On Friday afternoon (19 November), Heinz issued second-quarter numbers that highlighted perfectly the unequal nature of the global recovery.
“The US consumer is in a funk,” Heinz boss Bill Johnson said, as he reported that the ketchup maker’s retail sales in North America had, on an organic basis, inched up 0.2% during the company’s second quarter. The division also posted higher profits but, although Johnson said Heinz was “seeing some glimmers of hope” as some consumers “emerged from hibernation”, he said the spending power of consumers in the region remained under pressure.
Go deeper with GlobalData
“The reality is that they are making conscious and significant trade-offs in their budget and, for the first time ever, maybe since the Great Depression, we’re seeing 27% of them without discretionary income based on the Nielsen data we looked at last week, which is an incredibly high number.”
It was in Asia-Pacific where Heinz saw better growth. Sales were up 2% on an organic basis and foreign exchange boosted that growth to 8%. Heinz said its sales across the world’s emerging markets climbed by more than 10% during the quarter, which was a key factor in the group posting an almost 9% rise in quarterly profits, beating Wall Street forecasts.
While US shoppers are in that ‘funk’ and trading in Europe remains challenging, Heinz has got its eye firmly on growing in emerging markets. The company is forecasting it will generate some 16% of sales in emerging markets during its current financial year. Heinz is then planning for emerging markets to account for 20% of sales in 2013 and for up to 25% “shortly thereafter”.
See Also:
Johnson said China was “key” to these plans, although he said the country was “just one of a number of markets” that will be “very important” to Heinz in the future. “India is growing rapidly, Indonesia is extremely well positioned and there are a number of other markets we’re looking at,” he told analysts.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataOf course, Heinz could look to achieve these targets through organic growth, although a second obvious weapon is M&A. Heinz has just secured the acquisition of Chinese sauces maker Foodstar and Johnson said the company was “actively” exploring a number of opportunities. Of course, Heinz is more than just ketchup and condiments. Could a big baby-food deal in Asia be in the pipeline?
Speaking of big deals, as well as the latest to-ing and fro-ing over global yoghurt brand Yoplait, last week saw the announcement of a plan to merge convenience food groups Greencore and Northern Foods.
You can get chapter and verse on the acquisition here but, suffice to say, the move is set to create a more powerful supplier that should, in theory, be able to withstand the margin pressure of selling own-label foods to the UK multiples. The merged business, to be called Essenta Foods, may lose some volumes where their customers overlap but the new company should have more leverage when dealing with the retailers than either Greencore or Northern had alone.
The battle for Yoplait did intensify last week with Lactalis bidding EUR1.4bn for the business. Yoplait shareholders PAI Partners, the private-equity firm, and Sodiaal, the French dairy co-op, turned down the offer. The two investors said the Lactalis bid under-valued Yoplait and did not fit with Sodiaal’s intention to keep its stake. As things stand, only PAI, which has held its shares in Yoplait since 2002, wants to sell up.
Over the weekend, Yoplait CEO Lucien Fa again popped up in the French-speaking press to comment on the takeover speculation. In an interview with Swiss publication Le Matin Dimanche, Fa described Nestle as Yoplait’s ideal partner.
Nestle has yet to comment but the world’s largest food maker is often touted as a potential bidder when international food businesses are up for sale – and even when they are not. In recent months, Nestle, which is sitting on a substantial war-chest, has been linked with Yoplait, upmarket Swiss chocolate maker Lindt & Sprungli and even General Mills, the world’s sixth largest food group.
Will Nestle enter the fray for Yoplait?
