HEINZ TO ACQUIRE BEECH-NUT NUTRITION

BARBARA MURRAY

PITTSBURGH -- Improved service and more exciting merchandising opportunities were promised to retailers by the president and chief executive officer of Heinz North America here as H.J. Heinz announced it would acquire Milnot Holding Corp., St. Louis, a leading producer of branded and private-label food products. Milnot's largest subsidiary is Beech-Nut Nutrition Corp., maker of Beech-Nut baby food.

In baby food, the two companies combined would represent about 24% of the United States' prepared baby food category, compared to Gerber, which has a nearly 73% market share. Currently, Heinz and Beech-Nut are regional players with minimal overlap in distribution on grocery shelves. Beech-Nut's strength runs from Maine down the East Coast to Florida, Chicago, Indiana, Texas and California. Even in Texas, several sizeable retailers said they did not carry Heinz or Beech-Nut, and elsewhere, many retailers and wholesalers contacted by SN said they carry only Gerber.

"We don't expect it will have any effect at all," said Chris Ahearn, spokeswoman for Food Lion, Salisbury, N.C. "We have been phasing out Heinz and phasing in Beech-Nut."

"Our goal is to provide this spur to growth," said Heinz spokesman, Jack Kennedy.

Joe Jimenez, president and CEO of Heinz North America, pointed to benefits of scale and national presence, from which to drive innovation and category growth. "We will be able to offer consumers more innovative products and packaging," he said in a prepared statement, along with better merchandising opportunities by leveraging the strength of a combined sales and distribution system.

Whether the brand name would be Heinz, Beech-Nut or a combination of the two was left unsaid. The two companies must first go through a federal review process that Kennedy said Heinz is confident of passing, but which would probably take three to six months.

"These are two brands that have very strong equity," said Nomi Ghez, food analyst at Goldman, Sachs & Co., New York. She doubted that a single brand name would result.

"In New York, we don't know Heinz as a baby food," she said. "I think they understand that and don't want to introduce a new name."

In markets in the United Kingdom, Canada, Australia and Italy, where birth rates are declining, Heinz has been able to grow the category, using innovative ideas such as a nutritionally fortified "baby biscotti" in Italy, Kennedy said. He said the company's chief competition is just as likely to be homemade baby food as Gerber.