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H.J. Heinz Company

H.J. Heinz Company

600 Grant Street
P.O. Box 57
Pittsburgh, Pennsylvania 15230-0057
U.S.A.
Telephone: (412) 456-5700
Fax: (412) 456-6128
Web site: http://www.heinz.com

Public Company
Incorporated:
1900
Employees: 46,900
Sales: $9.41 billion (2000)
Stock Exchanges: New York Pacific
Ticker Symbol: HNZ
NAIC: 311111 Dog and Cat Food Manufacturing; 311230 Breakfast Cereal Manufacturing; 311412 Frozen Specialty Food Manufacturing; 311421 Fruit and Vegetable Canning; 311422 Canned Specialties; 311711 Seafood Canning; 311941 Mayonnaise, Dressing, and Other Prepared Sauce Manufacturing

Perhaps best known for its ketchup, the H.J. Heinz Company manufactures thousands of food products in plants on six continents and markets these products in more than 200 countries and territories. Heinz ranked first in ketchup in the United States with a market share in excess of 50 percent. Moreover, the companys StarKist brand tuna led its market with a 45 percent share, and its Ore-Ida label held more than 50 percent of the frozen-potato sector. Overall, the company claims to have 150 number one or number two brands worldwide. Breaking the companys sales down by sector, ketchup, condiments, and sauces account for about 24 percent of overall sales; frozen foods (including Ore-Ida, Budget Gourmet, and Weight Watchers), 15 percent; pet products (9-Lives, Gravy Train, and Ken-L-Ration), 14 percent; soups, beans, and pasta meals, 12 percent; tuna, 12 percent; infant foods, 11 percent; and other, 12 percent. Geographically, about 55 percent of revenues are generated in North America, 26 percent in Europe, 11 percent in the Asia-Pacific region, and eight percent elsewhere.

Henry J. Heinz and the Founding of His Company

The origins of this vast food empire may be traced to Pennsylvania, where eight-year-old Henry John Heinz began selling produce from his familys plot to nearby neighbors. At ten he used a wheelbarrow, and, by the time he was 16, Heinz had several employees and was making three deliveries a week to Pittsburgh grocers. Born in 1844 to German immigrant parents, Heinz was the oldest of nine children. He grew up in Sharpsburg, Pennsylvania, near Pittsburgh, and, after graduating from Duffs Business College, he became the bookkeeper at his fathers brickyard. At age 21, he became a partner. (Heinz retained an interest in bricks all his lifehe personally supervised the buying and laying of brick for his companys buildings, and his office desk was often piled with brick samples acquired on his travels.) In 1869, Heinz and L.C. Noble formed a partnership called Heinz, Noble & Company in Sharpsburg to sell bottled horseradish. Their product line soon expanded to include sauerkraut, vinegar, and pickles.

Following the panic of 1873 and subsequent economic chaos, the business failed in 1875, but Heinz quickly regrouped, and the following year started afresh with the determination to repay his creditors. With his brother John and cousin Frederick as partners and himself as manager, Heinz formed the partnership of F&J Heinz to manufacture condiments, pickles, and other prepared food. Ketchup was added to the product line in 1876. The business prospered, and Heinz made good on his obligations. In 1888, the partnership was reorganized as the H.J. Heinz Company after Heinz gained financial control of the firm. Soon Heinz was known throughout the country as the pickle king.

Small, energetic, and ambitious, Heinz was a cheerful man with courtly, old-fashioned manners. He exuded enthusiasm, whether for work, family, travel, religious activities, or good horses, and had a passion for involving others in his interests. According to his biographer, Robert C. Alberts, Heinz once installed an 800-pound, 14V2-foot, 150-year-old live alligator in a glass tank atop one of his factory buildings so that his employees might enjoy the sight as much as he had in Florida.

In the late 1800s, the typical American diet was bland and monotonous, and the Heinz Company set out to spice it up with a multitude of products. The phrase 57 Varieties was coined in 1892. Tomato soup and beans in tomato sauce were quickly added to the product line. Even as 57 Varieties became a household slogan, the company already had more than 60 products. At the Worlds Columbian Exposition in Chicago in 1893, Heinz had the largest exhibit of any U.S. food company.

By 1900, the year the company was incorporated, the H.J. Heinz Company occupied a major niche in U.S. business. It was first in the production of ketchup, pickles, mustard, and vinegar and fourth in the packing of olives. Overall the company made more than 200 products. Still, Heinz liked the lilt of his original slogan and in 1900 put it up in lights in New York Citys first large electric sign, at Fifth Avenue and 23rd Street. A total of 1,200 lights illuminated a 40-foot-long green pickle and its advertising message.

Heinzs clever merchandising won him a reputation as an advertising genius, but he did not allow his ambitions to over-shadow his religious convictions; during his lifetime, in deference to the Sabbath, Heinzs advertisements never ran on Sun-days. Heinz Company factories were considered models in the industry, both in their facilities and their treatment of workers. The company received many awards, and Harry W. Sherman, grand secretary of the National Brotherhood of Electrical Workers of America, remarked after visiting a Heinz plant that it was a Utopia for working men.

In 1886, Henry Heinz went to England carrying a sample case, and came home with orders for seven products. By 1905, the company had opened its first factory in England. The following year, the Pure Food and Drug Act was vigorously opposed by most food manufacturers, but Heinz, who under-stood the importance of consumer confidence in the purity of processed foods, was all for it, and even sent his son to Washington, D.C., to campaign for its passage.

