2011 Processor of the Year H.J. Heinz Co: Pittsburgh Product Development Touches the World

Six-year-old innovation center, plus distributed centers of excellence, keep the global pipeline full.

By Dave Fusaro, Editor in Chief

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Conventional wisdom says you can only take ketchup so far — although H.J. Heinz Co. continues to innovate its flagship product by launching new varieties and breakthrough packaging. At the company where ketchup is king, Heinz presides over a number of brands that appear to have the kind of legs that will keep the R&D department busy for many years. And in many countries.

Two points made in our lead story about Heinz bear repeating when you talk about product development at Heinz. One is that this company was so cost- and investor-conscious in the past that it didn't have a centralized, true research and development center until 2005. The other is the balance between accelerating growth in emerging markets and driving innovation to grow the core portfolio in developed markets.

Righting the first and supporting the second have been charged to Jim Matthews, who leads the six-year-old Heinz Global Innovation and Quality Center. As group vice president of Heinz North America innovation and emerging market capabilities, Matthews oversees the product and packaging innovation pipeline on the domestic front and also is responsible for building these capabilities in emerging markets to ensure Heinz is positioned to successfully transfer innovations openly and effectively among the businesses.

As Chairman, President and CEO William Johnson said in the preceding story, coordination and transfer of ideas among Heinz's diverse and far-flung holdings is a current challenge. That challenge has been handed to Matthews.

"One of our goals is to leverage innovation and apply knowledge, best practices and R&D from our developed markets to help benefit our newer businesses in emerging markets," Matthews notes.

The Heinz Global Innovation and Quality Center is located in suburban Pittsburgh, 20 miles north of Heinz headquarters downtown, which gives it both proximity to the marketers and executives but also a nice buffer. "It's allowed us to create a culture of innovation here that would have been more difficult in the city," Matthews says.

The 100,000-sq.-ft. center is the global hub for Heinz research and development. Inside are some 200 chefs, food technologists, researchers and package designers, plus experts in nutrition and quality assurance. The center provides technical direction, assistance and advice to Heinz business units worldwide.

The Innovation Center includes research kitchens and test kitchens, a pilot plant, a simulated retail environment (to visibly test marketing ideas and observe consumer behavior), a consumer feedback center plus a corporate library that houses the history of this 142-year-old company.

Before the center opened, just 50 people at Heinz were dedicated to product development.

"The R&D team was more like a technical services organization at the time, focused on assisting operations, driving out costs and improving productivity," Matthews says. "There was very little new product development work going on until Heinz, under Bill Johnson's leadership, increased investment in innovation under the company's long-term strategy to grow the core portfolio."

The center focuses its R&D in three areas: frozen foods, condiments & sauces and packaging.

Reflecting its global growth, Heinz is constructing a new facility in The Netherlands that will coordinate and drive R&D and new product development for the European market, and a similar facility is planned in China in several years.

Heinz also operates several Centers of Excellence that are focused on driving innovation in manufacturing and new product development in specific product areas, such as the Global Infant Nutrition Center of Excellence in Italy, where Heinz manufactures Plasmon, that nation's leading brand of baby food. That facility was responsible for developing one of the company's new products for consumers in China – Heinz Infant Formula.

Frozen products have kept the suburban Pittsburgh R&D team near busiest lately. This year Weight Watchers Smart Ones launched its first microwavable bagged meals, which deliver 30 percent more food than traditional trays. This new product line is expected to enhance the brand's positioning as a dinner option. The brand also is growing into other day parts with breakfast (sub-branded Morning Express), desserts and snacks (sub-branded Anytime Selections).

Weight Watchers Smart Ones also has become a star export, though only over our northern border. In just several years, it's one of the leading frozen nutritional brands in Canada.

OreIda Cheesy Potato CasseroleThe Ore-Ida brand, too, is branching out. In addition to the many varieties of cut and fried potatoes (including resurgent Tater Tots), Ore-Ida launched its sweet potato fries in fiscal 2010 and has extended the sweet potato line with two new varieties – Crinkle Cuts and Steak Fries. Ore-Ida recently introduced a Cheesy Potato Casserole in time for the holiday season. And several years ago, Heinz took the work out of making home-style mashed potatoes by introducing Steam n' Mash potatoes, which now includes a sweet potato variety.

Classico is evolving too, from its traditional red pasta sauces to pizza sauces to a classic alfredo sauce as well as light alfredo sauces that reflect the company's increasing focus on the health and wellness banner.

Foodservice, which is a $1.4 billion business for Heinz, commands one-third or more of the R&D center's time. Its development of the Dip & Squeeze Ketchup package has earned accolades from consumers and several industry awards for innovation, including honors from the DuPont Awards for Packaging Innovation and National Restaurant Association's Food & Beverage Product Innovations Awards.

Heinz has health and wellness goals for all its products, but they're clearly second to taste. Nevertheless, sodium has been reduced in Ore-Ida products and even in the sacred ketchup recipe; palm oil has been eliminated on French fries in the U.S.; there's less fat and more protein in most of the T.G.I. Friday's products; ingredient lists have been shortened on Classico sauces; calories and fat have been reduced in the new Light versions of Classico alfredo sauces; and whole grains have been added to Weight Watchers Smart Ones and Bagel Bites snacks.

Heinz recently disclosed that in North America, one-third of the company's new product innovations in the 2010 calendar year met its criteria for healthy nutrition innovation. The target for 2011 is 100 percent.

Matthews is just getting comfortable with his role as a coordinator of international product development efforts. "Product development is regionally deployed. Tastes are different country by country. We understand and embrace that," he says.

Thus the R&D centers in Netherlands and, soon to be, China.

In almost every international market, the company is focused on building its local brands, like Quero tomato sauces in Brazil and Master soy sauces in China, while driving the growth of the Heinz brand globally.

And while the suburban Pittsburgh center supports both objectives, Matthews also embraces a point made by Johnson. Counter to what other food executives may think, the Heinz chairman sees an untapped opportunity to take successful products and innovations from the emerging world and adapt them for consumer preferences and tastes in the developed world, rather than vice versa.

As for emerging markets, despite rising incomes and increasing curiosity for Western products, Johnson and Matthews say Heinz will continue to offer products that are tailored to localized tastes and habits. On the other hand, Heinz believes that the U.S. market is open to new tastes, products and packaging inspired by other regions of the world.

"Quero [the recent acquisition in Brazil] has some interesting packaging formats that we're looking at bringing here, and Heinz will offer U.S. consumers a flexible stand-up ketchup pouch with a spout that was developed for emerging markets," Matthews says. "We are also launching Heinz Ketchup blended with balsamic vinegar in the U.S. after this great new variety of our flagship product made a big splash with consumers in the U.K."

Heinz officials won't disclose exactly what's in the pipeline, but Matthews says the company is unveiling new packaging and sizes that will offer compelling price points for U.S. consumers with tight budgets, including Heinz ketchup and mustard at suggested retail prices of 99 cents — as well as affordable varieties of Heinz Worcestershire sauce and Heinz 57 Sauce and a one-pound bag of Ore-Ida French fries.

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