Manufacturing Strategies: Heinz's "Project Millennia" Calls for Overseas Expansion and Closing of 25 Domestic Plants

Chairman and CEO Anthony J.F. O'Reilly had unveiled the company's plan to strengthen the company's six core businesses, boost global growth and improve company profitability overall at that March meeting. O'Reilly told an audience that included more than 150 security analysts and journalists that the company would close or sell 25 plants at home and abroad.

In addition to brand building and increasing media spending by 30 percent, the key elements of Project Millennia are: overseas expansion; Efficient Consumer Response (ECR); value-added manufacturing; price-based costing; and working capital savings.

O'Reilly is relying heavily on the company's ECR initiatives, aimed at eliminating wasteful trade and supply chain practices, for big gains in Heinz North America profits. He anticipates annualized operating savings of $20-$30 million by Fiscal 1999. He also hopes to cut working capital by $40-$50 million.

Additional plans involve realigning production and distribution centers for pet foods to place factories and warehouses closer to Heinz customers and to develop co-packing arrangements with other dry pet food makers to lower delivered cost for the products. Heinz will also consolidate pet treat production to reduce overhead costs.

The Ore-Ida sale to McCain included plants in Burley, ID; Plover, Rice Lake and Fort Atkinson, WI; Grand Island, NE; and Clarksville, AR.

Among the Heinz financial goals in Project Millennia are 10-12 percent annual earnings growth; $14-15 billion in sales by the year 2003 (current sales are $9.5 billion); and more than $200 billion in free cash flow over the next five years. Here's how some of the Heinz facilities will be affected by the project:

• six factories -- two potato factories and four appetizer plants -- to McCain Foods Limited, New Brunswick, Canada, as part of a $500 million sale of the Ore-Ida food service business.
• Sale or closing of nearly one-fourth of its 111 plants worldwide, including at least eight European plants, seven Asian facilities, and 10 North American plants.
• Heinz will reduce its global workforce by about 2,500 employees, excluding those at plants and businesses intended for sale.
• heavy investment "to upgrade and build plants to add capacity in fast-growing markets."
• Increased production capacity for single-serve products in Australia.
• Closing of one of the five major ketchup and condiment factories in North America.
• Consolidation of the manufacture of Weight Watchers brand foods for Europe in a single expanded factory in Dundalk, Ireland, and eliminating current co-packers.
• Automate and optimize production at the currently labor-intensive cleaning of tuna at Star-Kist plants in Puerto Rico and American Samoa.
• Downsize or close up to three seafood production facilities that do not fit with the current low-cost manufacturing strategy.
• Close, sell or downsize up to five of the 10 current Heinz Bakery Product plants.
• Close several production facilities in Australia and New Zealand and develop Tomoana plant site for supply to Japan.
• Expand and develop international production centers around the world.

Edited by Nick Basta