Transition from Family Firm to Public Company: 1920s60s

Henry Heinz died at age 75 in 1919. At that time, the company had a workforce of 6,500 employees and maintained 25 branch factories. Heinz was succeeded as president of the company by his son, Howard, who began his career with H.J. Heinz as advertising manager in 1905 and became sales manager in 1907. In 1931, at the height of the Great Depression, Howard Heinz saved the company by branching into two new areas: ready-to-eat soups and baby food. He remained president until his death in 1941. In 1939, Fortune estimated total sales for the still privately owned company at $105 million.

By the time Howards son H.J. Heinz II (known as Jack) became president of the company at his fathers death, he had worked in all the companys divisions, from the canning factories to the administrative offices. He chose to launch his career as a pickle-salter for $1 a day in the Plymouth, Indiana plant. Later he became part of the cleanup staff, then a salesperson for H.J. Heinz Company, Ltd. in England. In 1935, fresh out of Cambridge University, Jack Heinz was sent by his father to establish a plant in Australia. Heinz-Australia later became that countrys biggest food processing plant.

From 1941, when Jack took over, to 1946, H.J. Heinzs sales nearly doubled. That year, Heinz made its first public stock offering and revealed that its net profit was more than $4 million. Foreign sales of baked beans and ketchup, particularly in England, contributed substantially to the companys success. During World War II, Jack Heinz was active in food relief and personally made four war-time trips to England to examine food problems there. The company insignia went to war, too; the 57th Squadron of the 446th Army Air Force chose for its emblem a winged pickle marked 57.

Jack Heinzs tenure was distinguished by expansion of the company, both internationally and at home. Subsidiaries were launched in the Netherlands, Venezuela, Japan, Italy, and Portugal. In 1960 and 1961, the H.J. Heinz Company acquired the assets of Reymer & Bros., Inc. and Hachmeister, Inc. StarKist Foods was acquired in 1963 and Ore-Ida Foods, Inc. in 1965.

During the 25 years that H.J. Heinz II was chief executive, the food industry changed greatly. The era was marked by the rise of supermarket chains and the development of new distribution and marketing systems. In 1966, H.J. Heinz II stepped down as president and CEO, though he retained his position as chairperson until his death in February 1987.

1970s and 1980s: The OReilly Revolution

In 1969, R. Burt Gookin, then CEO of Heinz, made Anthony (Tony) J.F. OReilly president of the companys profitable British subsidiary. OReilly, who was managing director of the Irish Sugar Company at the time, shook up the company by working 14-hour days and stressing a policy of winning through effort. OReilly was an uncommon executive; he was, among other things, a world-class rugby player. In 1973, OReilly was named president of the parent company, and in 1979 he became CEO. Shortly after the death of H.J. Heinz II, he was also made chairperson. From the beginning, OReilly stressed the importance of strong financial results. Some critics claimed that this emphasis created too stressful an atmosphere; in 1979, it was learned that managers of several subsidiaries had for years been misstating quarterly earnings in order to meet their target goals and impress top management.

Company Perspectives

I have always admired the tenacity of a great idea. The H.J. Heinz Company certainly belongs in this categorya concept as strong and vital today as it was when the business was created 130 years ago. What accounts for this durability is the adherence of successive generations of Heinz leadership to a Jejfersonianand classically Americanideal of continuous revolution and renewal. Thus, each change in the social and commercial environment becomes a new opportunity for growth and expansion.

Anthony J.F. OReilly, chairman

Overall, OReillys achievements were impressive, however. The timely acquisition of Hubinger Company in 1975 put Heinz in a position to cash in on the demand for high-fructose corn syrup when the price of sugar soared. In 1978, OReilly acquired Weight Watchers International, just ahead of the fitness craze that swept the nation.

At the same time that the company was branching out into new products, OReilly was cutting back on traditional businesses. By 1980, Heinz had increased volume, while cutting its number of plants from 14 to seven and reducing employment by 18 percent. OReilly also gave up the battle with Campbell Soup Company for the retail soup market. When generic products hit the supermarket shelves, Heinz countered not by producing for the generics industry but by nickel and diming it, as he said. For example, Heinz switched to thinner glass bottles that cut the cost not only of packaging but also of transportation. When imports began to undersell StarKist tuna, StarKist decreased the size of the tuna can, just as Hershey had downsized its chocolate bar when cocoa prices soared. This ploy netted StarKist $7 million in savings. Other nickel-and-dime cost savings came from eliminating back labels from bottles, reclaiming heat, and reusing water.

OReillys strategy in the 1980s was to pare costs to the bone and to use the savings to beef up marketing, primarily advertising, in an effort to increase market share. At the same time, Heinz pursued a cautious acquisition policy. By the mid-1980s, the company had spent $416 million to acquire more than 20 companies. Return on equity increased from nine percent in 1972 to 23.3 percent in 1986.

OReillys cost-cutting war included a threat to go to contract manufacturers rather than his own plants if the same products could be purchased elsewhere for less. Such tough talk elicited substantial concessions from labor unions in 1986. OReillys hard-nosed, bottom-line strategies won Heinz recognition as one of the countrys five best-managed companies in 1986. When H.J. Heinz died the following year, OReilly became the first non-family member to advance to Heinzs chair.

In 1988, Heinz bid $200 million for Bumble Bee Seafoods, the third largest tuna company in the country. The purchase would have given Heinz, whose StarKist brand already ranked number one, more than 50 percent of the domestic tuna market. Accordingly, the U.S. Justice Department prevented the purchase on antitrust grounds. Also in 1988, Heinz reorganized StarKist Foods into StarKist Seafood and Heinz Pet Products in order to strengthen seafood operations for a push abroad. In pet foods, Heinz, already a leading canned cat food producer, strengthened its dog food position through the acquisition of several regional brands.

