H.J. Heinz Case

With its headquarters in Pittsburgh, Pennsylvania, Heinz has offices located on six of the seven continents. Heinz focuses on marketing their products with an emphasis on health, wellness, and sustainability. Along with manufacturing high quality food products adapted to unique consumer traits in various regions of the world, Heinz also contributes generously to charitable efforts In parts of the world that need help most. Recently, Heinz received an award for ranking number one In customer satisfaction for the eleventh year In a row by the American Customer Satisfaction Index (Heinz, n.

D. ). The Company,” as it calls itself, has high standards for the food it manufactures and for its corporate operations resulting in a ole-model of a company raising the bar in global business operations. History and Global Footprint Heinz founder Henry John (H. J) Heinz created a foundation for company success by Instilling values of team bulling, collaboration, Innovation, vision, results-based operations, and integrity in his employees. By following his mission statement, “To do a common thing uncommonly well brings success,” Heinz has been successful at introducing new products to the market for over 140 years (Heinz, n.

. ). The H. J. Heinz Company was founded in 1869 in Sharpeners, Pennsylvania. It was incorporated on July 17, 1900, and grew to become a business partnership in 1905. Currently, Heinz headquarters are In Pittsburgh, Pennsylvania. 3 Heinz Is striving to develop globally while positively Impacting the world. Through Its than 30 countries with natural hybrid tomato seeds (H. J. Heinz Annual Report and ask, 2010). This enables farmers to produce higher yields of quality tomatoes without genetic modification.

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It has been particularly successful in China, and the Company recently began a program partnering with the United States Agency for International Disaster in the economically afflicted Upper Nile region of Egypt. Heinz also partners with Lucy Lieu as spokeswoman for the Heinz Encountering program to provide packages of powdered vitamins and minerals that can be mixed into normal meals for infants and children living in developing nations. The Heinz Microscope program has helped three million children fight the threat of iron deficiency, anemia, and vitamin and mineral malnutrition in 15 countries (H.

J. Heinz Annual Report and ask, 2010). The program was recently introduced into North America and Africa as it continues to grow, with a goal of reaching one million additional children by the end of this year. Heinz is committed to impacting the world through the Hindered and Heinz Encountering programs. Industry and Products As previously mentioned, Heinz is a global leader in the global market of food products. With sixty percent of its sales generated outside the United States, Heinz is an example of a company that has prospered from globalization (Heinz ASK Annual Report).

The products that Heinz manufactures and markets fall under the three categories of condiments, frozen foods, and infant foods. Product availability varies around the world, as do the ingredients. For example, popular Heinz products strutted in the United States include Smart Ones and T. G. I. Fridays frozen entrees, Pickles, Classics pasta sauce, and ketchup. Ketchup is also available in Poland, but it is made with different ingredients, is packaged differently, and is called “Pudding’s” (Heinz H. J. HEINZ ‘NC: INDUSTRY ANALYSIS 4 ASK Annual Report).

Heinz manufactures and markets products that meet the standards of individual countries, and the needs and wants of consumers in these countries. Whine’s innovative marketing techniques assist in generating product success in the global food industry. In February 2010, Heinz announced the latest addition to the Heinz Ketchup product line. The new “Dip & Squeeze” ketchup, which enables consumers to squeeze ketchup onto food by removing the tip of the small, ketchup bottle-shaped packet, or peel back the wrapper to dip their food in the sauce.

In recent efforts to promote the new Dip & Squeeze product, Heinz purchased a used truck, installed a custom kitchen with double-stacked convention ovens, food warmers, sinks, and a freezer. The truck was branded with the project’s slogan, “Heinz Ketchup Road Trip,” and the campaign was pitched on social media sites including Twitter and Faceable. The road trip began in mid-November in Pittsburgh, spent Thanksgiving in New York, and will make its way to Philadelphia before a final stop down south in Dallas.

