Heinz to Review Product Packaging in Bid to Cut Costs

11 July 2006

Across the world companies are feeling bottom-line pain triggered by rising fuel costs. Not least US packaged foods giant H J Heinz, hit by the double-whammy of spiralling oil and raw materials costs. Each one dollar rise in the price of a barrel of oil hikes the company's costs by upward of $5 million (€3.9m; £2.7m).

Moreover, the manufacturing of Heinz products is heavily dependent on sugar and corn - commodities also used in the production of oil-alternative ethanol, the costs of which have grown intandem with oil.

In a bid to compensate for the stratospheric increase in oil-associated overheads, Heinz Europe is reviewing its packaging methodology.

Options include using thinner product packaging, plus standardisation of such items as the plastic caps on 'top down' bottles of Heinz Tomato Ketchup and sibling brand HP Sauce, acquired last year from Groupe Danone of France.

Says Heinz Europe president/ceo Scott O'Hara, currently wrestling a tag-team of declining sales and soaring costs: "We have to make our branded goods better." The company must identify more ways of getting more people to consume more baked beans and soup - its core products - more often.

In the UK, Heinz is attempting to revive the frozen food category, increasingly losing ground to chilled foods. O'Hara is planning a media campaign to stress the health benefits of frozen foods.

He regards so-called 'functional foods' - foods that claim or imply health benefits - less as a passing fad than a long-term trend. "I think they are important and will be even more important as we go forward," he said.

One such 'functional food' is currently on the launch pad in the UK, canned multigrain pasta. Heinz is also set to launch a range of new products under its Weight Watchers brand, including a 'low GI' [glycaemic index] range. Such foods slow down the absorption of carbohydrates, helping to control appetite.

O'Hara, who was handed the Augean task of reversing Heinz' European fortunes in January, hails from Gillette where he steered its integration into Procter & Gamble.

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