H.J. Heinz CompanyHNZ

Morningstar Rating

Stock Research and Analysis

by Erin Swanson, CFA

Elevated commodity costs, challenging economic conditions, and erratic foreign exchange rates have been presenting head winds for packaged food firms, and Heinz is no exception. That said, we believe that the firm's global scale, as well as the brand Read more

Bulls Say

Heinz is the most global of the U.S.-based packaged food firms, operating with a strong international presence that accounts for about 60% of its consolidated sales annually.

The Heinz brand, which is placed on everything from ketchup to baked beans to baby food, is a $4 billion global powerhouse, accounting for about 40% of the firm's total revenue.

Enhancing shareholders' return is a priority for Heinz, as the firm targets returning 60% of its annual earnings to shareholders.

Heinz's top 15 brands (each of which results in more than $100 million in annual sales) drive about 70% of its revenue every year.

We are encouraged that Heinz intends to reduce the complexity of its offerings (by eliminating nearly 20% of its stock-keeping units) and to drive the product innovation of its core brands within its struggling food-service segment. Read more

Bears Say

Price increases taken to offset rising input costs for many of Heinz's products could lead to volume shortfalls as consumers seek to rein in their spending by trading down to lower-priced private-label offerings.

With 60% of its sales and the majority of its net income derived from its international operations, Heinz's results could be hurt by adverse exchange rate movements.

Heinz is far more exposed to food-service sales than its peers, as it derives around 15% of its sales from this channel versus less than 10% for the domestic packaged food industry as a whole.

Although some input costs have retracted from unprecedented highs, Heinz still expects 7%-8% commodity cost inflation in the current fiscal year, mainly driven by increasing costs for tomatoes, potatoes, tin plate, wheat, and beans. Read more

Strategy

For years, Heinz committed itself to reshaping its portfolio--disposing of less profitable assets and acquiring core products in growing markets. Now, Heinz is focused on enhancing its core portfolio Read more

Management

We welcome the extensive knowledge and experience that William Johnson (chairman, CEO, and president) has garnered after spending more than 25 years at Heinz. The stock-ownership requirements for senior management (6 times base salary for the CEO and Read more

Profile

Since its founding more than 100 years ago, Heinz has grown into a globally diversified manufacturer and marketer of packaged foods. Its products include ketchup, condiments, Read more

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