Visitors to the Heinz Ketchup Road Trip truck receive a free serving of Ore-Ida crinkle cut fries or Ore-Ida sweet potato fries (both Heinz public relations and communications for Heinz North America, explains the on-the-go campaign was very fitting for the Dip & Squeeze Ketchup packets. She says, “Since it was really made for eating on the go, we wanted to create an environment where people could experience it on the go’ (Vega, 2010). Geographic Coverage and International Sales Totals The Heinz Company sales extend across the globe and generated about $10. Billion internationally in the last year (Heinz ASK Annual Report). Heinz divides its markets into the five regions of North America, U. S. Foddering, Europe, Asia/Pacific and Rest of World. The Asia/Pacific region includes Australia, New Zealand, India, Japan, China, South Korea, 5 Indonesia, and Singapore. The Rest of World region includes Africa, Latin America, and the Middle East. The $10. 5 billion earned in the last year was the sum of North At-enemas $3,192, 219,000, U. S Food services $1 Rupee’s

Sat/pacific and Rest of world’s revenues (H. J. Heinz Annual Report and ask, 2010). These totals indicate that North America is Whine’s strongest market, closely followed by the European region. The Rest of World region includes many developing nations thus generated significantly lower revenue. A future agenda is the expansion of Heinz products in developing nations through the creation of useful, economical products and targeted marketing. Emerging markets that Heinz has operations in include China, India, Latin America, and Russia.

Heinz is also exploring new markets in the Philippines, Turkey, Vietnam, ND Brazil. On November 30, 2010, Heinz announced that it would participate in the 2010 Credit Issue Holiday Conference on December 7, 2010. During the conference, the Company will present an overview of Whine’s strategies, results, and businesses around the world represented by Margaret Noel, Senior Vice President, Investor Relations (The Wall Street Journal Market Watch) (H. J. Heinz Company to Participate in the 2010 Credit Issue Holiday Conference, 2010).

Global Production, Distribution Facilities & Supply Chain The Company owns a total of 67 factories and leases eight across the globe (H. J. Heinz Annual Report and ask, 2010). In North America, 20 factories are owned and four are leased, in Europe 21 are owned and none are leased, in the Asia-Pacific region 20 are owned and two are leased, and in the Rest of World six factories are owned and two are leased. Whine’s intricate supply chain enables its products to command vast global coverage and accessibility.

The products are sold through Whine’s own sales organizations, through 6 and independent grocery accounts, convenience stores, bakeries, pharmacies, mass merchants, club stores, foddering distributors and institutions including hotels, saturates, hospitals, healthcare facilities, and certain government agencies (H. J. Heinz Annual Report and ask, 2010). The Company has set a goal of delivering more than $1 billion in cost savings over the next five years through global supply chain initiatives designed to achieve economies of scale and reduce costs by leveraging people, process, and technology (H. J. Heinz Annual Report and ask, 2010).

Multinational Market Regions and Market Groups Throughout the varying entities of the Heinz Corporation at least one thing remains constant, high expectations pertaining to corporate and social responsibility. Their pride in responsibility, along with their strict outline of rules and business standards, allows for swift and easy adaptations to local and regional group regulations (such as: NONFAT, the EX., CAFTAN, SEAN, etc). Although countries and regions have differing health standards and regulations for food, Heinz avoids complications with the countries’ respective economic unions or organizations due to the Company’s nature of business.

If a firm in the food industry wishes to compete on a global scale, the foremost outside force it will contend with and adapt to is culture. One way in which a country expresses its culture is through food. Since cultures change from region to region, one can see that it would be virtually impossible for a firm competing on a global scale to have one product which transcends all markets and appeals to everyone’s preferences. Therefore, Heinz does not have one product that it must mold to different rules and regulations in order to sell it to different markets.

Heinz competes on a global scale through the acquisition of companies that have already established demand for products in their market. These acquisitions enable Heinz to bypass the political red 7 ape which most companies introducing products into a foreign marketplace must overcome. Therefore Heinz does not have to adapt, but maintain, the business practices of the firms they acquire. Although Heinz may not have direct involvement with economic unions or other similar organizations, 22 of their international locations are certified by the International Organization for Standardization (SO).

The ISO is, “a network of the national standards institutes of 163 countries, one member per country, with a Central Secretariat in Geneva, Switzerland, that coordinates the system” (FAQ, n. D. ). Specifically Heinz adheres to ISO 14001 which provides firms with a framework in order to manage effectively their business in hopes of assuring employees and stakeholders that they are working for, or investing in, an environmentally conscious company. Their involvement with the ISO illustrates Whine’s emphasis on the responsibility to stakeholders and consumers.

