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Heinz: New products will target low income shoppers

By Elaine Watson , 21-Nov-2011

Heinz has unveiled a series of new products with lower entry price points to target households with incomes of less than $50,000-a-year.

In a conference call with analysts on Friday to discuss the firm’s second quarter results, Heinz chief executive Bill Johnson said many shoppers were no longer ‘stocking up’, but buying smaller packs, more frequently.

He added: “Data shows that one third to one half of unit purchases in many US product categories are now of small-size SKUs as many consumers are shopping from week to week to stretch their food dollars.”

‘We are very undeveloped in the dollar stores’

To tap into this trend, Heinz is launching “a number of innovative new products in the third quarter that have been tailored specifically to meet the needs of US consumers with tight grocery budgets”, said Johnson.

“Right now our portfolio tends to skew more middle/upper income, we are very underdeveloped in the dollar stores and so these are opportunities for us to reach a segment of the population that historically we have underserved.

“Our launch includes several items with compelling price points of 99c and $1.99. These products have been developed to deliver the same great taste we always do and value in affordable sizes while maintaining and in some cases building on historical margins.”

‘Consumers have been turning to comfort foods during the recession’

The US products include a new 10oz pack of Heinz ketchup in a stand-up pouch with a spout (SRP 99c), a 9oz pack of yellow mustard (SRP 99c) and new cans of Home Style Beans (SRP just over $1), launched after encouraging results in test markets, said Johnson.

“We have a whole line of products like that coming. Consumers have been turning to comfort foods during the recession. We believe this is the right time for the return of this convenient, nutritious and value-oriented classic.”

In Europe, Heinz will launch a number of products priced around €1.

Firms not pushing aggressively into emerging markets will wake up and find they have been left behind

Heinz posted a 4.4% rise in net income to $263m (excluding special charges) on sales up 8.3% to $2.83bn in the second quarter (three months to October 26), led by double-digit organic sales growth and acquisitions in emerging markets, and strong growth in ketchup.

“The developed world is going to get increasingly difficult to operate in," added Johnson. "Those that are not pushing aggressively into emerging markets are going to wake up one day and find that the world left them behind.”

Overall, said Johnson, “we saw a combination of continued strength in emerging markets, the UK and much of Europe, and mixed results in other developed markets, where consumer confidence fell to its lowest level in 30 years.”

Group organic sales growth was up 1.5% reflecting a 4.4% increase in net pricing, partially offset by a 2.9% volume decline.

Including special charges, reported net income was down 5.6% to $237m.

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