China is set to become increasingly important to Heinz, with the US food giant today (19 November) describing the country today as “key” to its future growth.
Speaking to analysts after the ketchup maker posted rising second-quarter profits, chairman, president and CEO Bill Johnson said: “Looking forward I see China as key to unlocking future value for Heinz and consequently we are investing heavily there, particularly in sauces and infant nutrition.”
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Referring to the recently-acquired Foodstar business, a Chinese sauces manufacturer, Heinz bought in June for US$165m, Johnson said the company plans to “invest heavily” in the business over the next 12-18 months. Heinz wants to drive investment in developing marketing, people and the supply chain, Johnson explained.
“Foodstar is already growing rapidly and represents a real opportunity for Heinz to leverage our global sauces capabilities to drive growth while building a large and meaningful ketchup and sauces business in China,” he added.
Johnson would not be drawn on the actual value of Heinz’s entire Chinese operations but he said that one third of the company’s employees are in the country, where the company runs 12 manufacturing facilities. The Foodstar acquisition, the Heinz boss said, said has given the company access to “the heart and soul of the company, which is condiments and sauces”.
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However, Johnson said China was “just one of a number of markets” that will be “very important” to us 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 said.
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By GlobalDataJohnson revealed that Heinz is “exploring actively” a number of “core M&A opportunities” in the emerging markets, where the company is forecasting it will generate some 16% of sales in this current financial year, then 20% in 2013 and up to 25% “shortly thereafter”.
“We view the emerging markets as a target-rich base of consumers, which are likely to spend more and more of their income on branded packaged foods as they prosper,” Johnson said.
For the quarter, in India, the group posted a 29% increase in sales of its Complan nutritional beverage range, with Johnson adding it has “quickly grown to be one of the company’s top brands”
In Indonesia, it saw 19% growth in its ABC sauces brand, which the company has now extended to include new varieties of chilli sauce to “increase host food usage”.
In Russia, the company recorded a 16% increase in organic sales growth in ketchup, with the company leveraging its relationship with McDonald’s.
Overall, for the quarter, emerging markets delivered organic sales growth of 10.2% against a backdrop of sluggish growth in its other markets. In North America, the manufacturer recorded a 1.2% rise in sales in its consumer products division, while sales fell 5.2% in Europe, with 5.7% of the decrease down to unfavourable exchange rates.
