.
In an interview with the Financial Times, Behring explained that team members at 3G Capital are first and foremost owner-operators, with the owners being the individuals directly responsible for operating 3G's companies.
"Everyone at 3G has considerable skin in the game, which creates powerful incentives to do what is right for the long term," said Behring. "We are fortunate to be differentiated in this sense, as we are not moved by some of the short-term pressures typically felt by other groups."
"This gives us the luxury of maintaining a very disciplined approach to each one of our businesses, as we are able to identify and own companies only once we are entirely satisfied that they are well-positioned for profitable, long-term growth and successful brand-building."
A view of the firm's history shows that 3G Capital was built on an owner-operator approach to investing over a long-term horizon - and that's what it means to be totally committed.
3G Brings the Long-Term View
In 2010, 3G Capital acquired Burger King for $4 billion, took the company private and has been the company's largest shareholder supporting the company's global growth transformation including the creation of RBI and acquisitions of Tim Hortons, Popeyes Louisiana Kitchen, and Firehouse Subs, generating approximately 21x in total shareholder returns. In 2013, partnering with Warren Buffett, 3G Capital acquired HJ Heinz which later merged with Kraft Foods. Most recently, 3G bought Hunter Douglas - a well-established family business with more than a 100 year history as a leading global player in the window shades industry. Hunter Douglas is known for its innovation, entrepreneurial culture, leading brands and world-class management. It is active in over 100 countries and has an exceptional team of founders and entrepreneurial managers, and an unrivaled network of dealers and fabricators.
The deals all have multiple things in common. They're well known, popular brands. They're companies that have proved their value over long periods - from decades to centuries. At the time of acquisition, they had incredible international growth potential.
"We believe we attract best-in-class talent because of our long-term focus," said Alex Behring. "We've been building businesses for decades. We dream big."
3G Capital's Focus on Operations
A good example of this philosophy in practice is Anheuser-Busch InBev, of which 3G co-founders have been meaningful owners since 1989.
"Our greatest resource is our people. At the core of our operating involvement is the creation and committed implementation of an ownership culture," said Behring, adding that 3G's culture of ownership provides for the "responsible stewardship" of capital and resources throughout the entire organization, manifesting itself in every business decision. "We find that this culture is perfect for those who thrive in a performance-driven environment, which is why we are able to consistently attract and develop great talent."
As investors and owners with a total commitment to the business, 3G Capital is focused on being the careful stewards of great brands, said Alex Behring: "We aggressively reinvest in our product innovation, expansion into global white spaces, and brand health. We know that world-class brand reputations take decades to build and only hours or even minutes to lose. We are the stewards of our brands and businesses and are cognizant of that in everything that we do."
"We believe deeply in incentives and because of that, the vast majority of our energy - and the vast majority of our employees' performance targets - is linked directly to growth," he said. "This is true across all of our businesses, brands, categories, and geographies. We set goals based on what is going to create the most long-term value, and invariably that ends up being growth."
The Right Way, Every Day, Says Alex Behring
As a result, Behring said 3G Capital places an "extremely high value" on what he calls "good corporate citizenship," treating its people with respect and dignity.
3G's acquisition and management of Burger King is a good example. In 2010 the company was one brand, 12,000 units and sales of $15 billion across the entire organization and in 70 countries. Today, under the Restaurant Brands International (RBI) banner, the company comprises four of the world's most prominent and iconic quick service restaurant brands, more than 30,000 units, and over $40 billion in organization-wide Sales across over a 100 countries. RBI also has a $13.5 billion digital business. These independently operated brands have been serving their respective guests, franchisees and communities for decades. Through its Restaurant Brands for Good framework, RBI is also improving sustainable outcomes related to its food, the planet, and people and communities.
Since 2004, 3G Capital seems to have bought one business every few years, intending to own it for the long-term, partnering with existing shareholders such as families and founders, and making decisions for long-term value creation.
For 3G, Collaboration Is Key
3G's model seems to rely on true collaboration and partnership with a company's existing shareholders, as can be exemplified by its recent deal with window coverings manufacturer and retailer Hunter Douglas.
In early 2022, 3G Capital acquired a 75% stake in Hunter Douglas in a deal that valued the company at around $7.1 billion. The family patriarch sold his shares to 3G in a transaction sourced through an existing relationship with the founding family. Members of the founding family have stayed on the board and in operational positions to work with 3G over the long term.
If 3G's past performance is anything to go by, it seems that international expansion will be in the cards for Hunter Douglas, which has so far only scratched the surface of its global potential in regions such as Latin America and Asia.
International expansion, brand stewardship, genuine partnership with existing stakeholders, and a long-term outlook seem to be what total commitment means for 3G and the companies in which it invests.
