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H.J. Heinz Slimming down Heinz plans to shut 20 plants, sell Weight Watchers classes Thursday, February 18, 1999 By Patricia Sabatini, Post-Gazette Staff Writer
H.J. Heinz Co. yesterday unveiled another plan to streamline its worldwide operations. It plans to sell or shut down up to 20 of its 100 plants, eliminate 3,000 to 4,000 jobs over the next four years, and divest its long-suffering, but now re-energized Weight Watchers diet class business.
Source: H.J. Heinz Co.
The sale won't include the Weight Watchers frozen food unit, which sells low-calorie meals in supermarkets under the Smart Ones/Weight Watchers label.
The restructuring, widely anticipated by Wall Street, comes on the heels of another major restructuring two years ago called Project Millennia, which resulted in the sale or shutdown of about 25 plants and the divestiture of its Ore-Ida food-service business.
The goal of the new effort, dubbed Operation Excel, is to boost efficiency and maintain double-digit earnings growth over the next four years, Heinz said.
Heinz said it wasn't ready to announce precisely which plants would be affected by the cutbacks. But much of the focus will be on European operations, where at least seven facilities are slated to close.
The global food company said it also will reduce production at 10 processing plants, while expanding output at up to 15 others by designating them "centers of manufacturing excellence." Heinz wants to reshuffle production along product lines, moving European ketchup production, for example, which is now done at multiple locations, to a single facility.
Heinz said it won't close its North Side plant, which makes baby food, private-label soups and single-serve ketchup packets, but may change its product mix. That could mean either downsizing or expanding operations there, Executive Vice President Richard Wamhoff said.
Heinz would like to expand production on the North Side, Wamhoff said, but that decision hinges on negotiations with the city aimed at helping the company take over the land it would need to build a new warehouse.
"We could add production if we had more distribution and storage space," Wamhoff said. But the only way to expand the riverside complex, he said, is to move eastward, where a number of businesses lie in the way.
"We're trying to work with the city to help us figure out a way to do this," Wamhoff said.
Talks with Mayor Murphy's office have been under way for several months. Murphy spokesman Craig Kwiecinski wouldn't say whether the city had discussed financial incentives or how much land Heinz might need to expand.
"We are going to work to be competitive, to give them a reason to not only be in Pittsburgh, but to expand in Pittsburgh as they go through the restructuring process," Kwiecinski said.
Heinz employs about 1,650 people in Pittsburgh, including about 220 at world headquarters in USX Tower, with the rest on the North Side. In November, Heinz announced it was moving the headquarters for its Ore-Ida retail business from Boise, Idaho, to Pittsburgh, bringing roughly 135 jobs to the city. Only about 20 employees are transferring from Boise, "so we're hiring a lot of people to fill those jobs," Wamhoff said yesterday.
Those employees, along with headquarters staff for the Pittsburgh-based Weight Watchers food unit, will move into a renovated building at the North Side complex. It should be complete by the end of July.
Wamhoff said the company decided to put the Woodbury, N.Y.-based Weight Watchers classroom business up for sale, even though it has undergone a dramatic turnaround over the last year, because it didn't fit with the rest of Heinz's businesses.
"It's kind of out there buy itself..." he said. By selling now, since business has picked up, Heinz hoped to fetch the best price, he said. Wamhoff wouldn't say how much Heinz expected to get, or who might buy the business. He said a number of parties were interested in taking a look, but no talks were under way.
Wall Street has long gunned for Heinz to shed Weight Watchers. The business, which Heinz bought in 1978, boomed during the 1980s, but struggled for much of the '90s. Over the last year it has enjoyed renewed success, owing to a simplified diet program called 1-2-3 Success.
No Heinz employees in Pittsburgh work for the weight-loss classes, which are run by a franchisee.
Heinz said it would take a $900 million pre-tax charge to pay for the latest restructuring, mostly this year. The charge includes the previously announced $150 million charge Heinz took in its fiscal third quarter ended Jan. 27 for consolidating the Ore-Ida and Weight Watchers frozen food operations.
Heinz said another $200 million in charges would be taken over the next four years.
The restructuring is expected to reduce costs by $200 million annually. Heinz said it will use the savings to reinvest in its core brands, including beefing-up marketing efforts.
Heinz plans to spend an additional $100 million this year on advertising and price promotions, especially for its flagship ketchup, Ore-Ida potato and Star-Kist tuna brands.
Wamhoff said the difference between prices for its products and lower-cost competitors on supermarket shelves is at a "historic high." So Heinz will be cutting some prices and offering more special promotions to boost sales.
Post-Gazette staff writer Dan Fitzpatrick contributed to this story.
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Plant closings: Fifteen to 20 factories to be closed or sold, seven of them in Europe. Another 10 plants will be downsized, while production at 13 to 15 will be expanded. North Side food processing plant to stay, but could be expanded or downsized.