H.J. Heinz Co.'s longtime leader, Bill Johnson, stood in the Veranda ballroom at the Four Seasons Hotel San Francisco, addressing the ketchup maker's top 50 executives for the last time. Around the corner in a smaller room, his successor as chief executive officer, Bernardo Hees, waited to tell some of the same managers whether they still had jobs.
What was slated as an annual leadership meeting became an opportunity for Mr. Hees to dismiss 11 senior executives, according to three people familiar with the gathering, who asked not to be identified because it was private. The June 17 session was about a week after Heinz's $23.3 billion sale to Warren Buffett's Berkshire Hathaway Inc. and Jorge Paulo Lemann's 3G Capital.
Since taking over at the Pittsburgh-based ketchup maker, Mr. Hees eliminated hundreds of jobs, grounded corporate jets and pulled the plug on mini-fridges at the office. Savings will help pay down $12.6 billion in borrowing supporting the deal.
"The more cuts, the more quickly they can reduce the debt," Dave Novosel, an analyst at Gimme Credit LLC, said in an interview. "It makes the math work better."
Heinz isn't "the classic Buffett playbook, which is buy a great business and pretty much leave it alone," said Jeff Matthews, a Berkshire shareholder and author of books about the company.
Annual interest expense at Heinz probably doubled to $560 million since the takeover, Mr. Novosel said. Omaha, Neb.-based Berkshire also holds $8 billion in preferred stock that receives a 9 percent dividend, or $720 million a year.
Managing those costs falls to 3G. While Mr. Buffett committed more than $12 billion to the deal and has 50 percent of the common equity, Mr. Lemann's firm is in charge of operations at the world's largest ketchup maker, which also sells Ore-Ida potato snacks and had 31,900 employees at the end of its fiscal year.
An August memo obtained by Bloomberg News outlines new rules. They limit printing to 200 pages a month per employee and restrict color pages to "customer-facing purposes." Employees can spend no more than $15 a month on office supplies and are expected to reuse items such as box files. To save on electricity, mini-refrigerators "are not permitted moving forward" and staff should rely on appliances in common areas.
Such measures suggests there's not much fat to trim, said Noel Hebert, chief investment officer at Bethlehem-based Concannon Wealth Management. "When you start getting down to the amount of paper you can use, it's telling you the obvious stuff is gone," said Mr. Hebert, whose firm manages about $250 million.
Heinz shook up leadership to promote accountability and faster decision-making, according to a statement from Michael Mullen, a spokesman who declined to comment on the analyst's estimates or accounts from people who requested anonymity. "Heinz will reinvest more of our dollars where they directly impact our business -- in our brands and our products, and most importantly, in benefiting our consumers," he said.
Employee spending on business trips was limited to $45 per day for food and incidentals, two of the people said. The aviation department, which included two leased aircraft and a company-owned Gulfstream IV, was shut, according to one.
Office jobs have been a particular target for Mr. Hees. About 600 were cut in the U.S. and Canada, the company said in August, the month it announced about 250 positions were in jeopardy in the U.K. and Ireland. Heinz expects annual savings of about $150 million from 1,200 job cuts, according to a filing last week.
Management set a goal for margins of about 30 percent on earnings before interest, taxes, depreciation and amortization, one person said. Heinz's margin was about 17 percent in the fiscal year ended April 28.
3G has a playbook for costs dating to the early 1980s, when Mr. Lemann's longtime partner, Carlos Alberto Sicupira, ran Brazilian retailer Lojas Americanas SA. There, according to a 2004 Harvard Business School case study, Mr. Sicupira implemented zero-based budgeting to control costs.
The approach requires managers to develop annual budgets from scratch, rather than use the previous year as a baseline.
The cuts at the 144-year-old company pushed some executives to weigh leaving Heinz, the people have said. The new management sought to build spirit by embroidering employees' shirts with the ketchup maker's logo and has proposed composing a company song, one person said.
In opening remarks at the San Francisco meeting, Mr. Hees discussed his intention to take Heinz public again, the people said. Burger King returned to the stock market in 2012, less than two years after 3G bought the Home of the Whopper.
Mr. Buffett "has no plans to ever sell a share of Heinz stock," his assistant said in an email. The billionaire declined to comment on job cuts. Steve Lipin, an outside spokesman for 3G who works at Brunswick Group, declined to comment.
Even with added interest expenses, Heinz has steady cash flow to cover obligations and reduce leverage, said Gimme Credit's Mr. Novosel. That helped win record-low borrowing costs for a U.S. junk-rated business in March.
Mr. Novosel estimated in a July note that Heinz will be able to pay down about $250 million of debt this fiscal year without tapping its cash pile.
Still, lowering leverage "is going to be a long-term project," he said.businessnews