Forget those original 57 varieties. H. J. Heinz now has thousands of products. One of the world's largest food companies, Heinz makes ketchup and other condiments, soups, sauces, frozen foods, beans, pasta meals, infant food, and other processed food products. Its flagship product is ketchup, of course, and the company dominates the US ketchup market. Heinz's customers include food retailers, the foodservice industry, and the US military. Its leading brands include its namesake ketchup, Lea & Perrins Worcestershire sauce, Classico pasta sauces, Ore-Ida frozen potatoes, and its Boston Market, T.G.I. Friday's, and Weight Watchers frozen foods. Heinz agreed to merge with food giant Kraft in 2015.
Change in Company Type
In March 2015, Heinz and Kraft Foods agreed to merge in a transaction valued at $36 billion. The mega deal is projected to create the world's fifth-largest food and beverage company, with combined revenues of $28 billion. Heinz was initially acquired by Berkshire Hathaway and 3G Capital in 2013. The company remains headquartered in Pittsburgh.
North America represents Heinz's largest market, bringing in some 30% of consolidated 2013 sales. Europe contributes another 30%, with more than 20% coming from Asia/Pacific and the rest from other regions.
The food firm operates about 20 locations across North America, 17 in Europe, 25 in the Asia/Pacific region, and 10 others internationally.
Heinz provides food for families in 200 countries. The company's operating segments -- North American Consumer Products, Europe, Asia/Pacific, US Foodservice, and Rest of World -- are organized by geographical area. North American Consumer Products makes, markets, and sells ketchup, condiments, sauces, pasta meals, and frozen potatoes, entrees, snacks, and appetizers through grocery channels in the US and Canada. Its Europe segment performs the same activities in that region. The company's Asia/Pacific segment serves Australia, New Zealand, India, Japan, China, Papua New Guinea, South Korea, Indonesia, Vietnam, and Singapore. Heinz's US Foodservice business makes, markets, and sells branded and customized products (including ketchup, condiments, sauces, and frozen soups) to commercial and non-commercial food outlets and distributors across the US. The company's Rest of World unit operates in Africa, Latin America, and the Middle East.
Heinz's products are sold in mature markets in the US. However, it continues to see success with its name-brand food products. Indeed, Heinz products enjoy a #1 or #2 market share in more than 50 countries. Its top 15 power brands generate more than two-thirds of the company's annual sales.
Sales and Marketing
The ketchup company serves a variety of customer segments, such as food retailers, foodservice providers, and the US military. It sells its products to wholesale, cooperative and independent grocery accounts, convenience stores, bakeries, pharmacies, mass merchants, club stores, foodservice distributors, and institutions the likes of hotels, restaurants, hospitals, healthcare facilities, and certain government agencies.
Heinz, which sells its products through its own sales organizations and through independent brokers, agents, and distributors, spent $465 million on advertising during fiscal 2013, up from $440 million and $369 million in 2012 and 2011, respectively. Wal-Mart continues to be Heinz's largest customer, representing 10% of both 2013 and 2012 sales.
It pays to keep pounding the bottom of the bottle. Taking into account the past three years, Heinz recorded its highest net sales during fiscal 2013, driven by high volumes, especially in emerging markets.
Net sales rose less than a percentage point (0.2%, in fact) in fiscal 2013 as compared to 2012, helped by a 1% boost in volume and price increases. While Heinz saw volume gains in emerging markets, the company's sales slipped in the US, Continental Europe, Australia, and Italy. Net pricing spurred a 2% sales increase, driven by price increases across emerging markets, as well as in Continental Europe and US Foodservice.
As part of its strategy to squeeze the last drop out of its primary ketchup business and chase after promising emerging markets, Heinz is also focused on shedding non-core businesses operating outside the US. To this end, the company sold its China packaged food business in mid-2013 to Zhengzhou Sanquan Foods Co.
Mergers and Acquisitions
Heinz continues to develop its business in emerging markets and in areas that promise growth spurts. Emerging markets offer combined volume and pricing gains. To build on this foundation, Heinz in 2011 acquired an 80% stake in Brazil's Coniexpress S.A. Industrias Alimenticias, a producer of vegetables, sauces, and condiments (including ketchup and tomato paste) under the Quero brand. The purchase represents Heinz's first venture in Brazil, which is the fifth-most populated country in the world.
Previously, Heinz acquired Guangzhou-based Foodstar, a maker of soy sauce and fermented bean curd, in 2010 from private equity firm Transpac Industrial Holding for $165 million in cash. The purchase marked Heinz's entry into China's soy sauce market. Heinz is already on the ground there with a flourishing infant-nutrition business and Long Fong frozen dim sum. Heinz boasts full ownership of Egyptian condiments and sauces maker Cairo Food Industries, which strengthens its operations in Egypt and the Middle East. While infant nutrition is Heinz's smallest division, it's also the fastest-growing. To this end, the company is looking to make acquisitions in infant feeding, as well as in emerging markets such as China and India.