Due to a drop in fiscal second quarter earnings, the H.J. Heinz Co. has announced plans to close more plants. To reduce overhead, the company closed four plants in the first quarter of the year and has plans to close three more plants in the coming months. The sites of those closures have not been identified.
The 5.7% drop in earnings was attributed to weaker North American consumer sales that countered international growth. The company now expects 20% or more of its sales this fiscal year to come from emerging markets.
Chief Executive William R. Johnson said, “Given the economic headwinds we’re facing and the difficulties we’re encountering in U.S. foodservice and Australia, we expect to get to our full year [earnings per share] target in a different way.” He added, “Those who are not pushing aggressively into emerging markets are going to wake up one day and find out that the world left them behind.”
Heinz’s bottom line has taken a hit because of higher commodity prices, prompting the company to increase prices on many of their products and to trim costs with plant closures and layoffs. Consumer data reviewed by Heinz shows that many consumers are now purchasing smaller package sizes in virtually every category of Heinz products as a result of the weak economic environment. Heinz makes its namesake ketchup, Ore-Ida frozen potatoes, and Weight Watchers Smart Ones frozen meals.
In response, the company has decided to move up the roll out of items that will appeal to those consumers, including a new, 10-ounce version of Heinz ketchup, retail sizes of mustard, Worcestershire sauce, and Heinz 57 sauce, and a new line of Heinz Home Style Beans, all sold for around $1 per unit. Mr. Johnson said “Importantly, these new products will enhance our ability to serve the rapidly growing number of U.S. households with incomes below $50,000,” a segment of society that has grown three times faster than households with incomes above that threshold.
He said that the beans were being brought back at the request of consumers. He stated, “We believe this is the right time for the return of this convenient, nutritious and value-oriented classic. Consumers have been turning to comfort foods during the recession, and a recent consumer poll ranked baked beans as the No. 2 comfort food.”