3G Capital Founder Jorge Paolo Lemann Interview

Jorge Paolo Lemann, Founder of 3G Capital, which is responsible for the takeover and ownership of Budweiser, Burger King, Kraft, Tim Hortons, Heinz, explained his strength is assembling teams

“I’m no financial genius.  What I do best, which is sort of a surprise to me, is put teams of people together, finding great people, incentivizing them, working together with them, giving them a chance to shine, enabling them.  That’s the most important thing that I did.  That’s what I’ve found I do well.  And that’s not a skill that I knew I had.  You have to attract the best possible team.”

Jorge Paolo Lemann, Founder of 3G Capital, on attracting talent

“The people factor is something that you really have to work hard at.  Most people think of business as selling a product and you have a very good product to sell or you have a special strategy and after I found out that attracting good people to work with me, I found out that it was more powerful than what you were doing or what the product was.  As a team, you will find something interesting to do.”



Source: Jorge Paolo Lemann Interview, April 27, 2016


Jack in the Box 2Q16 Earnings Call Notes

Jack in the Box (JACK) Leonard A. Comma on Q2 2016 Results

Not seeing economic weakness in Texas, seeing weather weakness though

“I think the rains are probably the biggest current driver. We’ve been paying close attention to this and we do see that California is outperforming Texas, but what we’re not seeing yet is any confirmation that Texas has a major economic slowdown. So, we’re looking really at the most recent weather impact as the bigger contributor.”

We’re going to be involved in digital and it we may do it ourselves

“when you look at the list of potentially all things digital in delivery, we understand that in order for us to be competitive going forward, we will have to play in that space. What we’ve been able to evaluate and get some information on is really this understanding of how much of that business is being led by the aggregators that are out there or the third-party folks that do digital for major organizations and how much of that is being done internally. And what we see is, there is going to be a pretty decent contest with the aggregators versus the internal investment. Either way what you’re going to see is every major brand including us will play in that space, whether we do it all ourselves or partially ourselves, we’ll be involved in everything from delivery to apps and digital applications that allow us to manage everything from CRM programs to mobile payment.”

Going to stay outside of TV advertising for Qdoba

“Yeah. So, we tested TV alongside several other things and what we actually found is that some of the other things we were doing outside of television actually drove better results. So although TV was a great way for us to bring attention to the brand and some of the innovation that was happening. We didn’t feel like after the test it was the best go-forward strategy. So, we’re going to use other media type platforms, online and also promotional activities intended to put offers in front of the consumers’ face very directly and we’ll use those types of things to bring that messaging alive and essentially get food in people’s mouth, that strategy seems to be playing well for us. So, we’re going to stay more on that side of the things versus television.”

Not clear we’re seeing a softening outside of regional weather impacts, but it is clear that we’re seeing aggressive competition in a deflationary competitive environment

” I don’t know that it’s completely clear that there is a softening that’s happening outside of a regional impact, we’re going to keep a close eye on it. But at the end of the day, the pieces that are very clear is that the industry continues in a deflationary commodities environment to be aggressive.”

Impact of McDonalds all day breakfast has begun to wane

” it has begun to moderate, we can see that quarter-to-quarter. Additionally, we had mentioned back when we reported first quarter results that the breakfast items that were being sold outside of that 10:30 to noon timeframe had taken a hit, which we thought was largely due to the rollover from prior year’s promotions for Jack in the Box. And it was certainly compounded though by the aggressive marketing of the breakfast all day promotion from one of our major competitors. But as we move here into Q2 and Q3, we do see that the 10:30 to noon timeframe, which is the timeframe we set was most impacted has waned. And we also see that the impact outside of that timeframe has been negated.”

Chipotle 1Q15 Earnings Call Notes

47% EPS growth on 20% revenue growth

“During the quarter we generated revenue of nearly $1.1 billion, an increase of 20% on comparable restaurant sales growth of 10.4% and the opening of 49 new restaurants. This produce diluted earnings of $3.88 per share, an increase of 47%”

Encountered supply issues around pork because suppliers not meeting their standards

“We’ve encountered challenges from time-to-time since we begin our journey to find the very best ingredients we can and we do not anticipate our recent pork supply issue to be our last one. But our track record of driving positive change in this change in these areas is unprecedented and we believe these higher quality ingredients taste better. In January we suspended one of our pork suppliers after a supply chain audit found that they were not fully compliant with all of our standards. Our protocol requires that pigs are raised with access to the outdoors or deep bedding in barns and without the use of antibiotics. These differences are in stark contrast to the way conventional pigs are raise. In many cases they spend their whole lives indoors on hard flooded floors with no bedding, which we think is inhumane.”

People climbing the ladder is evidence of our success

“To strength of our culture is evident in many ways including through a growing number of individual success stories, as more and more of our people are climbing the ladder from crew to management and to field leadership positions as well.’

We thought that good ingredients would be the best marketing

“The marketing we do at Chipotle is unlike that of any other fast food brand. The reason for this is simple, very early on we decided to spend more on our ingredients and less on our marketing. It’s always been our belief that better quality food, prepared by hand and served by excellent teams will be the most powerful marketing of all. In fact we were serving better ingredients, including pasteurized dairy, local produce and meats without antibiotics or hormones long before there was even significant customer demand for such things.”

