Heinz Plans Draconian Cuts in European Trade Promotions

29 May 2006

Beleaguered foods giant H J Heinz, currently under attack by interventionist shareholder Nelson Peltz [WAMN: 08-Mar-06], will this week announce major cutbacks to its European trade incentives programme.

The cuts will seek "projected savings right across the business," according to a company statement. Additionally, says Heinz, "we will be announcing a new global procurement council to leverage our business units around the world."

In the wake of a major reshuffle of senior management, Heinz is performing well in the US and elsewhere in the world. But its European fortunes fail to match that progress, despite the recent sale of its John West seafoods brand range. Its Linda McCartney UK vegetarian meals business is also in the final throes of disposal.

The platform for detailing the European marketing cutbacks will be an analysts' meeting on Thursday. At that event, says Heinz cfo Art Winkleblack, the company will spell out "aggressive but realistic earnings and savings targets."

According to Winkleblack: "We feel very good about the progress we've made in the US and rest of world and the primary opportunity to redeploy trade spending towards marketing is in Europe now. That's the highest spending we have in the company and we're addressing that aggressively."

The move follows proposals from Peltz that Heinz cuts such trade spending by $300 million (€235.5m; £161.6m) globally and divert the funds to consumer marketing and product innovation. However, Heinz deemed this "an unrealistic figure that, if implemented, would cripple the company".

Data sourced from Financial Times Online; additional content by WARC staff