Heinz spokesman Jack Kennedy cited an increase in marketing spending for the company in its last fiscal year ended May 2. However, much of that, and spending going forward, includes initiatives such as public relations, packaging innovations such as Heinz EZ Squirt ketchup, and a recent entry into sports marketing with a 20-year deal to name the Pittsburgh Steelers' stadium Heinz Field.
"I see more articles about ad innovation at Heinz than I see actual ads," Prudential Securities analyst John McMillin said. "What [Heinz CEO] Bill Johnson promised three years ago was change, and part of that included more ad spending, which hasn't happened." Heinz's Mr. Kennedy denied a shift away from marketing of its core brands.
In April, Chuck Lanphear, media director for 15 years, was laid off during a major corporate downsizing, a termination that ended that position at Heinz. The company, which reported $9.43 billion in sales for its 2001 fiscal year, spent $89 million in measured media in 2000, according to Taylor Nelson Sofres' CMR. Mr. Lanphear, however, said actual spending was closer to $61 million, with $30 million of that expended on network TV.
Heinz has struggled in recent quarters, including reporting a net loss of $170.5 million in its fourth quarter.
Mr. Lanphear, 52, said Heinz is de-emphasizing advertising because it is increasingly focused on faster-growing private-label and food-service businesses that don't require it. Heinz recently expanded its business supplying generic products for retailers' store brands beyond soup to pet food. The company also provides frozen foods, soup, ketchup and mayonnaise to such outlets as Wendy's Restaurants International and Burger King Corp. "In terms of becoming more of a private-label company, it seems to be something Bill [Johnson] wants to do," Mr. McMillin said.
Mr. Lanphear's departure sparked the end of Heinz's relationship with Media Edge, which handled the company's national network and cable TV account, estimated at $40 to $50 million over the last fiscal year, according to two executives familiar with the matter. Media Edge handled media for all brands except Heinz ketchup, housed at Bcom3 Group's Starcom Worldwide.
The loss, effective in October, is the latest blow for the reeling WPP Group agency, whose top broadcast buyer Bob Igiel is near retirement. Heinz follows GlaxoSmithKline, Kraft Foods and Fort James business out the door. David Adelman, senior VP-director of convergence at Media Edge, also left the agency recently to take a job at Johnson & Johnson, where he is director of media futures/innovation. A Media Edge spokeswoman declined comment.
Media Edge's responsibilities for Heinz will be reassigned to its four brand agencies that have previously handled creative, planning and buying of other media: Bcom3's Leo Burnett Co. (with Starcom) for ketchup, sauces and condiments; WPP's J. Walter Thompson Co. (with MindShare) for pet food and pet snacks; Omnicom Group's DDB Worldwide, San Francisco, for frozen foods; and Empower, Cincinnati, for StarKist tuna.
Mr. Lanphear's exit is also significant because of the pivotal role he played in the fledgling business of purchasing TV ad time via Internet auctions. The executive had extended Heinz's use of auction site Freemarkets.com beyond the procurement of raw materials such as honey to the purchase of cable media, offering networks the chance to bid with the lowest cost-per-thousand price for Heinz to reach its target audience.
STILL COMMITTED TO AUCTIONS
During his tenure, Mr. Lanphear conducted two auctions for Heinz. Heinz is still committed to expanding its usage of Internet auctions to buy a variety of goods and services including advertising, according to the company spokesman. VP-Marketing Jay Abraham, who now oversees media as well as all other marketing responsibilities, however, is not expected to expend as much effort on the project as Mr. Lanphear did.
Outside of his role at Heinz, Mr. Lanphear also led an initiative on behalf of packaged good consortium Transora to explore working with a potential competitor to Freemarkets.com for media auctions intended this past April on behalf of heavy-hitters such as Bristol-Meyers Squibb, PepsiCo and Reckitt Benckiser. Without buy-in from enough advertisers to make it a worthwhile business proposition, however, Transora suspended the effort in March.
Contributing: Richard Linnett