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Emerging Markets Drive Heinz

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Emerging Markets Drive Heinz

Emerging Markets Drive Heinz
September 06
06:52 2010

Emerging markets such as China, India, Indonesia, Latin America and Russia are expected to deliver at least 20% of Heinz’s total sales by 2013, more than double their contribution of just five years ago, according to William Johnson, chief executive of the US-based global food group.

“Emerging markets are key to unlocking future growth because their economies are growing at a significantly higher rate than developed markets; the middle-class in emerging markets will eventually outnumber the combined populations of the US and Europe; and per capita consumption of packaged foods in emerging markets has significant upside,” he explains.

Record Sales and Profit

Heinz achieved record sales of $10.5b, up almost 5%, and record gross profit of $3.8b in its 2010 financial year, despite having to navigate “the most difficult economic environment in decades.” William Johnson adds: “Our record sales were driven by solid results in our Top 15 brands and most importantly, by accelerating double-digit growth in emerging markets, our most powerful growth engine.”

With emerging markets generating organic sales growth of almost 22% in the first quarter of the 2011 fiscal year, Heinz is on track to deliver its financial targets for the full year, even though the consumer and economic environment remains challenging.

Indeed, William Johnson says the global economy is in the worst state he has seen during his 35 years in the consumer goods industry. “The near-term economic outlook for the US and Europe remains pretty dreary, marked by high unemployment and low consumer confidence.” He adds “Many consumers have gone into what I like to term as economic hibernation, eating at home more often, eating out less, reducing spending and worrying more about the future.”

Heinz is not spending much time looking for M & A opportunities in the US and Western Europe but instead is focusing almost entirely on the emerging regions of the world.

Heinz expects to deliver another year of strong results on a constant currency basis, with sales growth of 3 to 4%, operating income growth of 7 to 10%, and earnings per share growth of 7 to 10%. Heinz also projects operating free cash flow of more than $1b for the second consecutive year.

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