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3G shakes up management at Heinz

| Thursday, June 20, 2013, 11:00 a.m.
Andrew Russell | Tribune-Review
A crescent moon rises over the Heinz ketchup neon sign on the side of the The Senator John Heinz History Center in downtown Pittsburgh on Thursday, Feb. 14, 2013.

The H.J. Heinz Co. has received an executive makeover.

Less than two weeks after taking control of the storied Pittsburgh food company, Warren Buffett's Berkshire Hathaway and 3G Capital selected a fresh team of 11 senior managers on Thursday to help guide the company.

The changes were swift but not unexpected. 3G Capital, which will be active in running the business, and its handpicked Heinz CEO, Bernardo Hees, are known for shaking up management and cutting costs. Hees spearheaded aggressive changes at 3G-owned Burger King when he was its CEO.

The Heinz departures include North America CEO David Moran, Europe CEO Dave Woodward and General Counsel Ted Bobby.

Brendan Foley was promoted to zone president of Heinz North America from president of U.S. consumer products. Matt Hill was promoted to president of Europe from a post overseeing the United Kingdom and Ireland. Dan Shaw was named general counsel.

“It was inevitable you'd see new management. New owners bring in new people,” said Jack Russo, an analyst at Edward Jones, St. Louis. “This is a large transaction, so they want people they feel comfortable with.”

Observers are watching for cost-cutting and changes in strategy and culture at the iconic ketchup maker as Buffett and 3G put their mark on the company after paying $28 billion — a deal that closed June 7 — to take the company private.

“This is the new leadership team,” said Heinz spokesman Michael Mullen.

No further top management moves are expected, he said, but he declined to comment about changes the new team might make.

Such management changes are “not at all uncommon after a private equity deal,” said Diane Denis, a professor of finance at the Katz School of Business at the University of Pittsburgh. “A lot of changes need to be made because they are trying to improve cash flow and competitiveness.”

Heinz employs 32,000 worldwide, including 1,100 in the Pittsburgh region. Employees will likely will be dealt job losses because it's easy for companies to reduce expenses by cutting staff, Denis said. Remaining employees will be pressured with cost control and efficiency.

3G, based in New York, estimates it can cut about $225 million in Heinz expenses within three years, according to Standard & Poor's Ratings Services.

3G declined to comment.

“Given their reputation in other acquisitions they've done, that number could go higher,” said S&P director Bea Chiem. “I'm sure they are going to look at everything.”

Chiem said 3G has made changes and reduced costs significantly and quickly at companies it has acquired in Brazil and elsewhere in South America. Burger King is the “prominent example” in the United States, she said.

Within two months of buying Burger King, 3G cut 413 jobs at the restaurant chain's North American and Latin American operations, including at headquarters. It also targeted travel, rent and other items to save up to $40 million a year.

The executive changes at Heinz on Thursday were not the first shake-up in Heinz management by 3G. The company previously replaced 15-year CEO William Johnson with Hees. 3G also replaced Chief Financial Officer Art Winkleblack with another 3G partner, Paulo Basilio, when the deal closed.

3G is known for its hands-on approach to companies it acquires. Buffett is betting on 3G to wring profits from Heinz. He said last month that he agreed to the acquisition because of his confidence that 3G would run the business well.

“Today's leadership announcement further builds on Heinz's strong foundation for future growth,” Hees, a 3G partner, said in a statement.

“As shown through today's various internal promotions and appointments, the company is focused on rewarding and promoting the best and brightest talent in the organization to lead Heinz moving forward,” Hees said.

Analysts do not foresee major changes in strategic direction from Heinz's new leaders.

“Heinz was performing (well) before” the buyout, Chiem said. “It wasn't a distressed situation. So it wasn't in dire need of changes.”

Russo agreed, saying the Pittsburgh company is not “a turnaround project” for 3G. “Heinz has great brand names and good penetration in foreign markets.”

Heinz is considered “a reasonably effective company before this transaction, having done significant restructuring in recent years,” Denis said.

Heinz listed 10 executives who will be on the senior leadership team, in addition to Basilio and Hees. Nine of the 10 were previously at the ketchup maker. The newcomer is Eduardo Pelleissone, who joined from Brazilian freight company ALL America Latina Logistica SA, to be executive vice president of operations. Heinz CFO Basilio previously led ALL.

Andy Keatings, the chief quality officer who has worked at Heinz since 1994, joins the leadership team and will be in charge of maintaining food safety and managing risk globally. He will have a “dotted-line reporting relationship” with the board, which includes Buffett.

Thomas Olson is a Trib Total Media staff writer.He can be reached at 412-320-7854 or tolson@tribweb.com. Staff writer John Oravecz and Bloomberg News contributed to this report.

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