16 September 2009 - The global economic recession has led consumers to shift behaviour and trends have shown a resulting rise in at-home dining, increased shopping in discount retail oulets, as well as a strong growth in private label sales.
One consumer foods company, however, widely anticipated such a shift in consumption patterns, and would argue that the consumer continues to trust famous brands. H.J. Heinz Company believes that consumers have remained loyal to its brands because they provide quality, nutrition, innovation, convenience and value all in one.
As part of its response to growing private label sales, Heinz has recently increased R&D and marketing investment for its core portfolio.
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"History has shown that companies that continue to invest in their businesses and brands during economic downturns ultimately outperform their peers. Thus we are continuing to invest in the long-term", said Heinz CFO Art Winkleblack at a conference in Boston last week.
70% of the company's sales are generated by its top 15 brands. "This allows us to focus our innovation and marketing resources, and to more effecively drive growth", argued Winkleblack.
Additionally, in North America and Europe, 74% of sales come from Heinz's top 5 brands (the iconic Heinz brand, SmartOnes, Ore-Ida, Classico and TGI Fridays.
Indeed, the company know what products are generating profit.
Ketchup and sauces account for 42% of the company's sales and are growing at a compound annual growth rate of 6%. Meals and snacks represent 43% of Heinz's sales and are growing at 4%.
Meanwhile, infant nutrition, considered as its fastest-growing segment at 9% CAGR, accounts for 11% of company sales. |
Commenting on Heinz's infant nutrition category, Scott O'Hara, the CEO of Heinz North America, said that he had high hopes for this very profitable business as it is growing quickly.
He views the global market for infant products as fragmented, which would offer a lot of opportunity for growth over time for the leading baby food producers, such as Heinz and its main rivals Nestle and Danone.
"In infant nutrition, we grow organically and we continue to monitor acquisition opportunities. We of course remain committed to this category", said O'Hara.
Overall, Heinz's global sales have grown at a compound annual rate of more than 5% over the last 3 years, which shows that its focus on its global portfolio of leading brands has resulted in good performances and Heinz is execting more of the same for FY 2010.