Cultural Issues In the United States, Heinz is an iconic brand known for the distinct glass ketchup bottles that are a mainstay in restaurants around the country. The simple condiment has become a staple to pair with many different kinds of food and is seen as much of necessity as salt and pepper to keep readily available. Heinz products as a whole have adapted and grown over the years to become well integrated with society needs. In terms of global development, Heinz has succeeded in finding new ways of innovation in product offerings to cater to specific demographics.

In order to accommodate to the tastes of the specific area, Heinz acquires an existing food company that has already proven successful in the market or shows potential for future growth. Recently, Heinz acquired Foodstuff, a leading 8 Chinese manufacturer of premium branded soy sauces and fermented bean curd Heinz completes acquisition of Foodstuff, 2010). Foodstuff has pre-existing brands that have been well established in an economy that is projecting an annual growth of seven to eight percent in the coming years.

North America In the United States, Heinz is the best-selling brand of ketchup in the country (H. J. Heinz Company, Inc. , 2010). There are many ‘heritage’ brands associated with common condiments used by Americans. These include items such as vinegar, cocktail sauce, chili sauce, pickles, relishes, mustard, and Heinz 578 Sauce. In the past year Heinz has introduced 200 new products in the past year, including Smart Ones breakfast sandwiches and Ore-Ida microwaveable mashed potatoes. Heinz also developed a variety of frozen products from successful preexisting brands, such as T.

G. I. Friday’s by creating foods with similar tastes that customers can enjoy at home. Since the U. S. Food market is heavily saturated, Heinz is focusing on developing new items from existing ideas to promote growth in the industry. Heinz has been a part of Canadian culture for the past 100 years specializing in condiments, pasta sauces, canned beans, pasta, refrigerated dressings, and infant foods. Their largest presence in this country is in infant food markets; they have enjoyed the number one position in this market for 70 years (H. J.

Heinz Annual Report and ask, 2010). The Company offers a wide range of products, from Nature Infant Formula to toddler snacks. More recently, Heinz has begun to deliver these items in traditional and organic varieties to accommodate parental health concerns. Europe In the United Kingdom, Heinz is inextricably linked with British history and culture to the extent that it is believed to be a U. K. Company. Items such as Heinz Baked Beans have become a century old tradition, along with other products such as HP sauce, Lea & Perrine Sauce, and Heinz Salad Cream.

Heinz Salad Cream was the first brand developed exclusively for the U. K. Market and was developed in their London kitchens in 1925 (H. J. Heinz Inc. 2010). Heinz frequently uses the strategy of taking successful products and exporting them into markets where there is a vacancy. This is especially true in the European market. For example, Pudding’s is one of Pollard’s largest producers of ketchup and it is now offered in the United Kingdom. Also, Italy’s Plasmas baby food brand has become the “gold standard” for infiltration products.

It has dominated the marketplace due to the all-natural recipes as well as expanded lines of Baby Specials that parents seek. The Baby Specials line promotes easier digestion and contains hypoallergenic nutrients. Heinz also positioned this line in Russia and has experienced increased adaptation in this market as well (H. J. Heinz Inc. 2010). Transferring successful products into different markets is a common Heinz business technique. Asia Pacific Heinz has learned from experience that it is not beneficial to sell one product globally and expect high assimilation into different cultures.

China and Indonesia are two areas that are growing rapidly and their culture is developing significantly. The Asian Heinz label reported a 44% increase in sales last year and is expected to continue to grow (Bayle 2008). In this region, Heinz sells beverage syrup and chili sauce and has acquired the successful soy sauce brand BBC. Since its creation in 1988, BBC has become the second largest soy sauce brand in this region behind the Japanese brand, Kinsman.

Heinz has also done a major overhaul in the packaging, flavoring, marketing, and distribution of these products to generate more than $200 million in 10 sales in the past year. To promote further growth and make the products more ideally accepted in these cultures, Heinz has inspired chefs to create innovative recipes using BBC (Bayle 2008). Heinz has been successful in the Asia Pacific region because they have adapted to the unique tastes of the culture and have used innovative marketing techniques such as inspiring procrastinating recipes.

Political and Legal Environment The Company’s performance is impacted by political and economic conditions in the nations in which it operates. The factors and conditions include changes in applicable laws and regulations, including changes in food and drug laws, accounting tankards and critical accounting estimates, environmental laws, and taxation requirements. Other factors include import and export restrictions, nationalization, hyperinflation environments, terrorist acts and political unrest.

