Heinz to axe 2,700 jobs as part of cost-cutting operation

01/06/06 Heinz has said that during the past 18 months, Heinz's Board of Directors and management team worked together to craft plans for aggressive cost-cutting, plant closings and employee headcount reductions.

During FY2007 and FY2008, the company plans to continue integrating its $6 billion global supply chain by better leveraging direct and indirect procurement, rationalizing the manufacturing footprint and driving continuous improvement initiatives. The company has identified 15 plants that it intends to exit in fiscal 2007, producing the majority of the company's expected employment reduction in FY07 of approximately 2,700, or approximately 8 percent. Together, these initiatives should result in at least $165 million in cost savings in FY2007. Heinz is evaluating plans to exit up to an additional five plants in FY2008.

During the next two years, Heinz plans to achieve $355 million in cost savings and $145 million in trade spend reduction. The Company says it is committed to reinvesting a portion of the savings in growing its sharply focused portfolio of leading brands. Specifically, the company expects to realize the following savings in the coming two fiscal years: $265 million in cost of goods sold and $90 million in SG&A, totaling $355 million.

During the next two years, Heinz says it will:
Drive Efficiency in Trade Spend. During the past three years, Heinz focused its efforts on driving efficiencies and reducing trade spend in its United States Consumer Products Business Unit, resulting in a 430 basis point reduction in trade spend in that unit. During FY07, the company will implement its successful U.S. trade management model in the other major business units. The opportunity is particularly large in Europe, which is expected to provide a significant portion of the $145 million in trade spend reduction Heinz expects over the next two fiscal years.

Integrate Global Supply Chain. Reduce Selling, General and Administrative Costs. In FY2007, the company expects to generate SG&A savings of $60 million. About $30 million will be sourced from headcount and salary reductions; $20 million from reduced professional fees as a result of our expanded indirect procurement program and $10 million from reduced costs in its U.S. distribution network. The company expects another $30 million in SG&A savings in FY2008.

Commenting on the plan, Heinz Chairman, President and CEO William R. Johnson said: "Our board and management are unified in our focus to deliver superior shareholder value. The Heinz plan sets aggressive but realistic goals for the next two years. We have the right strategy, the right brands and the right people to drive the business forward. We are in fighting shape to deliver high quality earnings growth by relentlessly attacking non-value-added costs and innovating and growing some of the world's best brands."