3G Capital – Portfolio Analysis, Recent Acquisition of Hunter Douglas

When 3G Capital announced its acquisition of Hunter Douglas in late 2021, Reuters Breakingviews column was quick to report “it’s classic 3G.”

The casual observer might not immediately see the significant similarities between Burger King — one of the most successful fast-food businesses in the world — and Hunter Douglas, a generations-old window furnishings company. Yet through the lens of 3G Capital — an investment company focused on long-term global growth opportunities — the two companies become more alike than they are different.

Their products couldn’t be more different. Burger King is famous for its popular Whopper hamburger while Hunter Douglas is known for manufacturing and installing quality custom window furnishings like blinds, shutters, shades, and drapery.

At the time of the Hunter Douglas acquisition, Daniel Schwartz, Co-Managing Partner 3G Capital cited 3G’s deep respect for Hunter Douglas, its diverse portfolio of brands and the steadfast leadership of the Sonnenberg family over three generations and how 3G was honored to be partnering with the Sonnenberg family and to work with Hunter Douglas’ management team on the company’s next phase of global expansion. Citing 3G’s commitment to empowering and supporting Hunter Douglas’ leadership and partnering closely with Hunter Douglas’ exceptional team of founders and entrepreneurial managers and unrivaled network of dealers and fabricators.”

3G Finds Companies With Incredible Longevity

One of the most prominent qualities Burger King and Hunter Douglas have in common is that they’re companies that have proven their strategy and values over the long haul. Additionally, Heinz which was acquired in 2013 by Warren Buffett’s Berkshire Hathaway and 3G was initially founded in 1869 by Henry John Heinz.

Hunter Douglas traces its roots back to 1919 and over the past century, the company has grown to the global market leader in window coverings market. 

Burger King was born in 1954 in Miami, and in the past 70 years has grown into a robust and reliable business built to last.

Both companies have weathered the storms of history and dramatic changes in market conditions for longer than most people have been alive. In that time, Hunter Douglas and Burger King have both adapted their product offerings to the changing times while staying true to their core values and strategies.

Burger King is one of the most well-known restaurant brands on the planet. In its own right, when people think of quality window furnishings, they think of Hunter Douglas first and foremost.

Hunter Douglas has always invested strategically, with the goal of strengthening its core business and growing throughout its value chain and market channels. It’s become the most widely recognized name in its industry with unmatched consumer brand awareness and a diversified product offering and channels.

Burger King’s branding strategy has consistently focused on its unique selling points and differentiation from its competitors. The company emphasizes its flame-grilled burgers, positioning itself as a provider of higher quality and tastier fare compared to competitors who primarily use griddles.

According to market data provider Statista, when it comes to restaurant chain customers, brand awareness of Burger King is at 95% in the United States alone.

3G Sees Similar Global Growth Opportunities

Through the lens of 3G Capital, these companies are valuable vehicles for long-term international growth.

In 2010, 3G Capital acquired Burger King for $4 billion, took the company private, and formed a powerhouse of fast food brands by grouping Burger King, Tim Hortons, Popeyes Louisiana Kitchen, and Firehouse Subs under the banner Restaurant Brands International. The move generated approximately 21 times in total shareholder returns. In 2010, Burger King was one brand with 12,000 stores and sales of $15 billion across the entire organization and in 70 countries. Today, under the 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 more than 100 countries.

When it comes to businesses with longevity, a deep history in their markets, and incredible growth potential, it’s hard to go past Hunter Douglas — a company with strong organic and inorganic growth potential across multiple geographies and channels. In the next few years alone, market analysts predict the window shade market in the U.S. is projected to succeed at a compound annual growth rate of 5.4%. Hunter Douglas is already the dominant player in the U.S. and its other global markets, but its growth potential in places such as Asia and Latin America is almost exponential. 

Founded in 2004 as a global investment firm and private partnership, 3G Capital has built a reputation as a hands-on investor focused on long-term growth. Its successes with Burger King and Hunter Douglas are case studies in the power of treating an acquisition as a owner-operator business-building proposition rather than just a line on a portfolio spreadsheet.

In an insightful academic paper, researchers from MIT’s Sloane School of Management analyzed how 3G’s founders were able to create a private equity firm that has outperformed its competitors by mastering operational engineering to generate higher returns than top quartile competitors. The key, the researchers found, was 3G’s ability to understand and integrate 3G people into the companies they acquire, so that everyone is working together with a common goal, and with a common understanding of the workings of the company.

“We are owner-operators first and foremost, as our owners are the individuals directly responsible for operating our companies,” CEO, founding partner, and managing partner Alex Behring told the Financial Times. “Everyone at 3G has considerable skin in the game, which creates powerful incentives to do what is right for the long term.”

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