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Heinz cuts jobs and factories

Janet Babin May 26, 2011

Heinz cuts jobs and factories

Janet Babin May 26, 2011

Kai Ryssdal: Pittsburgh-based HJ Heinz said today its quarterly profits were up. Just not up enough.

So it’s going to close five factories — two of which are here in the United States — and cut about 1,000 jobs overall. And the problem goes well beyond ketchup.

Marketplace’s Janet Babin has the story.

Janet Babin: In the U.S., the name Heinz is known for one thing:

Heinz commercial: Ketchup. I just got to ketchup.

But in the rest of the world, Heinz is known for lots of products. Morningstar analyst Erin Lash says 60 percent of Heinz’s sales are now generated outside the U.S.

Erin Lash: They sell beans in the U.K., and they sell infant and nutritional products as well as like soy sauce over in developing and emerging markets. So their product portfolio is definitely much broader than what we see over here.

Here, or there, the ingredients that go into those products have gotten more expensive. Milk, cheese, sweeteners and oils all cost more. To cope, Heinz announced it’ll shutter factories, and lay off workers. And it’s also been inching prices higher.

But Wells Fargo economist Mark Vitner says as raw material costs increase, there’s a limit to how much companies can pass on to us.

Mark Vitner: The prices that they’re having to pay for raw materials are going up about 5 percent. And they’re really lucky if they can get 2 to 3 percent increases on their final prices.

Why not just dump it all on consumers?

Vitner: There’s just not a whole lot of discretionary purchasing power to pay higher prices.

Vitner’s not suggesting that we’ll go without our favorite foods just yet. But the higher prices could have us all trying to squeeze just a little more out of that ketchup bottle. Vitner says companies will have to do the same.

I’m Janet Babin for Marketplace.

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