In overseas markets, Heinz began to expand into the Third World. It became the first foreign investor in Zimbabwe when it acquired a controlling interest in Olivine Industries, Inc. in 1982. Heinz also formed joint ventures in Korea and China, and in 1987 the company bought a controlling interest in Win-Chance Foods of Thailand. Win-Chance produced baby food and milk products, and, of course, Heinz planned to add ketchup to the line.

1990s and Beyond: Slower Growth and Restructurings

OReillys strategies succeeded in the 1980s. Heinzs sales doubled from $2.9 billion in 1980 to $6.1 billion in 1990, and net profits quadrupled to $504 million during the period. The CEO had hoped to increase Heinzs annual revenues to $10 billion by 1994, then retire at the close of his contract in 1995. Recession and competition from private-label products in the early 1990s, however, thwarted that plan and held the companys sales to $7 billion in 1993 and 1994. As Heinzs growth slowed from its double-digit pace of the previous decade, the companys stock declined as well30 percent from 1992 to 1994in spite of continuously rising dividends. As a result, OReilly postponed his retirement and embarked on a reorganization.

Divestments (most significantly, of the Hubinger subsidiary) in 1993 totaled $700 million. Internal cost-cutting measures included workforce and management staff reductions as well as achievement of manufacturing efficiencies. In America, OReilly cut brand advertising by 40 percent from 1990 levels and resorted to discounting to reverse 1991s market share losses to private labels. He shifted the companys domestic sales focus to the high-margin foodservice sector, acquiring J.L. Foods from Borden Inc. in 1994 for $500 million.

Key Dates

1869:
Henry J. Heinz and L.C. Noble form partnership, Heinz, Noble & Company, to sell bottled horse-radish.
1875:
Business fails following the panic of 1873.
1876:
Business is reorganized in a new partnership, F&J Heinz; ketchup is added to the product line.
1888:
Henry Heinz gains financial control of F&J Heinz and changes its name to H.J. Heinz Company.
1892:
The slogan 57 Varieties is first used.
1900:
Company is incorporated.
1905:
The first foreign factory is opened in England.
1919:
Henry Heinz dies and is succeeded by his son, Howard.
1931:
Company branches into ready-to-eat soups and baby food.
1946:
Company goes public.
1963:
StarKist Foods is acquired.
1965:
Ore-Ida Foods, Inc. is acquired.
1978:
Weight Watchers International is acquired.
1979:
Anthony J.F. OReilly is named CEO.
1988:
StarKist Foods is reorganized into StarKist Seafood and Heinz Pet Products.
1994:
Company acquires the Budget Gourmet line of frozen meals.
1995:
The North American pet food businesses of Quaker Oats Company are acquired, including such brands as Kibblesn Bits, Gravy Train, and Ken-L Ration.
1997:
Company initiates a major restructuring.
1999:
An even larger, multiyear restructuring is launched; the Weight Watchers diet class business is divested.

But domestic operations were little more than half of Heinzs operations in the 1990s. OReilly pinned his expectations for future growth on overseas markets, targeting baby food, in particular, for expansion. Heinz controlled 29 percent of the global infant food market in 1994 and completed the acquisition of Farleys baby food of Great Britain (from the Boots Company PLC) and Glaxo Holdings plcs baby food interests in India that year. Previously unchallenged in international baby food sales, Heinz faced a serious threat from the U.S. leader, Gerber, which was acquired by Swiss pharmaceutical giant Sandoz Ltd. and groomed for international expansion that year as well. Heinz also buttressed its interests in the Asia/ Pacific region with the 1992 purchase of New Zealands Watties Limited for $300 million. OReilly characterized the new addition as a mini-Heinz in a 1994 address to the New York Society of Securities Analysts. Heinz marked its 125th year in business with flat sales that OReilly himself characterized as disappointing.

The next two years, however, seemed to indicate that OReillys restructuring efforts were paying off. Sales surged ahead by more than $1 billion in each of those years, culminating in 1996 revenues of $9.11 billion. Further acquisitions played a role as well. In December 1994 Heinz paid $200 million to Kraft General Foods, Inc. for the All American Gourmet Company, maker of the Budget Gourmet line of frozen meals. Heinz nearly doubled the size of its pet food operation through the March 1995 purchase of the North American pet food businesses of the Quaker Oats Company for $725 million. Thereby added to the companys existing brands, which included 9-Lives and Amore, were Kibblesn Bits, Cycle, Gravy Train, and Ken-L Ration, among others. In March 1996 Heinz acquired Boulder, Colorado-based Earths Best, Inc., a maker of organic baby food. In June of that year William R. Johnson was named president and COO, positioning him as the likely successor of OReilly. Johnson, who had joined Heinz in 1982, was previously head of the tuna and pet food divisions, where he was noted for slashing costs and squeezing out profits from mature brands.

In March 1997 Heinz launched a major restructuring that involved the closure or sale of 25 plants and a workforce reduction of 2,500, as well as a plan to divest the foodservice operations of the Ore-Ida unit. The latter came to fruition in June 1997 with the sale of said operations to McCain Foods Limited of New Brunswick, Canada, for about $500 million (Heinz retained the Ore-Ida retail business). In connection with the restructuring, Heinz took pretax charges of $647.2 million in fiscal 1997, resulting in a reduction in net income to $301.9 million (compared with $659.3 million for 1996). Heinz also continued to make selective acquisitions, with one of the more important ones being the June 1997 purchase of John West Foods Limited from Unilever. John West was the leading brand of canned tuna and fish in the firms home country, the United Kingdom. In May 1998 Johnson was named president and CEO of Heinz, with OReilly becoming nonexecutive chairman.

