Effect of changing commodity costs on H.J. Heinz' procurement

William Johnson, Chairman, President and CEO of H.J Heinz, at the company’s 2009 Analyst and Investor day, made the following comments about current supply chain issues within his address.

“Heinz anticipates significantly higher costs this year for potatoes and tomatoes, partially in response to the phase out of European government subsidies for tomatoes, as well as higher cost for tin plate, meat, and beans.

“We do expect some easing in commodities like resin, dairy, and oil. Given our global operations currency cross rates are in some cases exacerbating the inflationary effect of commodity prices resulting in higher cost of goods. This is particularly true in the UK, New Zealand, Poland, Canada, and Russia.

“Our procurement team is managing our commodity portfolio effectively. We have now locked in prices for approximately 50% of our fiscal 2010 commodity purchases while retaining some flexibility for the remainder. Overall we currently anticipate commodity inflation of roughly 7% to 8% in fiscal 2010 including the impact of unfavorable cross rates.”

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