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Archive for Tuesday, September 28, 1999

HEINZ BUYS STAKE IN HAIN FOODS

September 28, 1999

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Pittsburgh (ap) -- H.J. Heinz Co. has struck a strategic alliance with The Hain Food Group Inc. aimed at combining Hain's natural and organic brands with Heinz's manufacturing and purchasing power.

Pittsburgh-based Heinz will pay $100 million for a 19.5 percent stake in Hain, which is based in Uniondale, N.Y., under the deal announced Monday.

Heinz expects from 15 percent to 18 percent growth in the natural and organic foods market.

"The natural foods industry is growing ... and we expect it to continue to grow, so Heinz must find a way to participate in that growth," said Joseph Jimenez, president and chief executive of Heinz North America.

As part of the deal, Heinz also conveys its Earth's Best organic baby food brand to Hain, which has been marketing and distributing the product for a year.

The alliance gets Heinz into the organic food market through Hain's distribution routes in North America at a relatively low cost, about 1 percent of Heinz's more than $9 billion in sales.

Heinz's $100 million investment represents one-third of Hain's projected $300 million in revenue for this year.

Hain has 3,500 brands, some leading organic or natural food categories such as snack chips and soy products, but has been caught between spending to expand its market and investing in more capacity. Heinz helps to solve the dilemma.

"This allows us to invest in brands, not in bricks and mortar in building plants. Heinz has the capacity," said Irwin Simon, Hain's chief executive.

Heinz also expects to bring some organic foods it currently sells in India and parts of Europe into North American markets through Hain's distribution system, Jimenez said.

William Johnson, Heinz's chief executive, said the deal should deliver earnings growth to both companies this year.

Bear Stearns analyst Terry Bivens wasn't so sure Heinz would see such an immediate benefit. But he said the deal would give slow-growing Heinz a foothold in a fast-growing food business, and puts serious muscle behind Hain.

One example: Heinz's strong relationship with Kroger would help Hain get its organic and natural foods in the grocer's new Nature's Market store-within-a store, Bivens said.

Jimenez and Malcolm Ritchie, a Heinz executive vice president and president of Heinz Europe, will join Hain's board.

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