Restructuring efforts continued into the early 21st century. In late 1998 the company took a $150 million charge to combine the operations of its Ore-Ida Foods and Weight Watchers Gourmet Foods units into a new unit called Heinz Frozen Food Company. Early the following year, Heinz announced its largest restructuring yet. In the first phase of a projected four-year program, the company planned to close 20 of its remaining 100 factories, reduce the workforce by an additional 4,000, and divest the diet class business of Weight Watchers. A key component of the program was the realigning of the company along global category lines, a major shift from the previous geographic arrangement. The six main categories, generating 80 percent of global revenues, were ketchup, tuna, frozen foods, infant foods, pet foods, and convenience meals. Heinz also planned to concentrate on the six countries that generated 80 percent of the companys revenues: the United States, the United Kingdom, Italy, Canada, Australia, and New Zealand. While the company hoped eventually to reap $200 million in annual savings from these efforts, it also planned to spend an additional $100 million during fiscal 2000 to increase its spending on marketing its flagship brands. Pretax restructuring charges for fiscal 1999 totaled $552.8 million.

In late 1999 Heinz completed the sale of the Weight Watchers diet class unit to Artal Luxembourg, S.A., a European venture capital firm, for about $735 million. Around this same time, with pressure for global consolidation among food companies growing, Heinz entered into merger talks with Bestfoods, maker of soups, sauces, bouillons, dressings, and other products. The talks collapsed, however, and Unilever soon stepped in to acquire Bestfoods. In the wake of this failed merger, Heinz continued its acquisitive ways. The company gained a foothold in the fast-growing natural and organic foods sector through the purchase of a 19.5 percent stake in Hain Food Group Inc. for $100 million. The Hain product line included Health Valley cereal and other products, Terra Chip snacks, and Westsoy soy beverages. Through the alliance with Heinz, Hain also acquired the Earths Best line of organic baby foods. In May 2000 Hain acquired Celestial Seasonings, best known for its herbal teas, in a stock swap, leading Heinz to invest an additional $80 million in Hain to keep its stake at 19.5 percent. Other developments included the acquisition of the frozen food business of U.K.-based United Biscuits PLC for $317 million. Sales for the unit in 1998 were $360 million, with the product line including frozen desserts, pizzas, potato products, and vegetarian/meat-free items. In February 2000 Heinz announced that it had signed an agreement to acquire Milnot Holding Corporation, maker of the Beech-Nut brand of baby food, for $185 million. Beech-Nut was the number two baby food brand in the United States, with 13 percent of the market, while Heinz was number three with 11 percent. The commanding leader was Gerber, with 73 percent. Despite what Heinz officials called Gerbers virtual monopoly position, the Federal Trade Commission moved to block the deal in July 2000 under antitrust laws. In June 2000 Heinz began selling StarKist tuna in vacuum-sealed pouches, claiming that the tuna was fresher-tasting and firmer than the traditional canned variety.

The restructuring efforts launched under Johnsons leadership appeared to be paying off for Heinz. Although overall revenues remained flatthe $9.41 billion for 2000 was only marginally larger than the 1996 total of $9.11 billionprofits were growing. For fiscal 2000, a pretax restructuring charge of $392.7 million was more than offset by a pretax gain of $464.6 million on the sale of the Weight Watchers unit, resulting in overall net income for the year of $890.6 million. The companys future remained uncertain, despite such improvements, as speculation about further food industry consolidation remained rife. Should Heinz not join in the merger wave, Johnson was prepared to pick up some of the brands that were certain to be discarded following the mergers of other food companies.

Principal Subsidiaries

Alimentos Heinz, C.A. (Venezuela); Alimentos Pilar S.A. (Argentina); AIAL S.r.l. (Arimpex Industrie Alimentari S.r.l.) (Italy); The All American Gourmet Company; Boulder, Inc.; Ets. Paul Paulet (France); Heinz Europe Ltd. (U.K.); Heinz Frozen Food Company; Heinz Iberica S.A. (Spain); Heinz India Private Ltd.; Heinz Italia S.r.l. (Italy); Heinz Japan Ltd.; Heinz Polska Sp. Z.o.o. (Poland); Heinz South Africa (Pty) Limited; HeinzUFE Ltd. (China); Heinz-Wattie Holdings Ltd. (New Zealand); Heinz Win Chance Ltd. (Thailand); H.J. Heinz (Botswana Proprietary) Ltd.; H.J. Heinz B.V. (Netherlands); H.J. Heinz Company Australia Limited; H.J. Heinz Company of Canada Ltd.; H.J. Heinz Company Limited (U.K.); H.J. Heinz Credit Company; H.J. Heinz European Frozen & Chilled Foods, Ltd. (Ireland); Indian Ocean Tuna Ltd. (Seychelles); Industrias de Alimentacao, Lda. (Portugal); Mareblu S.r.l. (Italy); Olivine Industries (Private) Limited (Zimbabwe); Portion Pac, Inc.; Pudliszki S.A. (Poland); PT Heinz ABC Indonesia; Seoul-Heinz Ltd. (South Korea); StarKist Foods, Inc.; Thompson & Hills Limited (New Zealand).

Principal Competitors

Aurora Foods Inc.; Bestfoods; Borden, Inc.; Campbell Soup Company; Chicken of the Sea International; Colgate-Palmolive Company; ConAgra, Inc.; Groupe Danone; Del Monte Foods Company; Hibernia Foods plc; Hormel Foods Corporation; International Home Foods, Inc.; Jenny Craig; Kraft Foods, Inc.; Mars, Inc.; Mcllhenny Company; Nabisco Holdings Corp.; Nestle S.A.; Novartis AG; Pillsbury Company; The Procter & Gamble Company; Ralston Purina Company; Sara Lee Corporation; Slim-Fast Foods Company; Tyson Foods, Inc.; Vlasic Foods International Inc.

