When HP, Lea & Perrins and Amoy sauces join Heinz tomato ketchup on the top table they will be able to boast a combined age of some 500 years. But if anyone thinks these brands are in their declining years, they couldn’t be more wrong, says Heinz UK and Ireland MD Jane Miller.
“It’s very exciting,” she says of the news this week that HJ Heinz is to purchase HP Foods for £470m from Groupe Danone.
“The growth potential for HP is very strong. Lea & Perrins is in 75 countries and there is the opportunity to export other HP brands the same way. And the Asian sauce category is largely underdeveloped so there is potential there. But there is also a lot of organic growth in our core business.”
Heinz beat off fierce competition from Associated British Foods, Premier Foods and Unilever to win HP (‘Odds up in HP Foods acquisition stakes’, The Grocer, May 7, p16).
The acquisition is a perfect fit for Heinz’s global condiments and sauces business and makes the company the number one in sauces in the UK. It already has a 77% share in ketchup and an 80% share in salad cream. Global sales of the brands it is acquiring are about $300m, the company says.
Analysts agree it is a logical move for the US food giant. Andrew Saunders, analyst at Numis Securities, says the purchase of HP will “unlock the brand’s true potential”.
“HP has not been a core activity of Danone for some time and it fits in much better with the Heinz portfolio,” he says. “It is certainly seen as an iconic British brand - it’s probably the first that springs to mind when consumers think of brown table sauce.”
The move follows the US food giant’s plunge into the Eastern European market last month when it took a majority stake in leading Russian ketchup, condiments and sauces maker Petrosoyuz. Both acquisitions signal its commitment to developing its four core businesses, which apart from sauces include meals and snacks, infant nutrition and foodservice.
Last month Heinz announced a strategic review of its European portfolio and global structure. It will now concentrate on its four core businesses and its number one and two brands as well as its largest markets and primary developing markets of Russia, Indonesia, China and India. It is also divesting non-core products and evaluating its seafood and frozen business in Europe. According to Heinz, this review process is ongoing.
The HP deal is expected to be concluded within three months, but Miller would only say the businesses are “under review” when asked about possible redundancies and factory closures. HP Foods employs 450 workers at two UK factories, Aston Cross, Birmingham, and Worcester, and has a US factory in Fair Lawn, New Jersey.
However, the long-term agreement that HP has with Premier Foods, which manufactures baked beans under licence, does not form part of the acquisition, according to Heinz.
As Heinz is such a big player in the global market any purchase will need regulatory approval, but the company does not expect any obstacles. “When you see it from a consumer perspective, red sauce users are totally different to brown sauce users. I am not anticipating any issues there,” says Miller.
What she does anticipate is the ability to bring some of Heinz’s value creation activity to HP. “A lot of great work has been done with the Heinz brand and we want to expand that. Taking our product and packaging innovation into iconic brands such as HP will be exciting. We have a lot in our tool kit,” she says.
Chief among these will be bringing the Good Food Every Day mantra into HP. Health is a key plank of Heinz’s innovation strategy and the company is continually seeking to reduce salt, sugar and fat in its products. Miller says it will “definitely” be bringing this thinking to HP.
And HP may not be the only one. With its eyes firmly on its core businesses, Heinz will evaluate any other opportunities on merit. “If something like HP comes up, we would be open to other acquisitions,” says Miller.