May 30, 2012
The Age
In June of last year, Heinz chief executive Bill Johnson described the Australian food market as the ‘worst’ in the world, laying the blame at the feet of Coles and Woolworths.
PEACE has broken out between Australia’s leading supermarket chains and their most vocal critic, global food manufacturer HJ Heinz, which has talked of an improving relationship with the retailers after years of acrimony and accusations.
Speaking at an investor day in the US this week, Heinz’s Asia-Pacific boss, Christopher Warmoth, praised the better relationship with Woolworths and Coles that had helped the food company stabilise its once struggling business.
”In the past eight months, we’ve seen a stabilisation of this business and that comes down to three elements. First, we’ve improved our relationship with the retailers, and they have told us that they have noticed our increased ability to bring them real value,” Mr Warmoth said.
”Our customer service has gone from poor to strong and that’s due to a total overhaul of our planning process.”
The conciliatory stance is a long way from the combative position taken by top Heinz executives last year and that peaked in June when Heinz chairman and chief executive Bill Johnson described the Australian food market as the ”worst” in the world, laying the blame at the feet of Coles and Woolworths as they battled for market share.
”There is no doubt that in terms of retail environment, the Australian market is the worst market, and ultimately the people will pay the price over there,” Mr Johnson told investors and analysts The comments followed Heinz’s announcement of plans to close three manufacturing sites in Australia with the loss of more than 300 jobs. Other food manufacturers followed, due to the strength of the dollar, a downturn in consumer spending and the effect of a price war between the big supermarket chains.
The tension was heightened by the proliferation of private-label, or house-brand, goods on supermarket shelves, with branded products often removed to make more space for unbranded supermarket-owned groceries.
During presentations to analysts, Heinz repeatedly drew attention to the tough market in Australia, calling it an ”inhospitable environment”. Mr Johnson once commented that Australian consumers would be the ”biggest losers” as Coles and Woolworths forced suppliers to cut prices and expanded their private-label ranges.
”Products will ultimately be devalued to address the price points that customers are asking us to address. So the consumer is going to ultimately be the big loser in Australia,” he said last year.
But it seems that is all behind Heinz. At the investor update this week, Mr Warmoth, who is Heinz’s executive vice-president of Asia-Pacific, said the local business and its relationship with the retailers was better.
”Australia has also reduced cost on every front,” he said. ”We have five factories, we closed one and have downsized three. We had a record year by far on the supply-chain productivity.
”Now we are not where we want to be in Australia but we’ve made significant progress and we enter FY ’13 with a much stronger foundation.”
It is believed Heinz had earnings of about $1 billion in Australia last year.
Coles and Woolworths have been locked in running battles with food manufacturers and suppliers for more than a year over a litany of issues. Supermarket executives have argued that many global brand owners had been using Australia as a cash cow for years by charging higher prices here than overseas.
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