Corporate Sustainability Report 2011
A SUSTAINABLE COMPANY. GROWN NOT MADE. “As the trusted leader in nutrition and wellness, Heinz® the original Pure Food Company® is dedicated to the sustainable health of people, the planet and our Company.” -Heinz Mission Statement
CONTENTS Social Sustainability Environmental Sustainability Economic Sustainability
SUSTAINABLE RELATIONSHIPS ARE AT THE ROOT OF WHO WE ARE Heinz has built an enduring legacy as an industry leader when it comes to supporting the health, safety and well-being of the consumers who enjoy our foods, the employees who work for us around the globe and the communities where our offices and manufacturing facilities are located. We believe an essential part of good corporate citizenship is giving back to the communities where we operate. Whether Heinz is tackling malnutrition by providing micronutrient assistance to millions of children worldwide, assisting local non-profit organizations, enforcing safety policies and our global code of conduct, or facilitating positive, collaborative work environments, Heinz and the H.J. Heinz Company Foundation are working to nourish and improve the lives of children and Heinz and the H.J. Heinz Company Foundation are working to nourish and improve the lives of children and families worldwide.
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Heinz Corporate Sustainability Report
EMPLOYEE POLICIES AND PRINCIPLES We train employees in workplace practices and inform them about our policies and principles, including our Global Code of Conduct, which communicates our expectations about legal and ethical behavior on the job, and our Global Operating Principles. These Principles convey our Company’s commitment to creating a workforce that fosters respect. These beliefs and practices prohibit knowingly hiring underage workers, using forced or involuntary prison labor and sexual harassment or abuse of employees. Our Global Operating Principles also recognize and respect the rights of labor unions, as well as each employee’s right to associate with any legally sanctioned operation.
It is Heinz’s policy to afford equal employment opportunities to all qualified employees and applicants. We␣re also committed to employment equity and to recruiting and retaining a diverse group of qualified and dedicated employees. In addition, every Heinz location is expected to adhere to company policies prohibiting discrimination, including harassment, and an accompanying set of policies that establish procedures for reporting and investigating complaints, prohibiting retaliation and providing for appropriate disciplinary action for violations.
Heinz encourages employees to consider the environment by offering country-specific programs and company-wide initiatives that promote sustainability. Each year, employees participate in Heinz’s Performance Management and Development program to establish personal goals and enhance professional development and career planning. One specific element of this process encourages employees to define a compelling, sustainable future that incorporates the Heinz Mission and Values into their job function. Our business practices also consider the environment. Employee communications are conducted electronically in most cases, and we use internal Web sites to distribute information about employee benefits and to house standard forms.
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Heinz Corporate Sustainability Report
Recycling and energy awareness are top-of-mind in our offices, where employees are encouraged to recycle paper, drink from reusable mugs and turn off computers, lights and other equipment at the end of each day. Our environmentally-focused employee activities contribute to raising awareness and inspiring behavior changes that will generate sustainable results in the long-term.
OUR SUCCESS GROWS WITH THE ENVIRONMENT From sustainable agriculture and energy-efficient manufacturing processes to eco-friendly packaging initiatives, Heinz is proving that smart business is compatible with environmental stewardship. In factory after factory, a transformation is underway to improve sustainability measures and reduce operating costs by installing more efficient equipment, modernizing business processes and implementing new technologies. KEY ENVIRONMENTAL GOALS: Lowering GHG emissions, including those related to agriculture and the transportation of goods, while increasing awareness programs for employees to implement at home and at work Reducing waste through packaging innovation and recycling Conserving water Improving energy efficiency
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Heinz Corporate Sustainability Report
Environmental Sustainability Goals
20%
20%
Environmental Successes
20%
15% 15%
Reduced Energy Consumption (per unit of finished production) through improved operational efficiency
10%
Reduced Water Consumption (per unit of finished production) through reuse and improved␣sanitation techniques
Reduction of solid waste (per unit of finished production) through increased recycling and reuse of waste
Increase in use of Renewable Resources including solar, biomass and biogas
15%
consumption in transportation (e.g., diesel
Reduction of agricultural carbon footprint
fuel) through improved efficiency of product distribution network
Improvement of tomato crop yields through the use of hybrid tomato seeds that require fewer inputs such as water, fertilizer, and fuel to harvest
Operations risk managers at each Heinz factory are responsible for the safety and environmental impacts of the plant. They monitor compliance with environmental and safety regulations and develop and coordinate programs for energy management, GHG reductions, recycling, packaging waste and waste disposal. Our commitment to protecting the global environment accelerated with our formal announcement of Companywide sustainability goals in May 2008.
