H.J. Heinz Company is the creator of the world renounced Heinz ketchup, Ore-Ida frozen potatoes and other packaged foods^1. In 2011, it’s profits fell from 251.4 million in to 237 million due to “struggling developed markets such as United States and Europe”^2. In response, Heinz is cutting product prices and shifting its focus towards emerging markets (Russia, Turkey, etc.). These tactics will be funded through sizeable decreases in company size; So far, Heinz has closed 80 plants and shed 1000 jobs worldwide. How will such internal and external changes affect Heinz’s profits?

From an internal standpoint, a reduction in it’s number of employees and plants are great tactics for increasing profits. To clarify, the reduced company size will shrink Heinz’s costs. Therefore, it is equating it’s lower sales for cost deductions. Furthermore, Heinz should not focus completely on developing countries; if too much money is invested in such areas, it could see even greater profit losses because of higher costs. Instead, Heinz should decrease costs in order to become more profitable in developed countries.

Footnotes:

^1- Heinz website, Our Company, http://www.heinz.com/our-company.aspx

^2- Heinz squeezed by new economic realities, Nov. 18, 2011, Sarah Skidmore, http://www.theglobeandmail.com/globe-investor/heinz-squeezed-by-new-economic-realities/article2240902/