Kraft Heinz CEO says acquisitions not the only route to growth
April 19, 2017 3:17 PM
Gene J. Puskar/Associated Press
Kraft Heinz CEO Bernardo Hees says Pittsburgh will continue to be a part of the company's future. “Look, that’s our company, our headquarters — always will be,” Mr. Hees said after the company’s annual shareholders meeting Wednesday. “We’re extremely committed to the long term in Pittsburgh.” That includes keeping the company name on Heinz Field, home of the Pittsburgh Steelers, he said, but it also means counting on research and development innovations coming out of the center in Warrendale established by the Pittsburgh-based H.J. Heinz Co. before it merged with Illinois icon Kraft Foods Group.
By Teresa F. Lindeman / Pittsburgh Post-Gazette
Kraft Heinz CEO Bernardo Hees has a message for Pittsburgh: The food company isn’t going anywhere.
“Look, that’s our company, our headquarters — always will be,” Mr. Hees said after the company’s annual shareholders meeting Wednesday. “We’re extremely committed to the long term in Pittsburgh.”
That includes keeping the company name on Heinz Field, home of the Pittsburgh Steelers, he said, but it also means counting on research and development innovations coming out of the center in Warrendale established by the Pittsburgh-based H.J. Heinz Co. before it merged with Illinois icon Kraft Foods Group.
Kraft Heinz, dually headquartered in Pittsburgh and Chicago, welcomed about a dozen shareholders to the Reed Smith building on Fifth Avenue for a no-frills meeting to take care of business — re-electing directors to the board, getting an OK for the executive compensation plan and deal with some shareholder proposals (Two efforts to push recyclable packaging and to get more information on deforestation were voted down by shareholders).
The maker of Heinz ketchup and Kraft macaroni & cheese has been in the news a bit lately, as the company just made an unsuccessful attempt to buy Anglo-Dutch consumer packaged goods giant Unilever. Markets moved and speculation on what comes next for Kraft Heinz steamed up.
Some shareholders at the meeting wanted to see what company executives might divulge about the future of the business. Mergers and acquisitions are nothing new to these investors.
Joseph Sausser of Sandusky, Ohio, traces his ownership of Kraft Heinz shares back to Philip Morris, which became Altria Group and then spun off its shares of Kraft Foods to its shareholders. He’s pleased with the management and the company at the moment.
“I’m very happy with the performance,” Mr. Sausser said. “I think there’s been a lot of synergies.”
He also cited innovation as a Kraft Heinz strength. Any products in particular? “I like the mustard.”
He also has Coca-Cola stock, so he’s paying attention to speculation that Kraft Heinz might look at buying one of the big beverage companies. But he’s in no rush to see a big deal.
“I’d like to see a little bit longer track record,” he said, noting that the impact of management’s cost-cutting and other steps needs time to filter through the operation.
Mr. Hees, who led the meeting sporting a white shirt with the Kraft Heinz logo embroidered over the pocket, didn’t talk about potential deals during his remarks to shareholders or in an interview after the formal meeting, but he reiterated the message that company officials have been giving of late — that Kraft Heinz has room to grow even if it doesn’t buy up other products and factories.
While he acknowledged the industry has taken note of the cost-cutting prowess demonstrated by 3G Capital, which teamed with Berkshire Hathaway to do the Heinz and Kraft deals, Mr. Hees doesn’t think that gives enough credit to his management’s push to invest in the business.
“I don’t think it tells the story. The story is much more balanced,” he said.
Mr. Hees said the strategy is to get profitable growth in organic terms, calling out $1 billion invested last year in upgrading manufacturing. He pointed to investments in plants in Davenport, Iowa, and Kirksville, Mo., as well increased spending on marketing over the last few years.
“I don’t think an acquisition is necessary,” Mr. Hees said, although he added that the company keeps an eye out for opportunities.
Ruth Jonas of Sewickley took the bus and then the subway to Gateway Center to make it to the annual meeting. She’d had Heinz shares years ago and recalls some entertaining meetings led by former Heinz CEO Tony O’Reilly. The ketchup company used to show some of the commercials it did for markets around the globe.
As a Kraft Heinz shareholder, she’s been pretty pleased. Her investments generally lean toward industries she understands, like food. She also owns Unilever stock. “I don’t go for the racy stuff and I don’t go for growth,” she said. “At 87, I don’t think I’ll be around for a lot of growth.”
But she wanted to find out what the company might be cooking up next.
Jerry and Vivian Forgus drove over from their home in Ravenna, Ohio. They’ve attended everything from the Berkshire Hathaway several-day annual gathering in Nebraska to the coupon-bonanza of the J.M. Smuckers annual meeting in Ohio.
Mr. Forgus seemed a little surprised that Kraft Heinz didn’t have much in the way of favors to share with its investors, but he, too, likes holding the stock.
He shared an observation he’d heard lately suggesting the merger-acquisition thing goes more than one direction. “This company could be acquired by another company.”
Teresa F. Lindeman: firstname.lastname@example.org or 412-263-2018.
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