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Heinz Corporate Sustainability Report
0.203
0.193
0.175
Energy (kWh/metric ton production)
822
763
693
Water (cu-m/per metric ton production)
7.71
7.39
6.50
Waste (metric tons/per 100 metric ton production)
2.16
1.88
1.57
of packaging through alternative packaging materials and reduction of existing packaging and containers
5% Reduction of fuel
GHGs (metric tons CO2 -eq”/per metric ton production)
Absolute reduction
use for various brands
15%
2005 2008 2009
Reduction of agricultural water usage
These global goals, which we hope to achieve by Fiscal 2015, include a 20% reduction in the generation of GHG emissions per unit of finished production, compared to the baseline year of Fiscal 2005. Heinz is pleased to report significant progress in reaching this goal, with an approximate 13.4% reduction in GHG emissions per unit of production through the implementation of various programs as of the end of Fiscal 2009.
Heinz is targeting areas of our operations that most impact the environment, as well as our manufacturing costs. Heinz facilities around the world have been proactively implementing new technologies, equipment and processes to operate more efficiently. We are investing millions of dollars in our plants and expect to recoup those investments through operational savings. Importantly, these improvements and investments are reducing the Company’s environmental impact and enhancing the ecological health of the world.
We are proud of our accomplishments thus far as Heinz seeks additional ways to enhance our environmental performance. Outcomes for our areas of focus with standardized metrics are showcased in the chart above.
ECONOMIC SUCCESS IS THE FRUIT OF OUR LABOR To grow the core portfolio, we continue to invest in marketing and innovation to sustain the growth of our leading brands. In the last three fiscal years, for example, Heinz increased marketing spending by 30% to support our leading brands with creative broadcast, print and Internet campaigns, as well as greater point-of-purchase promotions. We also increased R&D spending by more than 40% in the same period.
Heinz continues to execute the longterm growth plan that delivered solid results in Fiscal Years 2008 and 2009. We believe innovation is one of the keys to growth for consumer product companies like Heinz, which is why we continue to focus on developing new products, recipes and packaging at our Global Innovation and Quality Center in Pennsylvania. We also believe that Emerging Markets will be a key growth driver. Heinz is well positioned in these markets, which delivered a high percentage of our sales growth in Fiscal Years 2008 and 2009, and we expect to continue investing in the growth of our Emerging Markets businesses.
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Heinz Corporate Sustainability Report
To accelerate growth, Heinz continually explores strategic options such as acquisitions, mergers and joint ventures. Since Fiscal 2002, Heinz has shed noncore businesses with total revenue of approximately $3 billion and acquired focused businesses with combined revenue of about $2 billion that complemented our Core Portfolio. As a result, Heinz has become a leaner, more competitive, faster-growing company with a sharply focused global portfolio that leverages our strengths and our scale. We are confident in the future because we believe that Heinz has the plan, the portfolio, the brands, the management and the track record to continue to deliver growth and performance for our shareholders.