Further Reading

Alberts, Robert C, The Good Provider: H.J. Heinz and His 57 Varieties, Boston: Houghton Mifflin, 1973.

Alexander, Keith L., and Stephen Baker, The New Life of OReilly, Business Week, June 13, 1994, pp. 6466.

Baker, Stephen, The Odd Couple at Heinz, Business Week, November 4, 1996, p. 176.

Berner, Robert, Ketchuping Up, or a Classic Condiment Returns As Top Dog, Wall Street Journal, November 5, 1999, p. A1.

Berner, Robert, and Kevin Helliker, Heinzs Worry: 4,000 Products, Only One Star Winner, Wall Street Journal, September 17, 1999, p. B1.

Byrne, John A., The CEO and the Board, Business Week, September 15, 1997, pp. 106 +.

Campanella, Frank W., Tomatoes, and More: H.J. Heinz, with $4 Billion in Yearly Sales, Lifts Profits in Stateside Business, Barrons, May 20, 1985, pp. 73 +.

Dienstag, Eleanor Foa, In Good Company: 125 Years at the Heinz. Table, 18691994, New York: Warner, 1994.

Eig, Jonathan, Heinzs CEO Unveils Plans to Stimulate Growth, Wall Street Journal, June 16, 2000, p. B6.

Fallon, Ivan, The Luck of OReilly: A Biography of Tony OReilly, New York: Warner, 1994.

Hannon, Kerry, The King of Ketchup, Forbes, March 21, 1988, pp. 58 +.

Heinz: Lucky or Good?, Financial World, February 15, 1981, p. 38.

Machan, Dyan, Tony Who?, Forbes, June 15, 1998, pp. 98102.

Mallory, Maria, Heinzs New Recipe: Take a Dollop of Dollars, Business Week, September 30, 1991, pp. 86 +.

Miles, Gregory L., Heinz Aint Broke, But Its Doing a Lot of Fixing, Business Week, December 11, 1989, pp. 84 +.

Murray, Matt, Heinz Unwraps Details of Restructuring, Wall Street Journal, March 17, 1997, p. A3.

, H.J. Heinz Chairmans Growth Prediction Comes True: Acquisitions and Volume Gains Boost Sales 12 Percent, But Weight Watchers Sags, Wall Street Journal, April 10, 1996, p. B4.

Murray, Matt, and Rekha Balu, Corporate Icons Are a Hard Act to Follow, As Successors Discover: Heinz Chief Copes with Style and Expectations Born of a Very Different Era, Wall Street Journal, April 29, 1999, pp. A1 +.

Saporito, Bill, Heinz Pushes to Be the Low-Cost Producer, Fortune, June 24, 1985, pp. 44+.

Siklos, Richard, I Want More of Everything, Business Week, December 20, 1999, pp. 15862.

Symonds, William C., Andrew B. Wilson, and Marc Frons, Tony OReilly of Heinz: His Day Has 57 Varieties, Business Week, December 17, 1984, pp. 72 +.

Troxell, Thomas N., Jr., Spicy Results: Heinz Earnings Are Likely to Set Another All-Time Peak, Barrens, July 13, 1981, pp. 37 +.

April Dougal Gasbarre

updated by David E. Salamie

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H.J. Heinz Company

H.J. Heinz Company

U.S. Steel Building
600 Grant Street
Pittsburgh, Pennsylvania 15219
U.S.A.
(412) 456-5700

Public Company
Incorporated:
1900
Employees: 36,200
Sales: $5.8 billion (1989)
Stock Index: New York Pacific

To most people, ketchup and Heinz go together like pork and beansanother Heinz product. Ketchup is the most ubiquitous condiment in America, and the H.J. Heinz Company has been bottling it for more than a century. But Heinz is far more than ketchup. It manufactures thousands of food products in plants on six continents. The products of its British subsidiary are so well known in that country that many Britons regard Heinz as an English company. In the United States, Heinz ranks number-one in ketchup, vinegar, relish, tuna, and frozen-potato sales and is a major presence in the baby food, canned-bean, and petfood markets.

This vast food empire sprouted from a Pennsylvania garden when eight-year-old Henry John Heinz began selling produce from his familys plot to nearby neighbors. At ten he used a wheelbarrow, and by the time he was 16 Heinz had several employees and was making three deliveries a week to Pittsburgh grocers. Born in 1844 to German immigrant parents, Heinz was the oldest of nine children. He grew up in Sharpsburg, Pennsylvania, near Pittsburgh, and after graduating from Duffs Business College became the bookkeeper of his fathers brickyard. At age 21 he became a partner. (Heinz retained an interest in bricks all his lifehe personally supervised the buying and laying of brick for his companys buildings, and his office desk was often piled with brick samples acquired on his travels.)

In 1869, at the age of 25, Heinz and L. C. Noble formed a partnership called Heinz, Noble & Company in Sharpsburg to sell bottled horseradish. Horseradish was soon followed by sauerkraut, vinegar, and pickles.

Following the panic of 1873 and subsequent economic chaos, the business failed in 1875, but Heinz quickly regrouped, and the following year started afresh with the determination to repay his creditors. With his brother John and cousin Frederick as partners and himself as manager, Heinz formed the partnership of F.&J. Heinz to manufacture condiments, pickles, and other prepared food. The business prospered, and Heinz made good on his obligations. In 1888 the partnership was reorganized as the H.J. Heinz Company. Soon Heinz was known throughout the country as the pickle king.

