Slow-Pouring, Faster Spending: Heinz Ups Budget
As it emphasizes expansion overseas and suffers some bumps domestically, ketchup marketer Heinz indicated Tuesday that it will invest heavily in marketing between now and the spring.
The company said it expects its marketing budget to end up at $400 million-plus for its current fiscal year -- up 15%. That would mark a jump from $269 million five years ago. The company does not break out how much it invests behind brands in the U.S. -- a market that, along with Canada, accounts for 40% of sales.
But CEO William Johnson noted that marketing outlays will climb significantly through the end of April -- particularly in North America and the United Kingdom. He spoke on a conference call with investors as Heinz unveiled results in its most recent quarter.
Johnson promised that investment behind the WeightWatchers Smart Ones will jump 40% through the end of April. The brand is only sold in North America. He cited print as an outlet to be used.
Also in the U.S., Johnson said Heinz recently launched an aggressive "consumer value program" that includes couponing, targeted media and increased in-store marketing efforts. The expectation: mid-single-digit volume growth for consumer products in North America between now and April.
Coming in the next few months are new products -- notably in the Ore-Ida french fries area, including a sweet potato variety.
In the recently completed quarter, global marketing increased 14% to $103 million, the company said. While worldwide sales were up 2.5% to $2.67 billion, profit was down 16% to $231.4 million.
Heinz, CEO Johnson said, has been hurt by retailers looking to emphasize private label SKUs to meet consumers' recent cost-cutting preferences.
Johnson said the recession "continues to negatively impact consumer confidence and purchasing patterns. ... Even though the global recession appears to be abating, there is no question that consumers ... remain intensely focused on value, which they are more often defining as price." He added that consumers are "looking for bargains."
Emerging markets now make up 15% of Heinz's total sales, and the company said that should reach 20% by 2013. It is aiming to capitalize on an expanding middle-class abroad, a trend that may have hit a bump with the economy.
In the U.K., Heinz is running its most extensive campaign in five years, plugging its full portfolio and carrying an "It Has to Be Heinz" tagline.
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If Heinz wants to ramp up sales, then they need to emphasize more uses as normal. Otherwise, Heinz users won't be buying more in their ketchup arena - ketchup on your Cheerios, ketchup on your ice cream or just make your own dips with ketchup in seconds. Sometimes, the vast amounts of additional spending cannot (rather than do not) add that much more to profits. But I bet many folks would be happy with a great product to sell with great profits that do not have to increase to the nth degree every year.