Four Key Strategies GROW THE CORE PORTFOLIO
MAKE TALENT AN ADVANTAGE
Grow through health & wellness, taste, and convenience
Right leadership
Leverage the science of innovation Continue to invest in the business Execute strategic M&A
Strengthen bench Excel at recruitment/development Right incentives Optimize talent placement
STRENGTHEN AND LEVERAGE GLOBAL SCALE
ACCELERATE GROWTH IN EMERGING MARKETS
Innovation transfer
Invest for double-digit sales & profit growth
Global procurement
Leverage infrastructure/expand distribution
Global customers
Win with global customers/modern trade
Global process design
Grow through health & wellness, taste, and convenience
Wall-to-Wall SAP Productivity
Leverage the science of innovation Execute strategic M&A
BUSINESS AND FINANCIAL STRATEGY In Fiscal Years 2008 and 2009, Heinz executed our long-term strategy to drive growth and the Company’s success. OUR FINANCIAL STRATEGY IS FOCUSED ON THESE GOALS: Deliver growth in organic sales (volume plus price), EPS and operating income Maintain a strong balance sheet with robust operating free cash flow (cash from operations less capital expenditures net of proceeds from disposals of PP&E) Reduce costs and increase productivity to drive margins Invest in Heinz’s leading brands and core cateagories to drive growth Return a high percentage of EPS to shareholders through top-tier dividend Generate strong return on invested capital Enhance Total Shareholder Return
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Heinz Corporate Sustainability Report
GROWTH AND FINANCIAL PERFORMANCE Heinz delivered record annual sales exceeding $10 billion in both Fiscal Years 2008 and 2009, with solid growth in net income and earnings per share each year, led by higher sales of our top brands and dynamic growth in our sector. In Fiscal 2008, net income grew 7.5% to $844.9 million and earnings per share increased 11.4% to $2.63. The Company’s reported sales rose 11.9% to $10.07 billion, reflecting strong growth in Europe, North America and Emerging Markets. In Fiscal 2009, Heinz delivered record sales and profit in a difficult global economic environment as net income rose 9.2% to a record $923.1 million and earnings per share grew 10.3% to $2.90 a share. The Company’s reported sales increased to $10.15 billion, led by strong performances in Emerging Markets and North American Consumer Products and higher sales of ketchup and our top brands. Our global portfolio performed well over the two-year period as Heinz benefited from the increased trend of at-home dining, strong growth in our Emerging Markets, sustained organic sales growth (volume plus price) in our core brands, new product innovation and other factors.
In particular, Emerging Markets, which include markets such as Russia, India, Indonesia, China, Poland and Latin America, as well as The Czech Republic, Egypt, the Middle East and South Africa, delivered a growing percentage of the Company’s total sales as our brands connected with the emerging middle-class consumer in those regions of the world. 2009 SALES BY CATEGORY ($MM) $4.4 Meals and Snacks $4.3 Ketchup and Sauces $1.1 Infant Nutrition $0.4 Other
2009 SALES BY SEGMENT ($MM) $3.4 Europe $3.1 North American Consumer Products $1.6 Asia Pacific $1.5 U.’s. Foodservice $.47 Rest of World
Heinz sales in Emerging Markets grew 24.8% in Fiscal 2008 and 8.8% in Fiscal 2009, while delivering a disproportionate percentage of the Company’s total sales.
EARNINGS PER SHARE
$864
$878
$895
$880
FINANCIAL HIGHLIGHTS Overall, Emerging Markets generated 13% of our total sales in Fiscal 2008 and 14% in Fiscal 2009, up from 11% in 2008. With a solid infrastructure, excellent brands and capable local market leadership in fast-growing developing nations, we expect Emerging Markets to generate approximately 20% of our total sales by Fiscal 2013 as the middleclass expands in these dynamic markets. Forward-Looking Statement 2008/2009 Heinz Corporate Social Responsibility Report
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Heinz Corporate Sustainability Report
FY06 FY07 FY08 FY09
ANNUALIZED DIVIDEND PER SHARE $1.40
$1.52
$1.66
$1.20
FY06 FY07 FY08 FY09
Find more information online at heinz.com/csr