William R. Johnson, chairman, president and chief executive officer of the H.J. Heinz Co., believes the Pittsburgh-based company has positioned itself for long-term growth by moving forward aggressively in emerging global markets.
“I believe Heinz is better positioned in emerging markets than any other U.S.-based food company,” he told investors at a meeting in May. “Our long experience, growing infrastructure and improving business capabilities — combined with strong local brands and capable management — provide a sound base for continued strong growth” in Brazil, Russia, India, China and Indonesia, he said. “Like it or not, these are the growth markets for the 21st century.
“While the United States will be the best economy in the world for as long as I’m around, the reality is that, over the next 30 or 40 years, five or six of the top eight economies in the world are going to be in today’s emerging markets.”
Emerging markets were the company’s primary growth engine during the fiscal year that ended April 27, Johnson said, accounting for 16% of the company’s record-breaking sales of $10.7 billion — including record sales of baby food in China, nutritional beverages in India, soy and chili sauces in Indonesia, and ketchup and baby food in Russia.
Johnson predicted sales in emerging markets are likely to exceed 20% in fiscal 2012 and at least 30% of Heinz’s sales within five years.
Sales in the company’s North American segment grew 2.3% to $3.27 billion last year, or about a third of the company’s total. Volume increased 2% amid new products and trade promotions among some of the company’s well-known brands, which include Heinz ketchup and gravy, Smart Ones frozen entrees, Classico pasta sauces, Ore-Ida frozen potatoes and T.G.I Friday’s frozen meals and appetizers.
The company is transitioning away from its Boston Market product license, and expects to complete that process by the first quarter of fiscal 2012.
Heinz’s plans for the current fiscal year include the following, Johnson said:
• Accelerate investment in Project Keystone, an ongoing global initiative to improve productivity and make the company more competitive by standardizing systems.
• Establish a European supply chain hub in the Netherlands to consolidate and centrally lead procurement, manufacturing, logistics and inventory control.
• Exit five of 81 factories (two in Europe, two in the U.S. and one in the Pacific) and streamline its global workforce by 800 to 1,000 positions.
Tom Haggai, IGA chairman — who has overseen his own company’s growth overseas — said Johnson has done a good job broadening and refocusing Heinz’s operations. “The countries Heinz is operating in are growing, and that’s where the world’s growth will be.
“He understands the importance of taking a long-term approach to the developing nations of the world whose quality of life is improving.
“He’s smart, and one of the reasons I know he’s smart is that he recognized that Indonesia, the world’s fourth largest country, has a middle class that is really growing, and that’s a key to the good business Heinz will be able to do there.”
According to Haggai, “H.J. Heinz was a very diversified company when Bill Johnson came in, so he had a real challenge to keep the stock price up — and he met the challenge by applying himself to the business and streamlining the company and developing a new infrastructure.
“Bill is very methodical, and what he’s doing is very interesting to watch, and I believe he will win.”