Less reliance on traditional advertising than many competitors

“Chipotle has become quite buzz worthy with awareness coming from social media, public relations, advertising and our local and event market programs, but with less reliance on traditional advertising than many of our competitors.”

Other QSR relies on limited time offers to drive sales

“The vast majority of fast food brands use limited time offers, new menu items and price promotions as their core marketing strategy. These new menu items and offers rarely build long term loyal customers. Instead only provide spike in sales during the advertising window. In order to maintain traffic most fast food brands need to add a steady stream of new menu items throughout the year, resulting in bloated menus filled with hundreds of menu items. ”

Working to eliminate preservatives in tortillas

” Only our tortillas contain any preservatives or other additives and we are diligently working to eliminate those.”

Going to make an ordering app for Apple Watch

Our near-term priorities with regard to mobile include the launch of an ordering app for Apple watch which will be available April 24th and the exploration of new systems for mobile payment, including the use of ApplePay in our restaurants and our iOS app and potentially Google Wallet capability within our Android app. ”

Comps in April are being affected by carnitas

“comps in April so far appear on track to be in the high single-digits and we think our pork shortage is currently impacting our sales by as much as 200 basis points. ”

Going to raise prices on steak

“Beef prices remain at historically high levels, although beef inflation was largely contained during the quarter. We currently believe that the pricing for beef will remain at these elevated levels well into 2016 and perhaps even into 2017. As a result of this increased inflation we expect to raise prices on steak and Barbacoa this year most likely by the end of the third quarter.”

We undershot price increases last year

“as you will recall our intent last year was to cover the inflationary cost pressures of beef but we undershot this level in hindsight as beef costs continue to rise.”

Our growth seems to have come in waves

“we seem to have these wavess and if you go back even as we are private company, these waves where people figure out that’s Chipotle exists. They like it, they come back more often. And so we have this kind of surge and then we have a leveling off and then a surge and leveling off.”

Hardware requirement for ApplePay is minimal. Software is more of a challenge

“The restaurants certainly are not setup to accept mobile pay although with ApplePay in particular the investment on the hardware side is relatively minimal. So that’s not a significant barrier. The main challenge there is making the POS software compliant with ApplePay. So we are working on that and that’s the type of payment that’s of most interest to us as people being able to pay at the POS with their phone.”

McDonald’s 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Operating income down 15%

“In constant currencies, operating income was down 15% for the fourth quarter and 8% for the year. Earnings per share was down 14% for the quarter and 11% for the full year, both in constant currencies.”

Negative trends are beginning to moderate in Germany

“over to Germany; negative trends are beginning to moderate with the month of December marking the highest comparable sales performance in more than two years. ‘”

China recovering after supplier issue

“Fourth quarter comparable sales in China were negative 6.7% due to the lingering impact of the supplier issue. Each month of the quarter showed sequential improvements, reflecting the positive impact of our ongoing customer recovery efforts in the market.”

Broad based challenges in the US

“he underperformance of our U.S. business; throughout 2014, our results reflect the impact of ongoing broad-based challenges, including operating in an increasingly competitive marketplace and the sluggish industry growth.”

This is a market share game, it’s always going to be a market share game

“In the near-term, this is a market share game; it’s always going to be a market share game. So we trust and we expect to see a more customized approach from our owner operators in terms of owner operator-driven business plan locally, it’s based on the customer insights and the unique competitive sets in the marketplace.”

Low inflation plus higher min wage, healthcare expense going to hit operating margins by 20 bps

“Having said that, we are in a relatively low inflation environment, so pricing as I noted in my commentary, pricing will still be probably below our average if you assume the low inflationary environment continues. At the same time, multiple states are increasing minimum wages. We’ve got National Healthcare impacting 2015 for the first time. That’s going to hit the McOpCo margin for about 20 basis points.’

Margin pressure as variables don’t head in the right direction in 2015

“historically we’ve talked about a 2% to 3% — I’m sorry, 2% to 3% comp needed to maintain margins in the U.S., and again that’s been modeled in what we called a normal year. So when you have normal commodity inflation, normal price elasticity and ability to raise prices normal wage inflation et cetera. So a lot of those variables are a little bit out of whack for 2015. So the prices I already addressed we don’t see getting to our historical levels. Wages will probably grow a little faster than normal, especially if you throw in the healthcare impact of that. So again as we think about it, especially in this first half of the year U.S. margin will continue to be a little bit under pressure.’

Localization of relevant products, enhancing chefs

” we’re seeing this localization of what more locally relevant products that are being drawn or pulled from the marketplace as they get into the customer insights. We’re looking at building our culinary talent to support our talented U.S. chefs. We’re including our supplier team of chefs. We got some outside consultants who will bring a fresh and forward thinking perspective on our menu vision”

We have to make sure our definition of quality matches with our consumers

“We have to make sure that our quality aligns with the consumers’ definition of quality moving forward. So we’re going to be very aggressive in that area looking at — we’re working with our own operators to revise our product vision for a very different future, as led by the consumer from the provenance to the label ingredients, to the processes we use to bring the food from farm to table. We’ve opportunities to clean up our ingredient list and enhance the taste.”