Private Equity Buyouts: A Study of the US Ketchup Industry

Abstract

I investigate the effects of private equity buyouts in the ketchup industry. I find that Heinz's prices increase after its acquisition by 3G Capital and Berkshire Hathaway. I estimate the demand and supply of ketchup products. Using the estimated marginal costs, I show that Heinz's marginal costs increase by 19% after the buyout. I identify the divestiture of Heinz's second-largest plant as a likely reason. I show that the increase in marginal costs begins with this divestiture and is more pronounced in states closer to the divested plant. A counterfactual simulation indicates that the divestiture reduces consumer surplus by 9%.

Keywords: Private Equity, Buyouts

JEL Classification: G34, D18, L11