Food company H J Heinz has unveiled a new growth and innovation strategy, which includes a focus on its core areas and the potential sell off of parts of its business.
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Heinz’s plans include focusing on three attractive food categories where it has unique strengths – ketchup, condiments & sauces, meals & snacks, and infant nutrition, it said. Heinz said that it is the ‘category champion’ in these businesses by virtue of its detailed knowledge of consumer preferences, its distribution and channel expertise (including its foodservice business), its operational capabilities with leading-edge tomato technologies, and the strength of its brands, especially the Heinz brand, which has approximately $3bn in sales and represents one-third of global revenue.
Heinz’s growth plans include increased innovation in new products, creative recipes and packaging as a key contributor to sales and profit margin growth. The company this week opened a new Global Innovation and Quality Center in Pittsburgh where more than 100 chefs, nutritionists and researchers will be the driving force for product development in Heinz’s three core categories.
At the meeting with analysts, Heinz also plans to discuss dramatically improving its business and distribution systems, benefiting both Heinz and the retail trade. Heinz is moving to an integrated rolling 24-month planning system (“Heinz Business Management”), which will improve demand forecasting and greatly facilitate new product introduction and promotion planning.
In addition to focusing on three food categories where it has leading brands and superior capabilities, Heinz will drive for greater scale and leverage in key markets and countries. The company is in discussion with its investment bankers regarding the potential divestiture of non-core businesses representing approximately $1.4bn of annualized sales. These potential sales would include seafood, vegetable and frozen businesses in Europe (including the Petit Navire, John West and HAK brands) and the Tegel poultry business in New Zealand. Following these potential divestitures, Heinz Europe would generate annual revenue of $2.5bn, representing approximately 30% of Heinz’s global sales, with leading brands and a streamlined, less costly organization. Heinz has retained the services of J.P. Morgan & Company and UBS to assist with the potential divestitures.
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