The H.J. Heinz Company (NYSE: HNZ), in its Fiscal 2000 annual report released this week, outlines the successful growth strategy that makes Heinz a powerful global food marketer whose leading brands, innovative products and great-tasting recipes delight consumers in every corner of the world.
The 2000 annual report, “Heinz: Anytime, Anyplace, Anywhere,” documents how at any given moment, on every continent, in every time zone and at every eating occasion, people are enjoying the superior taste and exceptional convenience of Heinz products. From a refreshing late-night sip of Glucon-D energy drink in Mumbai to a generous noontime serving of Heinz ketchup in New York to a nourishing evening treat of Plasmon baby biscotti in Rome, the story is the same – Heinz is a constant companion to consumers of every age and culture.
A Strong Performer
The annual report highlights the strong top- and bottom-line performance that Heinz’s global growth strategy delivered in Fiscal 2000, including:
— A 3.8% increase in overall sales volume;
— Strong sales growth in key categories such as ketchup, condiments and sauces (+9.4%), frozen foods (+11.6%) and foodservice (+12.5%);
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— Earnings per share (EPS) of $2.57, excluding special items, resulting in an average compound EPS growth rate of better than 10% a year since Fiscal 1996;
— An increase in operating margins to 18.2% from 14.1% over the past fouryears; and
— Compound annual sales growth rates of 5-12% for five of Heinz’s seven key global businesses for the past three years.
According to Heinz President and CEO William R. Johnson, the key to this performance, and to the company’s continuing growth going forward, is “a stronger focus on marketing-oriented innovation and top-line growth.” In his opening interview, Mr. Johnson points to marketing breakthroughs such as the forthcoming Heinz EZ Squirt ketchup and StarKist pouch tuna, along with the recent national launch of Boston Market HomeStyle Meals.
“Our goal is consumer excitement, enjoyment and convenience,” Mr. Johnson says. He notes that Heinz is targeting top-line sales growth of 3-5% and EPS growth of 10% in Fiscal 2001, with stronger performance expected in the second half of the year resulting from the contribution of new brands and Heinz’s Operation Excel growth and restructuring initiative.
Mr. Johnson also points to the power of the company’s focused portfolio of leading brands, led by the ubiquitous Heinz mega-brand, whose annual sales approach $3 billion. “Almost 80% of our sales come from 40 well-known brands,” he says. “This tight focus on 40 strong brands represents a great marketing advantage versus companies with hundreds of smaller brands.”
The report illustrates that Heinz’s leading power brands command number- one or number-two market shares in more than 50 countries, and Heinz varieties are marketed in more than 200 countries and territories.
A Growing Global Presence
Heinz’s CEO points to acquisitions and geographic expansion as other major factors in Heinz’s growth equation, citing as particular examples:
— Heinz’s 19.5% stake in The Hain Celestial Group, a premier player in organic/nutritional foods;
— The acquisition of UB Frozen and Chilled Foods in the U.K., making
Heinz a leader in Western Europe’s rapidly growing quick-serve meals market;
— Expansion of Heinz’s fast-growing foodservice business through the
purchase of Thermo Pac, Inc., Serv-A-Portion and Quality Chef Foods, Inc.; and
— A joint venture with Nutri Asia of Manila to accelerate the expansion of Heinz’s dynamic sauces business in the Asia/Pacific region.
Fiscal 2000 also saw the first production of Heinz ketchup at Heinz ABC’s factory in Karawang, Indonesia and the launch of the company’s first line of jarred baby food at a newly constructed factory in Quingdao, China.
Success in a Changing Environment
Such recent achievements reflect a long-standing commitment to change, expansion and growth, observes Heinz Chairman Anthony J.F. O’Reilly in his farewell letter to shareholders. (Dr. O’Reilly is scheduled to retire as Heinz Chairman following the company’s annual meeting on September 12, 2000.) “Foremost among these transformations has been Heinz’s emergence as a preeminent global food company,” says Dr. O’Reilly. “A second critical evolution over the years has been the expansion of Heinz products into every occasion where food is sold or consumed.”
Dr. O’Reilly’s nearly 20-year tenure as CEO coincided with a period of dramatic change, within Heinz and the world around it, he recalls. “Steering Heinz through these sometimes-troubled waters was an exhilarating experience for me and my colleagues,” he says. “Our objective was, as it remains for today’s management, to adapt our company to the new appetites of a rapidly changing world in order to accelerate the growth of our brands and enhance shareholder value.”
The results have been impressive, Dr. O’Reilly indicates. In 1979, when he became Heinz’s CEO, the company’s annual sales were $2.5 billion and its net income was $110.4 million. Today, under Bill Johnson as CEO, Heinz’s annual sales exceed $9.4 billion and its net income is $925 million (excluding special items). “These results manifest the success of Heinz’s strategy of continuous transformation to address an ever-changing world,” he concludes.
A Global Essay of Growth
Heinz’s Fiscal 2000 annual report features a vivid photo essay by noted photographer Bob Day that shows consumers enjoying a world of Heinz products in a variety of settings around the clock. Accompanying each photo is a brief commentary by former Associated Press editor and reporter Catherine Erickson. The vignettes range from a 5 a.m. feeding of Wattie’s baby food in Auckland, New Zealand to a noontime student purchase of Boston Market HomeStyle Meals in Miami to a 6 p.m. family dinner with Heinz ketchup and microwaveable french fries in Cape Town, South Africa.
The report also contains a pair of colorful two-page spreads that give readers a convenient reference for Heinz’s many products, locations and leading market share positions around the globe. The Heinz Fiscal 2000 annual report is now available on the company’s Website: www.heinz.com. Visitors to the site soon will be able to download a free Heinz screensaver that keeps track of time around the world through an ingenious procession of local landmarks formed by ketchup squeezed from a Heinz bottle.
Looking forward, Heinz’s CEO concludes: “We will continue to focus on aggressive marketing and innovation as the best way to build shareholder value. Our consistent growth rate, combined with aggressive management and growing global brands, makes Heinz a very attractive investment.”
This news release contains forward-looking statements regarding the company’s future performance. These forward-looking statements are based on management’s views and assumptions, and involve risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These include, but are not limited to, sales, earnings and volume growth, competitive conditions, production costs, currency valuations, global economic and industry conditions, achieving cost savings programs, success of acquisitions and new product innovations, and other factors described in “Forward-Looking Statements” in the company’s Form 10-K for the fiscal year ended May 3, 2000, as updated from time to time by the company in its subsequent filings with the Securities and Exchange Commission.
ABOUT HEINZ: With sales over US$9 billion, H. J. Heinz Company is one of the world’s leading marketers of branded foods to supermarkets and away-from- home eating establishments. Its 50 companies operate in some 200 countries, offering more than 57 hundred varieties. Among the company’s famous brands are Heinz, StarKist, Ore-Ida, 9-Lives, Weight Watchers, Wattie’s, Plasmon, Farley’s, Smart Ones, The Budget Gourmet, Linda McCartney, San Marco, Go Ahead!, Bagel Bites, John West, Petit Navire, Boston Market, Skippy, Kibbles ‘n Bits, Pounce, Wagwells, Nature’s Recipe, Orlando, ABC, Olivine and Pudliszki. Information on Heinz is available at www.heinz.com.