September 25, 2011

They're Not Playing Ketchup

I wouldn't necessarily think of Heinz as a poster child for a company that is strategic and growing, and was therefore, somewhat surprised to read an impressive article in Harvard Business Review (October 2011) called "The CEO of Heinz on Powering Growth in Emerging Markets."

Heinz, headquartered out of Pittsburgh PA, is ranked 232 in the Fortune 500 with $10.7B in sales, $864M in profits, and 35,000 employees. They have increased their revenue from emerging markets from 5% a few years ago to more than 20% today.

Bill Johnson, the CEO of Heinz, explains his 4 As for success--which I really like:

1) Applicability--Your products need to suit local culture. For example, while Ketchup sells in China, soy sauce is the primary condiment there, so in 2010, Heinz acquired Foodstar in China, a leading brand in soy sauce.

2) Availability--You need to sell in channels that are relevant to the local populace. For example, while in the U.S., we food shop predominantly in grocery stores, in other places like Indonesia, China, India, and Russia, much food shopping is done in open-air markets or corner groceries.

3) Affordability--You have to price yourself in the market. For example, in Indonesia, Heinz sells more affordable small packets of soy sauce for 3 cents a piece rather than large bottles, which would be mostly unaffordable and where people don't necessarily have refrigerators to hold them.

4) Affinity--You want local customers and employees to feel close with your brand. For example, Heinz relies mainly on local managers and mores for doing business, rather than trying to impose a western way on them.

Heinz has a solid strategy for doing business overseas, which includes "buy and build"--so that they acquire "solid brands with good local management that will get us into the right channels...then we can start selling other brands."

Heinz manages by being risk aware and not risk averse, diversifying across multiple markets, focusing on the long-term, and working hard to build relationships with the local officials and managers where they want to build businesses.

"Heinz is a 142-year old company that's had only five chairmen"--that's less than the number of CEO's that H-P has had in the last 6 years alone.

I can't help but wonder on the impact of Heinz's stability and laser-focus to their being able to develop a solid strategy, something that a mega-technology company like H-P has been struggling with for some time now.

If H-P were to adopt a type of Heinz strategy, then perhaps, they would come off a little more strategic and less flighty in their decisions to acquire and spin off business after business (i.e. PCs, TouchPads, WebOS, etc.), and change leadership as often as they do with seemingly little due diligence.

What is fascinating about H-P today is how far they have strayed front their roots of their founders Bill and Dave who had built an incredibly strong organizational culture that bred success for many years.

So at least in this case, is it consumer products or technology playing catch-up (Ketchup) now?

P.S. I sure hope H-P can get their tomatoes together. ;-)

(Source Photos: Heinz here and H-P here)


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