Archive for Wednesday, December 9, 1998

HEINZ EARNINGS UP DESPITE SLOWDOWN IN PET FOOD SALES

December 9, 1998

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The company is looking for ways to improve its pet foods division, which employs 150 people in Lawrence.

From Staff and Wire Reports

H.J. Heinz Co. needs to boost domestic sales in its sluggish pet food unit to continue delivering what has been an overall good earnings performance quarter after quarter, analysts said Tuesday.

The Pittsburgh-based food giant earlier Tuesday posted fiscal second-quarter earnings of 60 cents per share, up from 54 cents per share last year. Both quarters exclude unusual costs.

Heinz noted in its earnings news release that it was "disappointed" by its market share in both pet food and frozen potatoes. The company employs about 150 people at a pet foods plant in Lawrence. It also has a plant in Topeka, where it employs about 130.

"We are disappointed by and addressing the market shares in ... pet food," said William R. Johnson, Heinz president.

The company told analysts in a conference call Tuesday that second-quarter pet food volume was down by about 1 percent year-to-year.

"Out of all their businesses, pet food is the one that is worrisome," said William Leach at Donaldson, Lufkin & Jenrette. "They need to improve domestic sales."

Heinz has already taken steps to improve growth in its frozen potatoes business by announcing earlier this year that it would consolidate Ore-Ida potatoes and Weight Watchers Gourmet Foods into its Heinz Frozen Food unit.

"They were a little more vague about what they're going to do with pet food," Leach said.

But he said Heinz would probably not consider an outright sale of the unit, because it is one of Heinz's core businesses, and also has been one of its most profitable.

Heinz's well-known brands in pet food include 9-Lives, Ken-L-Ration, and Kibbles `n Bits, which are made only at the Lawrence plant.

Leach said Heinz can probably improve pet food sales through product innovation, increased advertising, and better promotions.

"Pet food is a ruthless business ... you have to go out and steal market share from someone else."

Overall, analysts said they were satisfied with the quarter's results. Sales increased $58.3 million or 2.6 percent to $2.32 billion from $2.26 billion last year.

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