Last month, the U.S. fast food corporation Burger King (BK) announced that it planned to buy Tim Horton’s, the Canadian coffee and doughnut chain for $11 billion to create the world’s second largest fast food chain. Media and political commentary on the deal has focused on BK’s decision to move the merged company to Canada, a so-called tax inversion that can lower BK’s tax rate. U.S. Senator Sherrod Brown (Dem-Ohio) called the decision unpatriotic and urged Americans to boycott BK. “Burger King’s decision to abandon the United States means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders,” companies that happen to be based in Ohio, said Brown. “To help business grow in America, taxpayers have funded public infrastructure, workforce training and incentives to encourage [research and development] and capital investment. Runaway corporations benefited from those policies but want US companies to pay their share of the tab.”
Fast Food Goes Global
But BK, like other fast food companies, had already become a global corporation, with closer ties to international capital than any government. The financial shenanigans leading up to the acquisition illustrate the globalization of the fast food industry. In 2002, Bain Capital, TPG Capital and Goldman Sachs Capital Partners took BK public. In 2010, however, they sold off a majority stake to 3G Capital, a Brazilian private equity firm. By 2012, according to the Guardian, the company’s profits had fallen in half and 3G pushed BK to go public again. It used a merger with an already public shell company Justice Holdings, to expedite the public offering. The Brazilian 3G Capital will be the owner of the new company, in which BK will continue to be based in Miami and Tim Horton’s in Oakville, Ontario. 3G also owns Heinz, another multinational processed food company that brags about being “famous for our iconic brands on six continents.” A major investor in both BK and Heinz (as well as in Dairy Queen) is the billionaire investor Warren Buffett of Berkshire Hathaway.
Both BK and Horton’s have a global presence. BK has approximately 12,000 outlets in the U.S. and 73 countries and U.S. territories worldwide. Tim Horton’s operates in Canada and the US. In 2011, it signed an agreement with a company based in Dubai to open up to 120 multi-format restaurants in markets in the Middle East.
Health impact of acquisition
How might the BK/Horton’s marriage affect population health? In the absence of data, only informed speculation is possible. In general, market concentration shifts power away from consumers to producers. It allows bigger companies to spend more on marketing and research and development, activities carried out to further consolidate market share and enhance profitability. For these two companies, whose business depends on selling inexpensive high calorie, low nutrient food to people around the world, expansion means reaching more eaters with products known to contribute to obesity, diabetes and other diet-related diseases.
For BK, the acquisition offers an opportunity to cash in on the only growing sector of the fast food market—take out breakfast. Adding Tim Horton’s will allow BK to compete more with a main rival, Dunkin Donuts, the only fast food company that has not lost customers in recent years, according to Harry Balzer, vice-president of the NPK Group. Like other fast food companies, BK hopes to gain round the clock stomach share for fast food. Compared to other fast food meals, breakfast has even more potential to add calories, fat, sugar and salt to consumers’ diets since it replaces the often healthier home alternatives.
Concentration also gives industries more leeway to compete on price since they can achieve economies of scale and afford to lower prices in order to drive smaller competitors out of business. By making its energy-dense nutrient-poor fare more affordable to low income populations, the new company may further contribute to already high inequalities in diet-related disease among the poor and the better off.
The sad truth is that today no local, national or global organization has the mandate, resources or commitment for assessing the health impact of mergers or acquisitions like the one between Burger King and Tim Horton’s. Until that changes, we can expect these deals will continue to be good for profits but bad for public health.