Small, energetic, and ambitious, the pickle king was a cheerful man with courtly, old-fashioned manners. Heinz exuded enthusiasm, whether for work, family, travel, religious activities, or good horses, and had a passion for involving others in his interests. According to his biographer, Robert C. Alberts, Heinz once installed an 800-pound, 14½-foot, 150-year-old live alligator in a glass tank atop one of his factory buildings so that his employees might enjoy the sight as much as he had in Florida.

In the late 1800s, the typical American diet was bland and monotonous. The Heinz Company set out to spice it up with a multitude of products. The phrase 57 Varieties was coined in 1892. Tomato soup and beans in tomato sauce were quickly added to the product line. Even as 57 Varieties became a household slogan, the company already had more than 60 products. At the Worlds Columbian Exposition in Chicago in 1893, Heinz had the largest exhibit of any American food company.

By 1900, the H.J. Heinz Company occupied a major niche in American business. It was first in the production of ketchup, pickles, mustard, and vinegar and fourth in the packing of olives. Overall the company made more than 200 products. Still, Heinz liked the lilt of his original slogan and in 1900 put it up in lights in New York Citys first large electric sign, at Fifth Avenue and 23rd Street. Twelve hundred lights illuminated a 40-foot-long green pickle and its advertising message.

Heinzs clever merchandising won him a reputation as an advertising genius, but he did not allow his ambitions to overcome his religious convictions. During his lifetime, in deference to the Sabbath, Heinz advertisements never ran on Sundays.

Heinz Company factories were considered models in the industry, both in their facilities and their treatment of workers. The company received many awards, and Harry W. Sherman, grand secretary of the National Brotherhood of Electrical Workers of America, remarked after visiting a Heinz plant that it was a utopia for working men.

Henry Heinz went to England in 1886 carrying a sample case, and came home with orders for seven products. By 1905 the company had opened its first factory in England. In 1906 the Pure Food and Drug Act was vigorously opposed by most food manufacturers, but Heinz, who understood the importance of consumer confidence in the purity of processed foods, was all for it, and even sent his son to Washington, D.C. to campaign for its passage.

By 1919, when Henry Heinz died at age 75, the companys 6,500 employees and 25 branch factories were processing the harvest of some 100,000 acres.

Heinz was succeeded as president of the company by his son, Howard, who began his career with H.J. Heinz as advertising manager in 1905 and became sales manager in 1907. Howard Heinz remained president until his death in 1941. In 1939 Fortune estimated total sales for the still privately owned company at $105 million.

By the time Howards son H. J. Heinz II (known as Jack) became president of the company at his fathers death, he had worked in all the companys divisions, from the canning factories to the administrative offices. He chose to launch his career as a pickle-salter for $1 a day in the Plymouth, Indiana plant. Later he became a cleanup man, then a salesman for H.J. Heinz Company, Ltd. in England. In 1935, fresh out of Cambridge University, Jack Heinz was sent by his father to establish a plant in Australia. Heinz-Australia later became that countrys biggest food-processing plant.

From 1941, when Jack took over, to 1946, H.J. Heinzs sales nearly doubled. That year Heinz made its first public stock offering and revealed that its net profit was over $4 million. Foreign sales of baked beans and ketchup, particularly in England, contributed substantially to the companys success. During World War II, Jack Heinz was active in food relief and personally made four wartime trips to England to examine food problems there. The company insignia went to war too; the 57th Squadron of the 446th Army Air Force chose for its emblem a winged pickle marked 57.

Jack Heinzs tenure was marked by expansion of the company, both internationally and at home. Subsidiaries were launched in the Netherlands, Venezuela, Japan, Italy, and Portugal. In 1960 and 1961, the H.J. Heinz Company acquired the assets of Reymer & Bros., Inc. and Hachmeister, Inc. Star-Kist Foods was acquired in 1963 and Ore-Ida Foods, Inc. in 1965.

During the 25 years that H. J. Heinz II was chief executive, the food industry changed greatly. The era was marked by the rise of supermarket chains and the development of new distribution and marketing systems. In 1966, H. J. Heinz II stepped down as president and CEO, though he retained his position as chairman of the board until his death in February, 1987.

In 1969, R. Burt Gookin, then CEO of Heinz, made Anthony J. F. OReilly president of the companys profitable British subsidiary. OReilly, who was managing director of Irish Sugar Company at the time, shook up the company by working 14-hour days and stressing a policy of winning through effort. OReilly is an uncommon executivehe has been, among other things, a world-class rugby player.

In 1973 OReilly became president of the parent company, and in 1976, CEO. Shortly after the death of H. J. Heinz II, he was also made chairman. From the beginning, OReilly stressed the importance of strong financial results. Some sources blamed a pressure-filled atmosphere for the events that led to the revelation in 1979 that managers of several subsidiaries had been misstating quarterly earnings since 1971 to meet their target goals and impress top management.

Overall, OReillys achievements have been impressive, however. The timely acquisition of Hubinger Company in 1975 put Heinz in a position to cash in on the demand for high-fructose corn syrup when the price of sugar soared. In 1978, OReilly acquired Weight Watchers International just ahead of the fitness craze that swept America.

