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 joined with food giant Kraft in 2015 to form The Kraft Heinz Company.
Change in Company Type
In July 2015 Heinz and Kraft Foods merged in a transaction valued at $36 billion. The mega deal created the world's fifth-largest food and beverage company, with combined revenues of some $29 billion. The Heinz brand and business remains headquartered in Pittsburgh.
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.
While its products are sold in 200 countries , North America represents Heinz's largest market, bringing in nearly 40% of consolidated 2014 sales. Europe contributed another 30%, while the Asia/Pacific and Latin American markets contributed 19% and 8% of total revenues, respectively.
The food firm operates about 15 locations across North America, 13 in Europe, 18 in the Asia/Pacific region, and 12 others internationally.
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 sells its products through its own sales organizations and through independent brokers, agents, and distributors. It spent $386.2 million on advertising expenses (including production and communication costs) in fiscal 2014 (ended December 28), down from $439.3 million and $416.9 million in FY2013 and FY2012, respectively. Wal-Mart continues to be Heinz's largest customer, representing 10% of sales for each of the past three fiscal years.
Note: Financials prior to FY2013 may not be comparable to more recent results, as the company has changed its accounting methods following its merger and transition period in 2013.
Heinz has struggled to meaningfully grow its revenues and profits over the past few years as its business has matured. The company's sales dipped by nearly 5% to $10.92 billion in fiscal 2014 (ended December 28), mostly as sales volumes fell by 5% and because FY2013 included an extra week of sales (the firm's financials have been moved to align a new year end). Weaker frozen nutritional meal sales, reduced trade promotions in US Foodservice, raw material and packaging supply constraints in Venezuela, and share losses in its frozen potatoes, meals, and snacks business in the US Consumer Products segment were all to blame.
The company's net income fell sharply to $672.4 million in FY2014, mostly due to significant impacts by costs related to restructuring and productivity initiatives, along with merger-related costs and expenses. Heinz's operating cash rose sharply to $2.14 million for the year, thanks to higher earnings after adjusting for depreciation and amortization, impairment losses on intangibles and trademarks, and favorable movements in inventory.
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.
In the past, Heinz has developed its business in emerging markets and in areas that promised 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 represented Heinz's first venture in Brazil.
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.