Heinz chief's advice on emerging markets is food for thought

BACKGROUND:LIKE MANY Americans, Bill Johnson has a particular affinity with Ireland. And it's not just down to the Irish inheritance implicit in his name.

The Heinz chief executive visited Ireland frequently when he worked under Anthony O’Reilly at the global food company. “Every couple of months I’d come to Castlemartin and spend three or four days. We’d do our business plans here or updates, or he would introduce me to businesspeople from around the world who came through here.”

Johnson has evidently much respect for the man who hired him and whom he succeeded as chief executive, though the two men are no longer in contact.

“I haven’t spoken to him in a number of years. When Tony retired he really wanted to concentrate on his other businesses. I respected his desire for privacy.”

O’Reilly’s main attributes, according to Johnson, were his “global vision” and innate leadership skills – not to mention his sartorial sense. “I gained my love of double-breasted suits from Tony O’Reilly,” Johnson told a packed room at Croke Park’s convention centre yesterday.

Johnson was one of the main speakers at yesterday’s conference on Irish competitiveness organised by the US embassy. His appearance at the event may have something to do with his links with US ambassador Dan Rooney, owner of the Pittsburgh Steelers football team. Heinz has its headquarters in Pittsburgh and Johnson’s father was a lifelong NFL football coach.

In a lengthy address to the audience, which included chief executives such as Christoph Mueller from Aer Lingus and John Mullins of Bord Gáis, Johnson gave a candid insight into the challenges and strategic considerations of running a global food company.

Heinz is one of the world’s largest consumer food companies with annual sales of $11.6 billion (€9.2 billion). As well as its ketchup and beans products, which still count for about 45 per cent of turnover, its portfolio includes Weight Watcher products, infant nutrition and a swathe of national brands from soy sauce products in Asia to Quero, a leading brand of tomato-based sauces and vegetables in Brazil.

Johnson outlined some of the challenges facing food companies, in particular the dramatically deflated consumer market.

“Consumers in developed markets remain intensely focused on value to a degree that I have never seen in my career,” he told attendees.

One fallout of this has been the growth of private-label or own-brand products, an obvious threat to branded products such as Heinz. The company has combated this with a constant channel of innovative products and heavy investing in marketing.

However, it has been the lurch towards emerging markets, through a combination of bolt-on acquisitions and the exporting of existing brands, that has been the key to the company’s success.

From representing just 5 per cent of sales a decade ago, emerging markets now account for 21 per cent of Heinz’s sales.

As Johnson told delegates, given that 85 per cent of the Earth’s population would be living in the emerging world by 2015, the growth potential for emerging markets was huge. “Whether your company is based in the US, Ireland or elsewhere, a strategic presence in emerging markets is increasingly critical to compete.”