US food group Heinz has said it is “aggressively” looking at M&A opportunities in emerging markets.
Heinz yesterday (20 November) booked an increase in first-half profits, which it said was fuelled by “dynamic growth” in emerging markets. The region delivered a 13.2% increase in sales on an organic basis. Those markets account for 23% of total sales, Heinz said.
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Following recent deals in Brazil and China, the company said it is “aggressively evaluating” both organic and M&A growth initiatives in these markets.
“We have so many active M&A initiatives in the emerging markets, we literally had a meeting last week to decide how we’re going to put them in priority,” chairman, president and CEO William Johnson told analysts on the firm’s earnings call yesterday. “We have a number of very close-in initiatives underway in [Brazil, India and China] … as well as other markets where I think we need to improve our footprint.
“For perspective, I just came back from a 15-day around-the-world trip where I was in various parts of Asia and various parts of Europe, and we are aggressively looking at and aggressively in the process of M&A activity.”
Johnson also outlined Heinz’s innovation plans for emerging markets. The company increased group marketing spend by 10% this year to around $70m. The CEO said it has invested in “more boots on the ground” in emerging markets this year and sees this as a priority before putting money into “specific marketing”.
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By GlobalData“The boots on the ground is giving us a very solid tangible return in all these markets. I’d like to see us do a little bit more in Indonesia and maybe a little bit more in India. And then we have a lot of other initiatives in place.”
Johnson said Heinz is focused on introducing new middle-class consumers in emerging markets to its ketchup and core soy sauce brands.
In China, Heinz is nearing completion of its Shanghai facility, which it says will increase its soy sauce bottling capacity in the country by nearly two-thirds. The company has also started manufacturing Heinz tomato paste in Brazil and said it will begin producing ketchup locally next month in order to accelerate its distribution and availability.
The company has also launched a pouch line of sauces in Mexico with a second line due to be rolled out “very shortly”, Johnson said. He added: “We have a new pouch line going into Brazil. We’re going to have a second one of those coming very shortly. We’re starting to produce ketchup in Brazil in the next 30 or 40 days.
“There’s a significant amount of new product activity in the second half of the year and a significant response to the marketing spending that we’ve initiated in the first half the year, much of which really didn’t begin until the second quarter and you’ll see a follow-through in the third quarter.”
