HJ Heinz this week reported “solid” first-quarter profit growth, driven by double-digit sales growth in emerging markets and North America. Here we take a closer look at the results.
- The sales growth in the company’s top 15 brands was led by the global Heinz brand, including Heinz Ketchup, Complan nutritional beverages in India, ABC brand products in Indonesia and Smart Ones in the US.
- Ketchup sales were driven by higher sales and volume in the US and Russia, one of the world’s largest ketchup markets. The firm’s consumer marketing investments in the quarter increased by almost 10% to drive growth and innovation. Heinz said it still expects full-year fiscal 2011 consumer marketing investments to be in line with fiscal 2010.
- Volume increased by 2.5%, propelled by volume growth of almost 12% in emerging markets and more than 5% in North American consumer products. Net pricing increased sales by 1.1%, acquisitions increased sales by 0.1%, and foreign exchange translation rates reduced reported sales by 2.1%.
- Sales of the North American consumer products segment increased 4.8% to $762m. Volume increased 5.3% mainly due to growth in Heinz Ketchup, Smart Ones frozen entrees and Classico pasta sauces. Pricing decreased 2.7% reflecting increased promotional activity in several categories. Operating income increased 3.7% to $191m, reflecting the growth in net sales, higher productivity and the favourable impact from currency, partially offset by higher commodity costs.
- Heinz Europe’s sales decreased 7.7% to $713m as unfavourable foreign exchange translation rates decreased reported sales by 7.5%. Volume increased 0.2%, as higher ketchup sales across Europe, particularly in Russia and France, and frozen potatoes in the UK were offset by category-related declines in Italian infant nutrition and soups in the UK and Germany.