At the same time that the company was branching out into new products, OReilly was cutting back on traditional businesses. By 1980 Heinz had increased volume but halved its number of plants from 14 to seven and reduced employment by 18%. OReilly also gave up the battle with Campbell Soup Company for the retail soup market. And when generic products hit the supermarket shelves, Heinz countered not by producing for the generics industry but by nickel and diming it, as OReilly said. For example, Heinz switched to thinner glass bottles that cut the cost not only of packaging but also of transportation. When imports began to undersell StarKist tuna, StarKist decreased the size of the tuna can, just as Hershey had downsized its chocolate bar when cocoa prices soared. This ploy netted StarKist $7 million in savings. Other nickel-and-dime cost savings have come from eliminating back labels from bottles, reclaiming heat, and reusing water.

OReillys strategy is to pare costs to the bone and to use the savings to beef up marketing, primarily advertising, in an effort to increase market share. At the same time, Heinz is pursuing a cautious acquisition policy. By the mid-1980s, the company had spent $416 million to acquire more than 20 companies. Return on equity increased from 9% in 1972 to 23.3% in 1986.

OReillys cost-cutting war has included a threat to go to contract manufacturers rather than his own plants if the same products could be purchased elsewhere for less. Such tough talk elicited substantial concessions from labor unions in 1986. OReillys hard-nosed, bottom-line strategies won Heinz recognition as one of the countrys five best-managed companies in 1986.

In 1988, Heinz bid $200 million for Bumble Bee Seafoods, the third-largest tuna company in the country. The purchase would have given Heinz, whose StarKist brand already ranked number one, more than 50% of the domestic tuna market. Accordingly, the Justice Department prevented the purchase on antitrust grounds. Also in 1988, Heinz reorganized StarKist Foods into StarKist Seafood and Heinz Pet Products in order to strengthen seafood operations for a push abroad. In pet foods, Heinz, already a leading canned cat food producer, strengthened its dog food position through the acquisition of several regional brands.

In overseas markets, Heinz has also begun to expand into the Third World. It became the first foreign investor in Zimbabwe when it acquired a controlling interest in Olivine Industries, Inc. in 1982. Heinz also has joint ventures in Korea and China, and in 1987 the company bought a controlling interest in Win-Chance Foods of Thailand. Win-Chance produces baby food and milk products; Heinz plans to addwhat else?ketchup.

Heinz has already demonstrated a willingness to run lean and to shed unprofitable enterprises. With the rising number of two-income families, consumer demand for convenience food is expected to continue to increase. At the same time, shoppers are demanding quality and good taste. Heinz is well positioned to be thereall around the worldto give them what they want.

Principal Subsidiaries:

StarKist Seafood Co.; StarKist Samoa, Inc.; Heinz Pet Products Co.; Hubinger Co.; Caribbean Restaurants, Inc. (80%); Cardio-Fitness Corp.; H.J. Heinz Co. of Canada Ltd.; H.J. Heinz Co. Ltd. (U.K.); W. Darlington & Sons, Ltd. (U.K.); Mastar, Inc.; H.J. Heinz Co. Australia Ltd.; California Home Brands Holding, Inc.; H.J. Heinz Co. Belgium S.A.; H.J. Heinz GmbH (West Germany); H.J. Heinz S.A.R.L. (France); Johma Holding International B.V. (Netherlands); S.A.H.J. Heinz Central Europe N.V. (Belgium); Liven International S.p.A. (Italy); Marie Elizabeth-Productos Alimentares S.A. (Portugal); Pro Pastries, Inc. (Canada); Pro Bakers Ltd.; Scaramellini S.p.A. (Italy); S. Orlando S.A. (Spain); Frutsi Concentrate Co. (Puerto Rico) (80%); Montrose Canned Foods Ltd. (U.K.); Heinz Japan Ltd.; Alimentos Heinz C.A. (Venezuela); Industrias de Alimentaceo Idal, Ltda. (Portugal); Ore-Ida Foods, Inc.; Epicurean Foods & Beverages Pty. Ltd. (Australia); Galco Food Products Ltd. (Canada); Somycel, S.A. (France) (50%); H.J. Heinz B.V. (The Netherlands); Gagliardi Brothers, Inc.; Plasmon Dietetici Alimentari S.p.A. (Italy); Kgalagardi Soap Industries Ltd. (Botswana); Foodways National, Inc.; Weight Watchers International; Nadler-Werke GmbH (West Germany); Ets. Paul Paulet (France) (80%); Fratelli Sperlari S.p.A. (Italy) (80%); Olivine Industries (Private) Ltd. (Zimbabwe) (51%); Heinz-UFE Ltd. (Republic of China) (60%); Seoul-Heinz Ltd. (57%).

Further Reading:

Alberts, Robert C. The Good Provider, Boston, Houghton Mifflin, 1973.

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H.J. Heinz Company

H.J. HEINZ COMPANY


The Heinz ketchup bottle and the company slogan, "57 Varieties," are familiar to any American who eats in a restaurant or shops for food. The H.J. Heinz Company today manufactures thousands of food products in plants across the world and remains one of the world's leading food companies. Some of the best-known Heinz brandssuch as Skippy peanut butter, StarKist tuna, and Ore-Ida Tater Totsdo not carry the Heinz name. Heinz's divisions include food service, infant foods, ketchup and condiments, pet foods, tuna, and weight-control products.

The company's founder, Henry John Heinz, grew up not far from Pittsburgh, Pennsylvania. After working as a bookkeeper in his father's brickyard he and a partner, L.C. Noble, began to sell bottled horseradish, sauerkraut, vinegar, and pickles, naming their business Heinz, Noble & Company. This enterprise ultimately failed after the Panic of 1873, but Heinz and some of his relatives later organized a new business, which became known as the H.J. Heinz Company in 1888. The Pittsburgh business prospered and the nation came to know Heinz as the famed "pickle king." He also produced jams, jellies, and condiments, always packed in clean conditions and made from the freshest ingredients.

