THE BLOG
11/30/2010 02:27 pm ET | Updated May 25, 2011

Profiles in Doing Both: How Tuning and Transforming Make Heinz Healthier

Food giant Heinz first put ketchup in a container in 1876 and soon thereafter unveiled the forerunner to the ubiquitous glass bottle that became a staple in American households for more than 100 years.

Then in 2002 Heinz turned the ketchup world on end when it introduced its plastic, Easy Squeeze bottle. Thanks to its compressible, ergonomic shape and handy flip cap, extracting the company's tasty sauce was never so easy.

But 100 years before reinvention?

Suffice to say Heinz doesn't move at the pace of ketchup today. In fact, the company is reinventing itself in so many ways that it's difficult to keep up with all of its endeavors. This year, for example, the Pittsburgh company turned heads again when it unveiled its new Dip & Squeeze food containers. Specially designed for the food service industry, the new packets give food sellers a way to provide customers ketchup for both dipping and squeezing.

Heinz is also reinventing in other ways. It is aggressively expanding into new product categories such as infant nutrition and adult weight management. It is also expanding into new territories. In early November, the company completed the acquisition of Foodstar, a Chinese producer of soy sauces and fermented bean curd. In fiscal 2010, sales to China, Indonesia, Russia and other emerging countries grew faster than they did in any other region of the world. By 2013, the company wants to generate at least 20 percent of its sales from emerging market countries.

To reach that goal and others, too, watch for Heinz to launch additional reinventions in the form of new packages, products and acquisitions. Not many companies this size or age can move so aggressively.

So how does Heinz, a $10 billion conglomerate that does business in more than 200 countries, do it? For one thing, the food giant stays hungry. Take Chairman and CEO William Johnson. To this day, he still tastes as many as 400 new products each year (though he lets others decide which to take to market). Moreover, Johnson still believes in taking risks when the moment is right.

But Johnson doesn't stop there. In addition to the reinventions that he demands from his management team, he also pushes Heinz leaders to make systematic improvements to their ongoing operations. The optimization work takes on many forms.

Take Project Keystone, which is a global initiative whose primary purpose is to increase the company's competitiveness through process improvements, systems upgrades and capabilities enhancements. In particular, Heinz is trying to move to standard automation platforms, overhaul procurement programs and streamline decision making worldwide. The company has implemented Project Keystone in several parts of its business and plans to expand the program in the next year.

Thanks to Project Keystone and other measures, Heinz believes it can reduce costs by as much as $1 billion over the next five years. In addition to cost savings, the company expects to derive additional benefits from ongoing optimization efforts. These include increased cross-functional collaboration, improved scaling and more.

To ensure that Project Keystone and other related initiatives produce the returns desired by company management, Heinz recently created an internal Program Management Office, which reports into the Office of the Chairman. The new Program Management Office has wide-reaching responsibility for corporate effectiveness and efficiency. So does the Global Supply Chain Task Force, which aims to increase the company's return on fixed assets while reducing the environmental impact of its ongoing operations.

As a result of its recent optimization efforts, Heinz has rarely run as smoothly as it does today. In fiscal 2010, for example, Heinz produced a top-tier return on invested capital of 18.7 percent--one of the best in the company's history. In addition, the company's gross profit margin increased by 50 basis points thanks to improved productivity and better pricing.

Despite the global economic downturn and ongoing issues related to currency fluctuation, Heinz has stayed healthy and strong. There are many reasons why, of course. But if you want to understand one of the most important, look no further than the company's ongoing efforts to pursue reinvention and optimization simultaneously. By doing both, Heinz continues to outperform its rivals in the food industry.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Follow Inder on Twitter at @indersidhu.