Recessionary times are forcing families to eat more meals at home, a situation the H.J. Heinz Co. is capitalizing on, company executives said Friday.
The foodmaker is focusing its efforts during the economic downturn on what it calls the "Five Cs": consumers, costs, cash, commodities and currencies.
"We're preparing, we're positioning ourselves for success in recessionary times," CEO William Johnson told analysts Friday during a conference call after Heinz issued quarterly results.
Appealing to consumers looking for value, the Pittsburgh icon is doing things such as offering larger and smaller product sizes, and innovation in known brands, such as the new Ore-Ida Steam n' Mash potatoes, which Johnson said had one of the strongest introductions of any Heinz product.
A new stand-alone display case for Classico sauces touts a good, home-cooked meal for under $10.
"We sell affordable comfort food," Johnson said.
Consumers aren't looking to experiment with brands and products they're unsure of, he said. Heinz's products, including soups, Ore Ida potato products, SmartOnes frozen products and its flagship ketchup, leave no room for chance.
Results for the three-month period ended Oct. 29 show the strength of the Heinz brand. Net income jumped 21 percent to $276.7 million, or 87 cents a share, from $227 million, or 71 cents a share, in the year-earlier period.
Sales rose 3.5 percent, to more than $2.6 billion from $2.5 billion.
Heinz wasn't the only food company reporting higher profits yesterday. The J.M. Smucker Co. said its profits rose 3 percent during its fiscal second quarter to $51.5 million, or 94 cents a share, while sales jumped 19 percent to $843.1 million.
Tim Smucker, chairman and co-chief executive of Smucker, likewise said that the company's brands -- which include Folgers, Jif, Crisco, Eagle Brand and Hungry Jack and others in addition to its namesake jams -- are in a position to meet the needs of consumers.
Smucker hasn't seen such a shift to eating at home in more than a decade, he said.
But since people are looking to save money, there's some worry among companies and analysts that consumers will trade down to store brands, forgoing the name-brand products.
That's why Heinz said it will be pushing its value message to consumers, said Christopher Shanahan, a research analyst with Frost & Sullivan.
"They know that in the short term there's higher traffic in the grocery store but that means all of a sudden they're competing against private label," he said.
Heinz's top 15 brands, which account for three-quarters of total sales, jumped by 8.5 percent during the quarter.
"The flagship Heinz brand hit sales of nearly $1 billion during the quarter, for the first time ever," Johnson said.
The foodmaker said it benefited during the past three months from hedging against currencies, as it locked in foreign currency rates ahead of time.
The maker of Weight-Watchers and T.G.I. Friday's frozen meals said net prices rose 8 percent to offset higher costs for ingredients such as potatoes, meat and oil, which all food makers are facing.
The company's restaurant business was the only segment where sales fell, as customer traffic slowed.
Heinz reaffirmed guidance for the year of earnings of $2.87 to $2.91 per share on a 6 percent sales increase.
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