Heinz's marketing blitz paying off

Quarterly, overall income get a boost

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H.J. Heinz Co. Chairman William R. Johnson had never actually seen "American Idol" until a few weeks ago when the Pittsburgh ketchup company sponsored the hit Fox show. "I found it quite interesting," he told analysts.

He did not disclose whether he liked Blake or Jordin.

Jumping on the "American Idol" bandwagon is part of the company's game plan to increase marketing spending, which includes projects such as the TopThisTV.com effort promoted during the talent show.

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Tapping into the popularity of video-sharing site YouTube.com, the project asks consumers to produce their own commercials as part of a contest. With hundreds of entries submitted so far, a few of the better postings were shown at yesterday's presentation in New York. "We've already seen a pick-up in the [ketchup] business," said David Moran, president and chief executive officer of Heinz North America.

That was just part of the reason Mr. Johnson, and his management team, were so upbeat yesterday as they reported on the results of the past 12 months. A year ago at this time, the company was heading into a summer-long proxy fight that would get hot and heavy before two activists were elected to the board.

Now, everyone is on the same page, Mr. Johnson said. "What a difference a year makes."

Overall, the company reported a 7.8 percent increase in profit for the fourth quarter. Net income for the three months ended May 2 was $181 million, or 55 cents per share, vs. $167.9 million, or 50 cents, during the same period last year.

The numbers met analysts' projections, according to Thomson Financial Network.

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At $2.4 billion, fourth-quarter sales rose a mere 0.6 percent from last year but the quarter was a week shorter than the same quarter last year.

For the fiscal year, Heinz posted net income of $785.7 million, or $2.36 per share, vs. $645.6 million, or $1.89, last year. Sales rose 4.1 percent to $9 billion.

Based on the results, the board voted to raise the quarterly dividend on common stock 8.6 percent.

The North American consumer products segment posted a 7.3 percent increase in sales through strength in sales of Smart Ones and Boston Market frozen products and Classico pasta sauces. The U.S. foodservice business posted a slight dip in overall sales but its ketchup sales rose 5 percent.

Europe, which has struggled in recent years, posted a 3 percent sales increase. Heinz is not yet the leading ketchup in Russia but the company reported it has moved into the top spot in Moscow and St. Petersburg.

Looking ahead, the company is on track to roll out 200 new products this fiscal year, with more than 100 of those in Europe.

Analysts continue to keep a close eye on the company, if only because activist investor Nelson Peltz seems to stir things up wherever he goes. Earlier this year, confectioner Cadbury Schweppes announced plans to split its operations after word came he might make a move on the company. Speculation in April that Heinz might be considering its own strategic options also intrigued investors.

Mr. Johnson said yesterday that the company would continue to look for potential acquisitions. Heinz announced it has agreed to buy the Australian jams, toppings and jellies business of Cadbury Schweppes.

The company is projecting sales in the next fiscal year will rise 4 percent, with help from further marketing spending. It also raised its full-year earnings projections to a range of $2.54 to $2.60.

The stock closed yesterday at $47.58, up 2 cents on the day.

Teresa F. Lindeman can be reached at tlindeman@post-gazette.com or at 412-263-2018.


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