Heinz must fight to avoid being a has-been

The news that Clodagh Ward, one of Heinz’s longest serving UK marketers,
and Steve Turner, head of infant feeding, are leaving the company before
the conclusion of its advertising review and just months after its
latest management restructure (MW l…

The news that Clodagh Ward, one of Heinz’s longest serving UK marketers, and Steve Turner, head of infant feeding, are leaving the company before the conclusion of its advertising review and just months after its latest management restructure (MW last week) suggests that all is still not well at the grocery company.

Heinz has been struggling for several years with declining sales and a poor record in new product development. Last year it was also hit by a decision to cut its above-the-line spend (MW July 20, 2005) only to be caught out by Premier Foods’ Branston brand launching in its core baked beans market.

The company’s continued troubles have left industry insiders questioning why it has failed to address its problems. One senior food industry figure says the company is “conservative and short-termist” and that this is key to its problems.

A source close to Heinz says its decision to appoint Suzanne Douglas, the former general manager of Heinz Australia, as group marketing director instead of promoting Ward, a homegrown talent, is symptomatic of the UK’s lack of autonomy. The source says: “Heinz has got a thing about bringing people in from another country.”

It is understood that in the past, the UK division reported directly to Europe but that this has changed in recent years. One industry source claims that this followed the £10m relaunch of its soup portfolio including new recipes and a major TV campaign (MW August 12, 2004).

Failed campaign
But according to the food industry source, the campaign was seen as a disaster as it failed to make an impact on sales. This led to a number of changes, including moving the advertising out of Leo Burnett and into WCRS without a pitch (MW May 26, 2005). US consultants were also sent over to see what had gone wrong. The source says: “It was felt that the UK hadn’t delivered.”

The observer adds that the US-based head office is very commercially focused and that each division works on a quarterly budget, which drives its short-term approach. “There is incredible pressure to deliver and that makes it difficult to develop real innovation or marketing,” says the source. “If sales don’t perform then the advertising spend is cut. The UK is condemned because of that.”

Brands bought and sold
This approach has led to cost cutting across the company and the disposal of several businesses, including vegetarian ready meals brand Linda McCartney and John West, although Heinz has acquired HP Foods, which brought HP and Amoy into its portfolio.

It is also understood that the company sets very tough targets. Earlier this year, Jane Miller, the president for UK and Ireland, left after less than 12 months. Insiders say she failed to meet sales targets and was left with no choice but to resign. She has been replaced by former Procter & Gamble sales director David Woodward (MW May 13).

The US management has been under pressure for failing to invest in it brands or advertising. Corporate raider Nelson Pelz, a 5.4% shareholder, tried to force an ownership change in the summer by gaining five seats on the board, although he eventually won just two after a hard fought battle with chief executive William Johnson.

A two-year growth plan is due to start in 2007 with further cost cutting through the closure of four factories and the loss of 400 jobs. But industry experts say that unless the company becomes less conservative in its new product development and more supportive of its core products, the Heinz brand will face a terminal decline in the UK.

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