US ketchup maker Heinz has said it is “actively” looking for new opportunities to acquire companies in emerging markets after a “difficult” 2012, particularly in developed countries.
The US food giant said emerging markets accounted for 21% of group sales last year, from 5% a decade ago, and that it expects this to approach 25% in the next fiscal year, likely exceeding that of its US retail business for the first time in the company’s history.
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“While the bottom tier is growing and the middle-class is shrinking in developed markets, it is expanding in emerging markets,” CEO William Johnson said at a 2012 investor and analyst meeting yesterday (24 May). “These markets are much more advanced than developed markets in tiering products to different audiences and I have encouraged our team to share this critical learning as best practice with eachother so that we can leverage this knowledge appropriately.”
Johnson, pleased with results of recent acquisitions of Quero in Brazil and Foodstar in China, said the company is in talks on a number of deals that might meet its parameters.
“We look for sound commercial propositions and infrastructure and unique attributes that we can grow into profitable $1bn businesses,” he told analysts. “Brazil and China have greatly exceeded our performance expectations, while delivering robust growth.
“Our emerging markets portfolio is well-balanced and diversified… but we are actively looking for new opportunities in these and other high-growth markets and we are in the middle of a number of discussions regarding those opportunities.”
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By GlobalDataJohnson said emerging market development was “imperative” to the long-term growth of the company and added the company is planning to open an innovation centre in Asia “within a few years” to follow a centre in the final stages of completion in Europe.
Johnson, however, acknowledged the “challenges” the company faced during the year.
Yesterday, Heinz reported its net income in the 12 months to 29 April fell to $939m, down from $1bn in 2011. The company said profits were dented by charges of $224m linked to initiatives to improve global productivity.
“We had a difficult fiscal 2012 and frankly we are still wrestling with weak consumer metrics and shares,” he told analysts. “Our first priority is to address the value gap which has resulted from aggressive pricing actions last year designed to offset increasing costs. We are making progress but still have a way to go.”
Heinz shares closed at $53.55, down 31 cents yesterday.
