Heinz Off to a Strong Start

Sales in Emerging Markets such as China and India surged 25% as Heinz delivered a banner year with sales surpassing the ten billion dollar milestone for the first time.

14/08/08 Heinz Chairman, President and Chief Executive Officer William R. Johnson has said at the company’s Annual shareholder’s meeting that Fiscal 2008 sales increased 12%, driven by the successful introduction of numerous new products, many of them catering to the fast-growing healthy lifestyles segment. Sales in Emerging Markets such as China and India surged 25% as Heinz delivered a banner year with sales surpassing the ten billion dollar milestone for the first time.

Commenting on Fiscal 2009, Mr. Johnson said, “I am pleased to report that we are off to a good start in Fiscal 2009 and we will be releasing first quarter earnings on August 21.”

In a speech which focused on Heinz’s special strengths in Health and Wellness and in Emerging Markets, Mr. Johnson said, “Our top 15 brands, which represent approximately 70% of sales, performed particularly well over the past two fiscal years with a compound annual growth rate of 12% driven by continued double-digit increases in R&D and marketing investment against our tightly-focused brand portfolio.”

“We launched hundreds of successful new products during the past two years. One of our more successful innovations was plastic snap pot beans in the UK. These single-serve, microwavable versions of our healthy, fiber-rich baked beans are doing very well in the market. Another successful launch was Smart Ones Fruit Inspirations, the first health-focused frozen entrée with a half-serving of real fruit. This line of four entrees is already on track for $40 million in sales in its first 12 months.”

Mr. Johnson continued, “The new plan raises our outlook in several key areas with the following annualized targets:
• Sales growth of 6% +;
• Increases in consumer marketing of 8-12%;
• Operating income growth of 6-7%;
• Earnings Per share Growth of 8-11%; and
• Operating Free Cash Flow of around $850 million per year.”

“Heinz continues to offer consumers great tasting and convenient foods while also giving them the health benefits that they are increasingly seeking across:
1. Lifestyle, including products like Heinz SteamFresh vegetables in Australia and reduced salt and sugar beans and ketchup to promote general wellness;
2. Children’s Nutrition, where we are a category leader in the markets in which we compete; and
3. Weight Management.”

Mr. Johnson continued, “Combined, our Weight Watchers Smart Ones and Weight Watchers from Heinz brands represent almost one billion dollars in sales and together are among the fastest growing equities in the Company. Smart Ones is rapidly becoming a lifestyle brand with an increasingly loyal consumer base and we continue to explore new meal occasions including the recent launch of Smart Ones Morning Express – a line of four handheld breakfast sandwiches and quesadillas.”

“Smart Ones’ torrid growth also continues in Canada where it now has 7 of the top selling 11 varieties in the nutritional meals category only 18 months after the brand was first introduced.”

 “The Health and Wellness opportunity is large, but perhaps our biggest growth opportunity is in emerging markets, where we are leveraging our first-mover advantage and go-to-market capabilities to drive accelerated growth.”

“In fact, emerging markets, which grew sales 25 percent in Fiscal 2008, are expected to contribute about a third of the Company’s total sales growth over the next two years.”

“These markets accounted for 13 percent of total Heinz sales in Fiscal 2008, up from just 8 percent a few years ago. With the growth trajectory I just described, they are expected to reach 15 percent of sales by the end of our new plan and as much as 20 percent by 2013. This would be a significant accomplishment given the growth we are also experiencing in our developed markets.”

 “Two of our newest innovations in the U.S. build on insights gleaned from extensive research which revealed that consumers want added convenience while still feeling like they are an integral part of the meal preparation process.”

“Ore-Ida Steam n’ Mash potatoes and T.G.I. Friday’s Complete Skillet Meals satisfy both requirements.”

“Not since the days Henry Heinz was introducing his first 57 varieties have we been driving such a strong innovation agenda for the Heinz brand globally. We had a busy year of product launches for the brand in Fiscal 2008, with another on tap for Fiscal 2009.”

“In Australia, we launched new varieties of Heinz SteamFresh vegetables in Fiscal 2008 and in Fiscal 2009 we will expand SteamFresh into the meals category.”

“In the UK, our Heinz soup innovation pipeline resulted in record shares in Fiscal 2008, and we have more new varieties planned for later this year.”

Finally, Mr. Johnson noted that, “With a healthy balance sheet and abundant opportunities to explore in both the developed and developing world, we are confident in our ability to execute value-added acquisitions.”