Heinz hits it big in emerging markets
0 Comments | Tribune – Review / Pittsburgh Tribune – Review, Sep 2, 2010 | by Rick Stouffer
H.J. Heinz Co. is investing where the returns are — in emerging markets — CEO Bill Johnson told analysts Wednesday after the world’s largest ketchup maker reported a 13.1 percent jump in first quarter profit.
The Pittsburgh-based company is targeting its resources, such as new product introductions, investment in plants, and even possible acquisitions, where Heinz can realize the quickest return on investment, Johnson said.
“It may not be the greatest thing for the U.S. and Western Europe, but it’s what’s best for our shareholders,” Johnson said on a conference call yesterday while discussing Heinz’s results for the three-month period ended July 28.
Heinz said net income increased to $240.4 million, or 75 cents a share, from $212.6 million, or 67 cents a share, in the comparable period a year ago. Sales grew by 1.6 percent, to nearly $2.5 billion, from $2.4 billion one year ago.
Most of the sales growth came from emerging markets.
Johnson recently has talked about the possibilities and opportunities in countries such as China, India, Indonesia and Russia. Heinz is pushing for 20 percent of its worldwide sales to come from such countries by 2013. For the quarter, these markets were responsible for nearly 18 percent of Heinz’s revenue.
Despite a difficult economic environment worldwide, sales growth include an 8 percent jump in ketchup and nearly 6 percent growth in Heinz’s top 15 brands, Johnson said.
Ketchup sales were driven by higher volume in the United States and Russia, which has become one of the world’s largest ketchup markets. Total ketchup and sauces sales increased to nearly $1.1 billion from $1.07 billion a year ago.
“You have to be competitive in developed markets, but it absolutely makes sense for Heinz to be shifting a lot of its investment to different countries,” said Christopher Growe, a St. Louis-based analyst who follows Heinz for Stifel Nicolaus & Co. Inc. Growe has a “buy” rating on Heinz’s stock.
Sales in the Asia-Pacific region increased 19 percent, fueled by growth in India and Indonesia, the company said. In Europe, sales fell 7.7 percent, primarily because of unfavorable foreign-exchange rates
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