Heinz continues to spread its product line worldwide
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Citi Investment analyst David Driscoll made a pertinent observation during the H.J. Heinz Co.'s recent third-quarter earnings conference call.
Company officials had been enthusiastically explaining how strong sales growth has been for the Pittsburgh food company in markets beyond traditional developed countries such as Europe and the U.S. -- places like Latin America and the Africa-Middle East region.
"By the way," said Mr. Driscoll, "one of these days you guys have got to change the segment name of 'Rest of World' to something more attractive."
The awkward designation seems destined to change if global sales patterns for Heinz continue on the current path.
The company, founded in Sharpsburg in 1869, embraced the potential of feeding other countries early on in its development. Founder Henry Heinz, according to company lore, got his products into London's Fortnum & Mason food store in the 1880s.
The U.S. and the U.K. continue to be key markets, but company officials have used a mix of acquisitions and organic growth to move into markets far along the trade routes. At this point, more than half of the Pittsburgh company's total sales are generated outside of the U.S.
Being a global company means coping with local issues. Last year, Heinz ran into a price war in Australia that convinced it to overhaul operations there. About a year ago, a devaluation of the Venezuelan currency hit results. Close to home, the recession has kept Americans from eating out as much, which hurt the U.S. Foodservice division.
Lately, the biggest sales growth has been coming in places that might have seemed inhospitable territory for a consumer packaged goods company a few decades ago.
In the recent third-quarter update, Heinz reported organic sales in its North American consumer products segment rose 1.3 percent, while its U.S. Foodservice division showed a 1.7 percent gain.
At the same time, organic sales growth in the Asian/Pacific segment -- which includes China, India and Indonesia -- hit 6.6 percent, while the "Rest of World" segment produced a gain of 30.2 percent.
Heinz, which had $10.7 billion in sales in the last fiscal year, still sells more overall in the developed markets but population trends and the new middle class in emerging markets offer more opportunities to gain new customers.
Just as Victorian-era Brits began to taste new spices as their merchant fleets brought back their finds, Heinz operations in the U.S. are starting to bring back innovations that have been helpful in emerging markets.
Heinz is now introducing a new container for its flagship ketchup to the U.S. market, a flexible plastic container that can stand on a shelf. Heinz is using the doypack, familiar to consumers in places like Russia and Latin America, to create a 10-ounce, 99-cent package targeted to American households trying to stretch a weekly paycheck by buying smaller quantities.
Flavors are also coming back home. U.S. consumers can now buy balsamic vinegar ketchup, first sold in the U.K., and baked beans that were based on recipes developed in the company's Canadian operation.
Heinz doesn't make products in the Pittsburgh area anymore, even if traffic reporters persist in calling the North Side plant along Route 28 "the Heinz plant." That facility is now owned by TreeHouse Foods, out of Illinois.
Pittsburgh can still lay claim to Heinz world headquarters and North American headquarters, which are both Downtown, and its Global Innovation and Quality Center in Marshall. The company employs about 1,200 people in the region and 35,000 worldwide.
First Published March 20, 2012 12:00 am