US: Heinz continues with "aggressive" European drive

By Michelle Russell | 6 September 2012

In May 2011, Heinz made a decision to "exit" five production facilities across Europe

In May 2011, Heinz made a decision to "exit" five production facilities across Europe

US food giant Heinz has said it is continuing to drive an "aggressive change agenda" in its European operations, which it says will allow it to become "even more competitive".

The ketchup maker said it is implementing change on the Continent in a bid to address "the difficult economic environment". CFO Art Winkleblack told analysts yesterday (5 September) the strategy had included the establishment of a supply chain "hub" based in Netherlands.

"This year we are working very hard in Europe where we are driving an aggressive change agenda," he told attendees at the Barclays Back to School Conference. "If you think about the European environment I'm glad we started [the turnaround] when we did, a couple of years ago. As we continue do that, some things will be completed early and others will take longer but we are doing what we need to do to change the game in Europe."

In May 2011, Heinz made a decision to "exit" five production facilities across Europe, the US and the Pacific region under a revamp of its supply chain and manufacturing network.

The Netherlands-based supply chain hub is also part of the turnaround plan. Through the centre, Heinz said it wanted to "consolidate and centrally lead procurement, manufacturing, logistics and inventory control" at the facility. In addition, the firm initiated plans to construct a European innovation centre in The Netherlands last year, which will serve as a hub for nutritional science and new product development. Completion is expected in early 2013.

"We used to have a fragmented supply chain... we've now consolidated that into a European supply chain hub in the Netherlands that is giving us a lot of operational benefits and tax benefits," Winkleblack said yesterday. "We are also driving the innovation centre in Europe. If you think about the way we used to do innovation it was plant by plant, market by market, now we have critical mass all together."

Last month, Heinz booked a 9.5% gain in net income from continuing operations to US$279m, excluding the impact of a productivity programme on its results a year ago, for the quarter to 29 July.

In Europe, where reported sales declined 7.2% to $778m in the quarter, Winkleblack had said at the time that the region is "a tale of two cities" for Heinz.

"If you go to either end of the continent, we're performing extremely well. So Russia and the East in particular had a great quarter. And the UK business continues to be a fortress for us given the strength of our brand equities there and the power of the innovation and execution within the business," he said when the results were announced.

However, he pointed to the middle of the Continent, which he described as a "tough" market. "In Continental Europe and Italy, consumer confidence is low, unemployment is high. And so it's a challenging market there, and I think we continue to evolve our products and our packaging to meet that environment."

Despite the company's European struggles, Winkleblack sounded an upbeat note to investors and analysts at yesterday's conference.

"Heinz has a stable of iconic brands and a highly-focused balanced portfolio ... strong profitable high growth in emerging markets, excellent cash flow and an experienced management team that adapts quickly to the changing environment. We've come a long way over the last decade to become the company we are today. Overall we are off to a very good start to the new year."

Sectors: Baby food, Canned food, Condiments, dressings & sauces, Emerging markets, NPD & innovation

Companies: Heinz

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