The H.J. Heinz Company F4Q09 (Qtr End 04/29/08) Earnings Call Transcript

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The H.J. Heinz Company (HNZ) Q4 2009 Earnings Call May 28, 2009 8:30 AM ET


William Johnson – President & CEO

Art Winkleblack – EVP & CFO

David Moran – EVP, President & CEO Heinz North America

Scott O’Hara – EVP, President & CEO Heinz Europe

Margaret Nolan – VP IR


David Palmer – UBS

Terry Bivens – JPMorgan

Ed Erin – RBC

Robert Moskow – Credit Suisse

[Eric Sirota – Unspecified Company]

Chris Growe – Stifel Nicolaus

Bryan Spillane - Banc of America - Merrill Lynch

Andrew Lazar – Barclays Capital

[David Driscoll – Citi Investment]

Unspecified Analyst

Unspecified Analyst

Unspecified Analyst

Margaret Nollen

My name is Margaret Nollen, Vice President Investor Relations for the H.J. Heinz Company. I’d like to welcome everyone to our 2009 Analyst and Investor Day. For those of you attending today’s session all of your conference materials are included in the folder. If you don’t have one, just raise your hand and we’ve got folks passing those out.

Each speaker’s presentation is separate and the agenda for the day is in the front of the folder. Updated financial and statistical summaries are also included in the back of your packet which now includes five years of financial and sales history.

For those of you on the simultaneous listen-only call or webcast, the presentation and stat pages are available on our website at in the Investor section.

We have a great update planned for you today starting with a strategic overview by William Johnson, a detailed walk through by Art Winkleblack of our FY09 results and F10 plans. This will include a thorough analysis of foreign exchange impacts on our business. In addition we will have presentations from our largest markets, North America and Europe, with David Moran and Scott O’Hara. Mike Milone will be participating during the Q&A session. Mike is responsible for rest of world and quality.

Our schedule is a bit tight today so let me lay out the parameters and you can be prepared to get the maximum benefit. We have presentations scheduled throughout the morning, from 8:30 to just after 10:00. There will be one quick 10-minute break about 9:30. To ensure we stay on schedule we have a single Q&A session at the end of our formal presentations or from about 10:00 to 11:00.

So fair warning, keep your questions handy throughout the morning. As a reminder questions will be taken from those persons attending the presentation today here at The New York Stock Exchange and a special thank you to our friends here for use of their facilities.

Now before we begin let me refer you to the forward-looking statements, during our presentation we may make predictive statements that are intended to clarify results for your understanding. We ask you to refer to our 2008 Form 10-K as well as our press release today which list some of the factors that could cause actual results to differ materially from our predictions.

We undertake no obligation to update or revise any forward-looking statements. We may also use non-GAAP financial measures in our presentation as the company believes such measures allow for consistent period-to-period comparisons of the business. The most directly comparable GAAP financial measures and reconciliations of these non-GAAP measures are available in the company’s earnings release and at the back of our presentation today.

And now the day begins. I’d like to turn it over to William Johnson, Chairman, President and CEO of H.J. Heinz.

William Johnson

Thank you Margaret, I have to thank [Angela Zarr, Eric Sirota and David Driscoll] without whom I wouldn’t be here today. The guard refused to let me in. They vouched that I wasn’t an analyst and that seemed to convince him.

Secondly as part of your gifts what we forgot to give you was a currency calculator and I think you’ll find that handy as Art goes through his comments later.

On behalf of Heinz and our Senior Management team I want to welcome you to the NYSC for our 2009 Investor and Analyst Meeting. Our purpose today is to share with you the excellent results we’ve generated over the past three years, recap our record 2009 performance, review consumer and customer trends, and discuss our outlook for fiscal 2010.

Our message is unmistakably clear, Heinz is a healthy company with strong category leading brands and core businesses that are performing well in a difficult environment. On an operating basis we expect to deliver another year of growth on constant currency basis in fiscal 2010.

History tells us that the unprecedented volatility in currency is cyclical and is certainly outside of our control. Putting it aside you will see why I continue to be encouraged about our prospects in fiscal 2010 and beyond. We have great brands, a focused global portfolio in categories where we are positioned to win and a strategy that has delivered good results over the last three years.

Equally important we have a nimble proactive management team that has worked together for a number of years in this industry and has proven its ability to adapt quickly and effectively to changing conditions. Here is why we are well positioned for continued growth and performance.