Venezuela, a country included in the Rest of World market, is a country of concern for Heinz. This environment of Venezuela creates risk for market penetration and business operations. Other political and legal factors listed by The Heinz Company that can occur and adversely affect financial results are disruption of supply chain, factors affecting the cost of production, transportation, and distribution such as increased energy costs; increased pension, labor, and people-related expenses; food safety issues, environmental, legal, tax and other regulations.

Foreign currency exchange rate exposure, the failure to successfully integrate acquisitions and Joint ventures into existing operations and the failure to gain applicable regulatory approval for such transactions or divestitures can also adversely affect the Company 11 (H. J. Heinz Annual Report and ask, 2010). These factors are most frequently encountered when attempting to enter an emerging market. On November 19, 2010, the H. J. Heinz Company reported higher second quarter operating income, net income, and earnings per share resulting from strong sales from growth in Emerging Markets and global ketchup (Courier, A. & Styles, T, 2010). Emerging Markets were responsible for a 10. 2 percent sales growth driven by infant nutrition products, ketchup, and nutritional beverages as well as increased pricing, primarily in Latin America (Courier, A. , & Styles, T, 2010). For the quarter, Emerging Markets were responsible for 15 percent of total sales (Courier, A. , & Styles, T, 2010). Globally, sales of ketchup grew 3. Percent, led by Russia where Heinz is the number one brand (The Wall Street Journal Market Watch). However, currency movements adversely affected sales in Europe and Venezuela.

In an online article from Bloomberg Business (Devourer, C, 2010), it was reported that sales from the European market decreased 5. 2 percent year-over-year to $798 million primarily resulting from unfavorable currency effects. The report also stated that the Rest of World market saw sales decrease 19 percent to $120 million due to the devaluation of the Venezuelan currency late in the third quarter of Fiscal 2010 (Proactive Investors, 2010). Emerging Markets If a firm wishes to expand and maximize its growth potential it must analyze what markets they are currently in and which ones they have yet to enter.

They should then determine which markets show the most promise for profitability and identify these as their emerging markets. According to the Business Dictionary, “emerging markets” are, “new market structures arising from digitization, deregulation, globalization, and open-standards, that are shifting the balance of economic power from the sellers to the buyers. ” For Heinz, emerging markets are crucial because they generated about of their 2009 total sales (H. J. Heinz Annual Report and ask, 2010). Their primary emerging markets include India, Indonesia, Latin America, Poland, and China; sales in these markets grew by 8. % in the fiscal 2009 year and continue to show expansion and growth (H. J. Heinz Annual Report and ask, 2010). According to the Heinz website one of the four keys in its business strategy is acceleration and growth in emerging markets (H. J. Heinz Annual Report and ask, 2010). They seek to do this by investing for double-digit sales and profit growth, leveraging infrastructure and expanding distribution, winning the global customers, applying modern trade tactics, growing through health and wellness (as well as taste), and by leveraging themselves through innovation (H. J. Heinz Annual Report and ask, 2010).

On a macro level Heinz generally expands its company throughout the world through major mergers, acquisitions, and Joint ventures. Heinz seeks companies with established products in the region they wish to expand to. Then seek to compose a deal where they can merge or acquire the company; thus attaining a low-risk market entry. Understanding Whine’s emerging market strategy is exemplified in the establishment of business in India. India has become one of the leading emerging markets for numerous industries due to its large population (1 , people in July 2010), and advancements in technology, transportation, education, and government (CIA, n. . ). Since the culture and cuisine are exponentially different than Whine’s home country, the Company has had to invest in products which will meet the preferences of the Indian consumer. In India, Heinz offers a variety of food products such as Indian chutneys, energy drinks, instant (or ready-to-eat and ready-took) meals, and most importantly nutritional beverage mixes that enhance child growth and 13 placement. The Indian consumer is health conscious thus one of the main sources of revenue for Heinz is its nutritional beverages.

In order to manage its Indian market Heinz must have locations for offices, factories, and distribution in India. Heinz currently has a head office in Iambi, in addition to four branch offices, two factories in Assistant and Aligarh’s, and 119 distributors dispersed throughout India (Map, n. D). This complex system of management is necessary in order to be successful in a foreign market. This allows Heinz to decrease communication time between distributors and management, which could prove to be essential in problem solving.

