H.J. Heinz Co. has reiterated its commitment to staying in Pittsburgh, but the historic food company's local presence is shrinking as a result of management moves to trim employment here and consolidate operations.
The global ketchup maker spent Tuesday morning telling hundreds of workers that they would no longer have jobs with Heinz, as 600 office positions, including 350 jobs in Pittsburgh, were cut across the company's operations in the U.S. and Canada.
Following the layoffs, including some that came before Tuesday, Heinz employment in the region will drop from close to 1,200 to about 800. Across North America, the company will employ 6,000.
While gut-wrenching, the job cuts were not unexpected.
Almost as soon as the plan was unveiled in February to sell the company founded in Sharpsburg more than a century ago to a joint venture of Berkshire Hathaway and 3G Capital, speculation began that the new owners would need to cut costs to make the $28.75 billion deal a good investment.
And Brazilian investment group 3G Capital, where new Heinz CEO Bernardo Hees is a partner, has a track record of trimming headquarter operations, something that happened both at Burger King and Anheuser-Busch when 3G took over those companies. Mr. Hees, formerly CEO at Burger King, took over at Heinz on June 7 when the sale went through.
His job is to find new ways to grow sales and profits in the consumer packaged-goods industry, which has proven to be a difficult task in mature markets like the U.S. Heinz has seen much of its sales gains in recent years in emerging markets with a growing middle class.
"As part of our transition to a private company, the senior leadership team has examined every piece of our business to better position Heinz for accelerated growth in a very competitive global market," Michael Mullen, senior vice president of corporate and government affairs said Tuesday.
Mr. Mullen said an evaluation process was done to get to a streamlined structure for the Heinz North America division. "Unfortunately, this process resulted in a number of difficult but necessary organizational changes, including the elimination of 600 office positions across the U.S. and Canada, including 350 in Pittsburgh. We regret the impact this has on Heinz employees and their families."
He described the cuts as coming in "across-the-board salaried roles," without breaking down in more detail what positions were trimmed.
Mr. Mullen said employees whose jobs were eliminated were notified Tuesday morning in one-on-one meetings.
He called the moves "difficult" but necessary for growth. "Our new organizational structure will simplify, strengthen and leverage the company's global scale, while enabling faster decision making, increased accountability and accelerated growth."
Heinz has struggled to get strong results out of its important North America division in recent years. The company reported in July that the North American consumer products segment -- which includes lines such as Heinz ketchup, Ore-Ida frozen potatoes and Classico pasta sauces -- saw sales drop $46 million, or 1.4 percent, to $3.2 billion in the fiscal year that ended April 28.
By comparison, the company's Asia/Pacific region reported a sales gain of $33 million, or 1.3 percent, to $2.53 billion. The rest-of-world segment that includes markets such as Brazil, Mexico and the Middle East saw sales grow $137 million, or 14 percent, to $1.12 billion.
Another mature market, Europe, also reported a drop in sales of $127 million, or 3.7 percent, to $3.31 billion. Some of that was blamed on currency exchange issues, but Europe's economy has not exactly been booming in recent years.
More cuts could be coming around the world, as Heinz's new management continues its assessments.
Mr. Mullen said the senior management is looking at proposals on ways to create a flatter, leaner organization structure.
"Heinz continues to examine every aspect of our business globally to ensure we are operating as efficiently and effectively as possible in order to reach our growth goals," he said. "We are committed to openness and transparency with our employees and will follow the appropriate local consultation processes."
In June, the company announced plans to cut 45 jobs at a 170-employee plant in the United Kingdom, saying the Kendal factory's work producing infant milk destined for China would be sent to a New Zealand-based company. That move was subject to a consultation process with the plant's employees and their representatives.
Mr. Mullen said, "Heinz employees around the world will be advised of relevant decisions as they are made."
He reiterated that the company will continue to be headquartered in Pittsburgh, which was something that the new owners had agreed to in the contract purchasing the ketchup maker, in addition to fulfilling the contract that puts the Heinz name on the football stadium used by the Pittsburgh Steelers.
"While we're pleased that H.J. Heinz Co. will keep their corporate headquarters in Pittsburgh, we were disappointed and saddened to learn that they will be eliminating a significant number of local jobs," Mayor Luke Ravenstahl said in a statement Tuesday. "My thoughts are with the Heinz employees and their families during this difficult time."
City Councilman Bill Peduto, the Democratic nominee for mayor, also issued a statement, saying he was disheartened to hear the news. "Heinz is a Pittsburgh institution and is recognized internationally as such. Heinz has a long and storied history in Pittsburgh and I will be reaching out directly to the new ownership group to guarantee that it is a part of our future."
Heinz has not had a manufacturing operation in Pittsburgh in years. The place on the North Side that traffic reporters call the Heinz plant was sold to Del Monte Foods, which in turn sold it to TreeHouse Foods.
Mr. Mullen said Heinz will continue to operate its research center in Marshall.
But as part of shrinking its payroll and operations here -- as well as integrating the new CEO's management preferences -- the company plans to create an open office environment in One PPG Place. That will, Mr. Mullen said, "foster increased collaboration and faster decision making."
PPG Place has been the site of Heinz worldwide management operations, while its North America division has been based at the Heinz 57 Center on Sixth Avenue.
"They will be consolidating most of their operations at PPG," said Chuck Perlow, a partner in McKnight Realty Partners, which owns the Sixth Avenue building. Mr. Perlow said McKnight was notified Monday that Heinz would be reducing its space in the former Gimbels building.
Heinz, which now has space on the sixth floor as well as the ninth through 14th floors for a total of about 300,000 square feet, will continue to lease the sixth floor covering around 40,000 square feet, he said.
The Downtown office market is stronger now than it was when Heinz moved in more than a decade ago. Mr. Perlow, who said the food company has been a great tenant, said his company is bullish on the market.
He added, "The saddest thing is a lot of people are losing their jobs."
Teresa F. Lindeman: firstname.lastname@example.org or at 412-263-2018. First Published August 13, 2013 1:30 PM