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Introduction and Background
Started in 1869 by Henry John Heinz, the company is the most global of the food companies in U.S (H.J. Heinz & Co., 2012: n.d). The company is famous for its iconic brands serving delicious, nutrition and convenience foods in families across five continents and 200 countries across the world (H.J. Heinz & Co., 2012: n.d). The company claims to sell 650 million bottles of Heinz Ketchup across the world and has 15 power brands constituting 70% of the global sales (H.J. Heinz & Co., 2012: n.d).
The situation pertains to 2001 when the company suffered a loss of $171 million in the fourth quarter of 2000-2001 for the three months ending April as compared to a net earnings of $97.3 million in the same quarter of the previous year (Food Navigator, 2001: June 20). The company was faced with a dilemma about whether it should continue with its Tuna business or should dispose the business whose restructuring of the Tuna and Pet Foods business would cost the company a large amount for which the company has announced to incur a restructuring charge of $299 million in the last March and an additional cost of $15 million to be incurred in the first quarter of 2001-02 (Food Navigator, 2001: June 20). Bill Johnson, the Chief Executive of the company was not ready to abandon the business and was enthusiastic about its new pouch packaging and "Lunch to Go" snacks for its Starkist Tuna brand (Food Navigator, 2001: June 20). But Bill did not discuss about its other suffering business of Vlasic pickles and Beech Nut baby foods. The higher energy and other costs were also taking a toll on the company (SEC, 2001: June 14). But the Chief Executive was excited about the ketchup business, which was going very strong for the company (Food Navigator, 2001: June 20). At present, the business has positive net profits and increased revenues (Market Watch, 2012: n.d) and the Starkist tuna brand has been sold by the company in 2002 to Texas pacific investment group (Brus, 2002: June 13) as also being discussed in the subsequent sections. The study will focus on evaluation of current performance of the company and identify the strategic direction for the company and how the company needs to manage its business units
Goals and Objectives
The goals and objectives for this paper will be:
- To evaluate the current position of the company in terms of its overall performance.
- To identify how the company can fill its strategic planning gap.
- To suggest suitable approaches for the company to manage its Strategic Business Units.
Heinz Current Performance
- The revenues of Heinz has increased from $10.7 billion to $11.64 billion with an increase of 8.78% but the annual net profit of the company has dipped from 989.51 million in financial year 2010-11 to 923.16 million in 2011-12 thereby depicting a drop in profitability by 6.7% (Market Watch, 2012: n.d).
- For the fourth quarter of fiscal 2011-12 ending April 29, 2012, the revenues increased to $3.05 billion from $2.89 billion in the same period in the last fiscal which shows an increase of 5.6% (The Associated Press, 2012: May 24).
- In the first quarter of financial year 2012 ending July, Heinz earnings have increased by 14% (Stynes, 2012: Aug. 29).
- The company has performed well globally with sales of $42 billion in emerging markets in 2011 (Katje, 2012: May 31).
- With reference to the situation of 2001, the company does not have the Tuna business in its portfolio at present in 2012 as its Starkist brand of Tuna was sold to Texas Pacific/Del Monte by Heinz despite the fact that the company was commanding a majority 40% market share in the Canned Tuna business in U.S (Brus, 2002: June 13). This happened due to the reason that the company was not earning enough profits despite having its own can making facilities and canneries (Brus, 2002: June 13).
Heinz Company Expectations
As announced during the annual shareholder meeting, it was expected that the first quarter earnings of the fiscal 2012-13 would report an increase of revenues by 23.5% (Ziobro, 2012: Aug. 28). With a strong performance of the company in 2011 in emerging markets, the company expects to almost double its sales in these emerging markets from $42 billion in 2011 to $80 billion by 2018 (Katje, 2012: May 31).
Strategic Planning Gap
- There is a difference between the present performance of the company and the expectations provided the facts in the situation. Therefore for Heinz, a Strategic Planning Gap occurs. Strategic Planning Gap is the difference between company's present performance and the company's expected performance (Kotler & Keller, 2008).
- Although it was expected that the earnings of company would rise by 23.5% (Ziobro, 2012: Aug. 28), the actual increase was only 14% leading to a gap of 9.5% in the earnings and the company needs to fill this strategic planning gap.
- The profitability of the company has also dropped by 6.7% in 2011-12 whereas the profitability should have increased for the whole year.
- Since the net income of the company increased by more than 8% in 2010-11 as compared to 2009-10, the net income increasing from $914.49 million in 2009-10 to $989.51 million in 2010-11 (Market Watch, 2012: n.d), the expectations of management would have been more than 10% growth for 2011-12 but the actual growth was in negative territory.
This Strategic Planning Gap can be depicted with the help of following figure:
Figure 1: Strategic Planning Gap
Time (in years)
The solution provide guidance on preparing a marketing strategy for Heinz.