• by Karlene Lukovitz  @KLmarketdaily, August 14, 2008

So it wasn't surprising that ears perked up during Heinz's annual stockholders' meeting Wednesday when chairman, president and CEO William R. Johnson noted, in response to a direct question about whether Heinz would consider acquiring Campbell Soup, that Campbell would make a "nice fit."

Describing Campbell as "a great company," Johnson added that Heinz "is always looking for opportunities to expand and grow."

Just five days ago, Heinz completed the acquisition of Bénédicta, a French manufacturer of tabletop sauces, mayonnaises and salad dressings. Heinz described Bénédicta as "fitting perfectly" into its global strategy of focusing its portfolio on three core categories: ketchup and sauces, infant/nutrition, and meals and snacks--including baked beans, pasta meals and, yes, soups.

Furthermore, in his formal remarks, Johnson stated that Heinz's healthy balance sheet and growth opportunities in both developed and developing regions makes the company "confident in [its] ability to execute value-added acquisitions."

Would Campbell warm up to considering such a match? No way to tell at this point. Campbell isn't responding to queries about Johnson's intriguing, ostensibly off-the-cuff remarks.

Heinz may be hoping that that Q&A exchange didn't steal too much thunder from the company's announcement that sales increased 12% in fiscal '08, to surpass the $10-billion mark for the first time.

The growth was driven in large part by successful product launches, particularly in the booming health and wellness segment.

Together, the Weight Watchers Smart Ones and Weight Watchers from Heinz brands alone--which are among the company's fastest-growing lines--represent nearly $1 billion in sales, and Heinz continues to extend these. Johnson reported that after just 18 months in the Canadian market, Smart Ones now has 7 of the 11 top-selling varieties within the nutritional meals category.

However, pointing out that sales in China, India and other emerging markets surged by 25% in fiscal '08, Johnson said that these markets may represent Heinz's biggest growth opportunity.

Heinz expects emerging markets--which have grown from 8% to 13% of total sales in the past few years--to contribute about a third of the company's total sales growth as laid out in its two-year (FY 2009-10) "high-performance plan." That would bring these markets' contribution to 15% of total sales, and Johnson projected that they could account for 20% of the total by 2013.

"This would be a significant accomplishment, given the growth we are also experiencing in our developed markets," he said.

Heinz's top 15 brands, which represent approximately 70% of sales, saw compound annual growth of 12% during the past two years, driven by "continued double-digit increases in R&D and marketing investment" against the company's "tightly focused brand portfolio," Johnson said.

The two-year Heinz plan calls for sales growth of 6%; 8-12% increases in consumer marketing; 6-7% growth in operating income; 8-11% growth in earnings per share; and operating free cash flow of approximately $850 million per year. Johnson said that fiscal '09 is "off to a good start."

Heinz's hundreds of new product intros over the past two years have included "plastic snap pot beans" (single-serve, microwavable versions of its baked beans) in the UK; Smart Ones Fruit Inspirations (four health-focused frozen entrées that include a half-serving of real fruit), expected to generate $40 million in their first 12 months; and the recently launched Smart Ones Morning Express (four handheld breakfast sandwiches and quesadillas).

Johnson said that two of Heinz's newest launches, Ore-Ida Steam 'n' Mash potatoes and T.G.I. Friday's Complete Skillet Meals, came out of "insights gleaned from extensive research, which revealed that consumers want added convenience while still feeling like they are an integral part of the meal preparation process."

Back on the soup front, Heinz achieved record shares in the UK last year, and has more varieties on the burner for this year.

The company also has had a hit with new varieties of Steamfresh vegetables in Australia, and will extend this line into the meals category in the current fiscal year.

In total, Heinz has about 400 new health and wellness foods in the pipeline, according to Johnson.

"Not since the days Henry Heinz was introducing his first 57 varieties have we been driving such a strong innovation agenda for the Heinz brand globally," he said.

Some of Heinz's ongoing investment in consumer marketing is clearly being directed into the digital space. Last week, the company unveiled its new 2.0-technology global corporate Web site. In addition to voluminous info and ads/videos about its products, the site offers an interactive timeline that takes visitors on a "virtual adventure" through Heinz's history; employee video testimonials; real-time Heinz stock updates and financial news RSS feeds; tools, tips and recipes for healthier lifestyles; and an area devoted to detailing the company's sustainability initiatives.

Not to mention wallpaper downloads featuring Heinz products, and a Heinz Ketchup Widget designed to encourage Heinz fans to interact via posting to social network sites. The widget lets them "squeeze" messages to "splat" their friends.