Heinz Divides Star-Kist Into 2 Separate Units
Moving to capitalize on the fast-growing cat food market, H. J. Heinz Co. on Tuesday said it had divided its Star-Kist Foods Inc. subsidiary in Long Beach into separate canned seafood and pet food operations.
The canned seafood unit, which makes Star-Kist tuna, will be known as Star-Kist Seafood Co. The pet food division, whose flagship brand is 9-Lives cat food, will be called Heinz Pet Products Co. The company also sells cat food under the Amore and Kozy Kitten brands and dog food and treats under the Tuffy’s, Skippy, Vets, Recipe, Jerky Treats and Meaty Bone brands.
Heinz said the changes are effective immediately, and that the company plans no layoffs as a result. Both concerns remain based in Long Beach. The company also announced new chief executives for the two units.
Pet foods acquisitions and the successful “Morris the Cat” television commercials have helped make Heinz the market leader in cat foods. The company holds about one-third of the canned cat food market, according to the trade publication Advertising Age.
What’s more, a strong economy and the emergence of busy two-income households have increased the popularity of cat ownership and produced strong demand for cat foods, said William M. Fallon, vice president of finance at Heinz Pet Products.
“Cats have surpassed dogs as the nation’s No. 1 pet,” he said, because “cats are a little more self-sufficient than dogs.”
In a statement issued Tuesday, the chief executive of Heinz also talked of an expanding tuna market for Heinz, but industry analysts were skeptical.
The reorganization comes eight months after Heinz failed in a bid to acquire Bumble Bee Seafoods for an estimated $200 million. The purchase was challenged by the Justice Department on antitrust grounds, and Bumble Bee was ultimately acquired by Pillsbury. Bumble Bee, with a 20% share, would have given Heinz virtual dominance, according to industry analysts.
Major Advances
Although Star-Kist and its Breast O’ Chicken brand hold more than 37% of the domestic canned tuna market, Heinz has been bruised by competition from imports as well as growing consumer preference for other low-priced protein sources such as chicken.
‘We have made major advances in our canned seafood business both in the U.S. and abroad since the beginning of the decade,” said Anthony F. J. O’Reilly, Heinz chairman and chief executive. “We are now thinking in terms of a worldwide fish and tuna market for Heinz.”
However, some analysts viewed the announcement as the first step toward a possible divestiture of Heinz’s volatile canned tuna business.
“I think they want to segregate the earnings of pet foods from the tuna side . . . to isolate Star-Kist as a potential divestiture candidate,” said William Maguire, a Heinz analyst at the New York investment house Merrill Lynch. “The tuna business is not a growth business. Profit margins are eroding, and more and more chicken is competing against tuna as a protein source.”
Added Janet Mangano, a Heinz analyst at Josephthal & Co., a New York investment house: “What it looks like to me, is not a reorganization simply for operating efficiencies. . . . They may have a future sale (of the tuna unit) in mind.”
The new president and chief executive of Star-Kist Seafood is Keith A. Hauge, formerly group vice president-seafood division of Star-Kist. William R. Johnson, formerly group vice president-Star-Kist pet food, was named president and chief executive of Heinz Pet Products.
Richard L. Beattie, president and chief executive, announced his retirement from Star-Kist, which was acquired by Heinz in 1963. He will remain as a consultant for the transition, the company said.
