Heinz to Up Adspend by $50m in Move to Outflank Peltz

14 August 2006

William Johnson, wearer of H J Heinz' triple crown (president/chairman/ceo), has again cranked up his Victrola and promised to increase the company's adspend. This time by an eye-watering $50 million (€39.17m; £26.47m).

Such promises are something of an annual joke on Wall Street, according to Advertising Age. Johnson, it seems, is given to making - and breaking - such vows on a twelve-monthly basis.

He told AdAge he plans to hike the company's media spend by nearly $50m this fiscal year, pouring the cash into the Heinz, Ore-Ida and Smart Ones brands. A move which (if it happens) would nearly quadruple last year's measured media spend of $14m.

At the same time, however, Johnson implies that such profligate spending is unnecessary. "It's not the amount of money you spend; it's the efficiency and effectiveness of what that money produces," quoth the Heinz honcho.

He cited Heinz' success in turning around its North American business over the last four years, a period marked by extremely limited - or to use his words, "impactful and efficacious" - spending.

"Interestingly enough, where we've suffered the least top-line growth is where we've spent the most [advertising] money, which is in Europe," Johnson said

Much of this hype is directed at dissident shareholder Nelson Peltz and his acolytes who seek five seats on the Heinz board - an issue opposed by Johnson that will be voted upon at the beans barony's annual meeting on August 16 [WAMN: 28-Jul-06].

Whether or not the adspend razzamatazz impresses the Peltz faction is unknown; but it has certainly given pause for thought to Neuberger Berman's veteran analyst Bill Leach.

"For the thirty years I've been doing this [job], every year [Heinz] were 'raising ad spending,' and every year they didn't. They always cut it to make the numbers."

Pausing for effect, Leach then pulled out the recent twelve-week domestic results for Heinz showing volume up 6.7%. "Maybe they have it right," he opined.

Both sides' preparations for this week's annual meeting resemble a trailer for Gunfight at the OK Corral, the chosen battlefield this time round being the pages of the financial and advertising press.

Data sourced from AdAge (USA); additional content by WARC staff