Heinz promoted his products skillfully and with great zeal. Noting that the American diet at this time was quite bland, he coined the "57 Varieties" slogan to spark an interest in changing people's eating habits. The slogan logo appeared everywherein newspapers and magazines and on streetcars, billboards, and even large concrete figures along highways. At the 1893 World's Fair in Chicago he introduced "pickle pins," a fad which soon swept the country. In 1900 he put up the first electric advertising sign, representing a 40-foot pickle, in New York City. A religious man, Heinz never allowed such advertisements to appear on Sundays. His plants were known for their humane treatment of workers and there was never a strike against the company while Heinz was president.

By 1905 Heinz had opened a factory in Great Britain, beginning what would become a global operation. In 1906, unlike many other American food manufacturers, he supported the Pure Food and Drug Act, which regulated the production of processed foods to make them safer to eat. By the time of Heinz's death in 1919, the H.J. Heinz Company employed 6,500 people and ran 25 branch factories. He was succeeded by his son, Howard, who remained president until his death in 1941. Heinz continued to produce its traditional condiment lines, though in 1931 it added a baby food division, which, along with canned soups, helped keep the company afloat during the Great Depression (19291939). By 1937 the company's business had doubled.

H.J. Heinz II, known as Jack, took over as president after his father's death, leading the company in once again doubling its sales over the next five years. Jack Heinz was active in food relief efforts during World War II (19391945); during this time, many more women took jobs in Heinz plants as men went to war. Sales abroad increased substantially in the 1940s, ketchup and baked beans were particularly popular in England. Heinz went public after the war and continued to expand during the 1950s and 1960s, opening plants in the Netherlands, Venezuela, Japan, Italy, and Portugal. It also bought Reyumer & Bros., Inc., Hachmeister, Inc., StarKist Foods, and Ore-Ida Foods. Throughout the latter half of the twentieth century, Heinz weathered many changes in the food industry, as distributing and marketing systems adapted themselves to the new supermarket chains.

R. Burt Gookin succeeded Jack Heinz as CEO, and J.F. O'Reilly, president of the company's British subsidiary, took over as president of the parent company in 1973. He changed the company's emphasis by cutting back on traditional business while introducing new products. During O'Reilly's tenure Heinz acquired Weight Watchers International and several other companies, and ceased trying to compete in the soup market with the Campbell Soup Company. O'Reilly, who became CEO in 1979, also instituted a cost-cutting policy, downsizing some product packages and pressuring plants to be more productive. Although the Justice Department prohibited Heinz's bid to purchase Bumble Bee Seafoods in 1988, the company reorganized StarKist Foods and Heinz Pet Products in an effort to increase sales abroad.

Heinz began to expand into Third World countries and also reached into China, Korea, and Thailand. These new strategies succeeded, doubling Heinz's sales from $2.9 billion in 1980 to $6.1 billion in 1990. During these years Heinz was investing almost as much overseas as in the domestic economy. It controlled 29 percent of the worldwide infant food market, challenged only by the U.S. leader, Gerber Foods. Heinz also had begun investing in the Asia-Pacific market with the acquisition of Wattie's Limited in New Zealand. A recession in the early 1990s, however, combined with increased competition caused a slowdown which decreased the company's stock value. A number of divestments, staff reductions, and decreases in advertising outlays helped to minimize the losses in the domestic market.

Despite continuing market challenges O'Reilly insisted that Heinz would prosper if it remembered its dedication to niche marketscondiments, tuna, frozen potatoes, and weight-control productsand to what he called "constant rebirth." The company acquired the pet food division of Quaker Oats Company in 1995 and increased its market share of the tuna business to 46 percent by 1997. O'Reilly instituted a major restructuring plan called Project Millennia, which would eliminate 25 plants, cut 2,500 jobs (6 percent of the total workforce of 43,000), and take a charge against earnings of $650 million. O'Reilly said that the move would make Heinz, along with Campbell Soup Company and Sara Lee Corporation, one of the three most important food companies in the world. Indeed, the company came close to its 1997 goal of $9.5 billion in sales, pulling in actual sales of $9.3 billion. Although O'Reilly was criticized by some industry observers for raising product prices and reducing advertising support for some of the Heinz brands, he had helped the company to grow from $l billion in net worth in 1979 to nearly $20 billion in 1998.

In 1997 Heinz divested itself of the Ore-Ida food service operations business and scaled down its Weight Watchers division. Under the leadership of William Johnson, the company president who succeeded O'Reilly as chairman, Heinz considerably enhanced its advertising and marketing efforts. After a drop in 1998 sales, in February 1999 the company announced another cost-cutting plan that would eliminate 4,000 jobs and close an additional 20 factories.

See also: Campbell Soup Co.

FURTHER READING

Alberts, Robert C. The Good Provider. Boston: Houghton Mifflin, 1973.

Alexander, Keith L., and Baker, Stephen. "The New Life of O'Reilly." Business Week, June 13, 1994.

A Golden Day, A Memorial and a Celebration, 1869 1924. Pittsburgh: H.J. Heinz Company, 1925.

"Heinz to Close or Sell 25 Plants, Eliminate 2,500 Jobs." Minneapolis Star Tribune, March 15, 1997.

"H.J. Heinz Company." 1998 Quarterly Report. Pittsburgh: H.J. Heinz Company, 1998.

In Good Company: 125 Years at the Heinz Table. Warner Books, 1994.

Murray, Matt. "Era Is Nearing an End As Heinz's Johnson Assumes More Control." Wall Street Journal, March 10, 1997.

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