Financial Statements Analysis for Heinz

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ABOUT THE HEINZ COMPANY

The Heinz Company was incorporated in Pennsylvania on July 27, 1900. It manufactures and markets food products throughout the world. The company is mainly organized into the following reportable segments:

* North America Consumer Product: The segment includes the manufacturing and selling of ketchup, condiments, snacks, and other products into the grocery channels in the U.S. as well as the Canadian business.

* Europe: This segment includes products across all of the company’s categories throughout Europe.

* Asia Pacific: Includes the company’s operations in Australia, New Zealand, India, Japan, China, South Korea, Indonesia and Singapore across all of the company’s categories.

* U.S. Food Service: This segment includes the manufacturing and selling of branded and customized products to commercial and non-commercial food outlets in the U.S.

* Rest of the World: The segment includes the company’s operations in Africa, Latin America and the Middle East.

CHART I: Sales evolution by geography

As can be seen in Chart I, the company has maintained a fairly stable sales composition. However, it can be seen that international markets, particularly the Asia/ Pacific region, fuel the company’s sales growth. Developed markets like the U.S and U.K, though remain particularly important do not provide HNZ as well as other players in the packaged food sector the growth that emerging markets are currently providing. The U.S. Food Service segment has been experiencing consistent sales declines as restaurant traffic continues to weaken.

Approximately 70% of the company’s total sales are generated by the top 15 brands, which typically have the highest or second highest market share in their respective product category. The company’s top fifteen brands include: Heinz, Pudliszki, Complan, T.G.I Friday’s, Classico, Watties, Golden Circle, Weight Watchers, ABC, Bagel Bites, Delimex, Plasmon, Smart ones, Honic, and Ore-Ida.

CHART II: Sales evolution by product line

The company’s two most important product lines are ketchup and sauces and meals and snacks; the ketchup and sauces business lines has been growing modestly as a result of the growth in Heinz Ketchup, which posted organic sales growth of 3.8% in FY11. Heinz ketchup continues to maintain a number one share in six of the world’s top ten ketchup markets. The meals and snacks business line actually dragged sales growth in FY11. This segment includes products such as frozen dessert, and TGIF frozen meals. The category softness can be attributed to volume declines as a result of price increases taken to maintain margins. Combined, the ketchup and sauces and meals and snacks segments make up approximately 83% of total sales.

The infant nutrition business line represents approximately 11% of total sales, and has posted modest sales growth during the last two fiscal periods. This segment has been benefited by increases in nutritional supplements and beverages in emerging markets such as Indonesia and infant feeding products in China. Performance on developed markets has been affected by volume declines resulting from price increases taken in previous years.

As most companies in the packaged food industry, HNZ is increasing its presence on the healthy product categories as consumers are increasingly paying more attention to these factors. HNZ has released a line of organic products, healthy beverages, and weight-control meals and snacks. The company expects that a focus on healthy products will complement its strategy of expanding its core portfolio and accelerating growth in emerging markets.

COMPANY’S RECENT FINANCIAL PERFORMANCE

INCOME STATEMENT ANALYSIS:

The Heinz Company has shown consistent sales growth throughout the last three fiscal periods. This performance can be attributed to the company’s strategy of accelerating growth on Emerging Markets, and increasing productivity...
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