The dispersed web of Heinz factories and distributors decreases costs because it reduces shipping expenses. Having “in country’ sites allows them to distribute their product with minimal shipping and transportation costs; and it also greatly shortens the distribution time. India is only one example of the value of the emerging market to Heinz. Adaptation and implementation is necessary for the Company’s global success. Heinz has similar other important markets such as Poland, China, Latin America, and Indonesia to name a few. Growth in sales in China can be accredited to major acquisitions of

Foodstuff, Long Fond, and their involvement in nutrition and baby foods. Poland hosts Whine’s Pudding’s brand and is the country’s main food processor for prepared meals and also is its largest producer of ketchup. There are many examples as to how Heinz stays competitive in emerging markets. They continue to seek growth in these markets through acquisition, mergers, adaptation, research and development, local supply, distribution, and management systems, and through the implementation of high standards which must be adhered to by all segments of their large corporation.

The future in these emerging markets looks promising for Heinz as they expect to maintain their #1 or #2 market 14 share in over 50 countries through an expected contribution of 20% of sales (from emerging markets) by 2013 (H. J. Heinz Annual Report and ask, 2010). Foreign Currency Marketplace Currency exchange rates have a high impact on Whine’s present and future focus. In emerging markets, acquisitions and foreign exchange translation rates had a favorable impact on the 30% sales growth in 2010 (H. J. Heinz Annual Report and ask, 2010). For Heinz, assets and liabilities are translated at the exchange rate in effect at ACH year-end.

Income statements are translated at the average rate of exchange prevailing during the year and translation adjustments are included within shareholders’ equity (H. J. Heinz Annual Report and ask, 2010). To date, it appears that foreign currency exchange rate has not completely hindered Heinz from pursuing potential markets where they feel that their company would be well positioned. Due to the fact that H. J. Heinz Inc. Is located in the United States, there are no currency exchange issues. During the PAYOFF, sales in Canada increased by 1. 3% due to favorable Canadian exchange rates.

This is an improvement over the past year where sales were down as result of the dollar weakening against the Canadian currency. This favorable exchange rate in 2010 also resulted in an increase in gross profit from PAYOFF (H. J. Heinz Annual Report and ask, 2010). During the fiscal year of 2010, transaction-related currency cross-rates in the U. K. Hindered the Company’s gross profit margin (H. J. Heinz Annual Report and ask, 2010). For the continent as a whole, gross profit declined to $1. 25 billion largely due to “unfavorable foreign exchange translation rates and increased commodity costs (H.

J. Heinz Annual Report and ask, 2010). This also led to a large decrease in sales due to the unfavorable rate. The areas that were affected the most by this slide were the frozen food plants in Europe resulting from increased commodity costs and higher manufacturing costs (H. J. Heinz Annual Report and ask, 2010). Asia Pacific In this region, foreign exchange translation rates were very favorable, which led to an $83 million gross profit increase for Heinz (H. J. Heinz Annual Report and ask, 2010). Improvements in productivity also motivated this large increase.

Operating income of he firm increased as a result of good exchange rates and an increase in marketing investments. Venezuela In Venezuela, Heinz has a currency control board that is responsible for the translation of foreign currencies. Concerning imports, Heinz has established good relations to obtain U. S. Dollars for the official exchange rate for items such as ingredients, packaging, manufacturing equipment, and other necessary inputs. There is an unregulated parallel market for exchanging EVE to U. S. Dollars, but this Company does not enter into such transactions. The official exchange rate has been axed for several years at 2. 5 Veto 1 U. S. Dollar, despite a large increase in inflation. Heinz has recorded a $62 million currency translation loss due to the currency devaluation (H. J. Heinz Annual Report and ask, 2010). However, even with these regulatory institutions in place to combat issues that may arise, the country of Venezuela is still a large liability. The government of Venezuela recently expropriated Owens-Illinois, the world’s largest producer of glass containers. Hugo Chapel claimed to the media that “[Owens-Illinois] was exploiting workers and damaging the environment”, which is why the government is taking over the local unit.

In the media release, it was cited that Chapel even momentarily forgot the name of the company he was taking over. 16 This demonstrates that Venezuelan dictator has ruthless motives that affect his decisions. Heinz must continue to monitor these developments in order to prevent incurring future damage. Global Market Entry Strategies Whine’s primary method of market entry is through acquisition of existing companies in a particular market. The Company’s recent acquisition trends have involved Beams Big Emerging Markets) and the BRICK (Brazil, Russia, India, and China) countries.