Emerging markets seizing larger role at Heinz

by Eric Schroeder
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BOSTON — Representing more than 80% of the world’s population, emerging markets stand as one of the four foundations of strategy at H.J. Heinz Co., said Mike Milone, executive vice-president, Rest of World, Global ERM & Global Infant/Nutrition.

Mr. Milone, who spoke Sept. 8 at the Barclays Capital Back to School Consumer Conference in Boston, said Pittsburgh-based Heinz expects its percentage of sales from emerging markets to exceed 20% in fiscal 2012. The company already is off to a good start in achieving that goal, he said, noting that the percentage reached 23% during the first quarter of fiscal 2012.

To reach its goals, Heinz has identified four keys to growth: strong leading brands, strong local management supplemented with global capabilities, local focus and execution, and strategic and cost-effective acquisitions.
Of Heinz top 15 brands, six are key emerging market brands, Mr. Milone said.

“With our Quero in Brazil, ABC in Indonesia or Master in China, each is a powerhouse in its local market and represents a well-established brand equity with local consumers,” he said. “Heinz is actually our largest brand in emerging markets and is recognized and well respected virtually everywhere.”

By focusing on strong local management Heinz has the ability to pick up on insights into local behaviors, tastes and cooking habits, which Mr. Milone said affects Heinz’ product and package design as well as its go-to-market process.

“Our local organizations have resources and decision-making autonomy and are able to achieve deep sales and distribution penetration specific to the vagaries of each market,” he said. “This is particularly important to our emerging markets success as modern trade is not nearly as well developed as it is in North America and Europe.”

Turning to local focus and execution, Mr. Milone noted success in Venezuela, Mexico, China, India and Indonesia, citing specific instances in which Heinz has made headway during the most recent quarter. In the case of Mexico, Heinz recently completed installation of a new ketchup processing line, a move Mr. Milone said will make Heinz’ products more affordable and boost margins in the country.

Strategic and cost-effective acquisitions are the fourth key to growth at Heinz. The company within the past year has acquired Foodstar in China and Quero in Brazil.

Mr. Milone said Heinz’ “rest of world” segment, which includes Latin America, Africa and the Middle East, is expected to generate fiscal 2012 sales of $1 billion. Rest of world combined with Heinz’ business in Asia and Eastern Europe is on track to exceed 20% of total sales at Heinz during fiscal 2012, with a goal of reaching 30% by fiscal 2016, Mr. Milone said.

“Heinz is well positioned in attractive emerging markets,” he said. “We have a proven operating model, a positive outlook and an exciting future. We are and have been doing what others are just beginning.”

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