Since spinning off our US tuna, pet food, baby food, and soup businesses to Del Monte in 2002, Heinz has become a focused, efficient, and innovative company with leading global capabilities in three vibrant core categories; ketchup, condiments, and sauces, meals and snacks, and infant/nutrition.

In fiscal 2009 96% of the company’s sales came from these three core categories with approximately 70% from a very focused portfolio of just 15 brands. We have a proven plan to drive growth and consistent performance in this environment and are confident that we can sustain our recent momentum.

Our industry leading top and bottom line growth over the past three years reflects the quality of our plan and our four strategic pillars; grow the core portfolio, accelerate growth in emerging markets, strengthen and leverage global scale, and make talent an advantage. Since we first announced our plan in June of 2006, we have grown sales at a compound annual growth rate of 5.5% to about $10.1 billion.

We have grown earnings per share by 38% from an organic base of $2.10 in fiscal 2006 to $2.90 in the year just ended. We have delivered double-digit growth each year and a compound annual growth rate of around 11%. We’ve generated operating free cash flow of nearly $2.7 billion, much of which has been returned directly to our shareholders and we’ve improved our after-tax return on invested capital by 360 basis points.

Our excellent three-year performance was highlighted by a record year of sales and net income in fiscal 2009. Reported sales rose modestly to a record $10.1 billion. However on a constant currency basis sales in fiscal 2009 increased 7.4% to $10.8 billion and most importantly organic sales grew 5.5%. We have now achieved organic sales growth for 16 consecutive quarters.

Net income grew 9.2% to a record $923 million. Earnings per share increased 10.3% to $2.90 at the higher end of our guidance supported by healthy organic sales growth and our decision to hedge currency. Operating free cash flow reached $880 million, well above our target despite an incremental $65 million discretionary pension payment, and after-tax return on invested capital improved to 18.4%.

I am particularly pleased with our consistently strong cash flow results, the almost $2.7 billion in operating free cash flow we’ve generated over the last three years has enhanced the company’s financial vitality, protected our credit ratings which remain a priority, and helped sustain our strong balance sheet.

Equally important is underwritten another increase in our dividend which we announced this morning. The dividend increase reflects the ongoing confidence of management and The Board in the future, and our strategy of returning a high percentage of earnings to Heinz shareholders. With this increase our dividend has grown almost 56% since being adjusted in fiscal 2003 for the Del Monte spinoff.

Its clear that we’ve delivered consistently good performance and growth over the last three years. With this period now behind us, I want to look forward and share my perspective on how the changing environment is shaping and influencing not only our plans but those of our peers.

The severe global recession that started late 2007 has fundamentally altered the world in which we operate. There is no question that the recession with a sharp decline in GDP, home foreclosures, tighter credit and high unemployment has dramatically effected consumer confidence, behavior, spending and ultimately their consumption.

However regardless of the economic climate the Heinz team remains focused on delivering results while continuing to build a strong foundation for the future. Our strategy reflects a thorough understanding of the factors that we originally discussed in November as a means of optimizing our performance during these challenging times.

We refer to them as the five C’s; consumers, commodities, currency, cost, and cash. Let’s start with a quick review of the consumer. In both developed and emerging markets consumers are trying to stretch their budgets. Value conscious consumers around the world are eating out less and at home more often.

They’re pursuing lower prices and becoming more selective shoppers. In short, it’s a shop smart, value meal economy. The consumers’ growing appetite for value has propelled private label growth and contributed to unprecedented channel shifting. Private label growth while still a major concern does appear to be easing somewhat, albeit at higher sustained share levels.

We expect this growth to slow even more as the global economy improves. The desire for greater value is driving an increase in channel shifting as consumers seek lower prices at grocery, discount, dollar, club stores, or where ever they can find it. We’re seeing a similar trend in Europe where traditional retailers have begun to respond to the discounters with their own value selections. Scott will have more on this later.

In light of this trend we are reallocating some marketing resources to in store activities to influence consumer decisions at the point of purchase. Its likely that we will see marginally higher levels of deals and allowance spend in the new fiscal year to counteract the value difference in certain categories.

However as I said at Cagney, we much all be wary of the [inaudible] prosperity that results from simply chasing volumes. While the current economic climate is testing consumer goods companies, our research does indicate that consumers still prefer leading brands in most categories including ours.

Heinz products around the world are fairing relatively well as consumers continue to place confidence and trust in our brands and we continue to connect with them. In the US for example, the Heinz brand ranked number one in University of Michigan American Customer Satisfaction Index for now the ninth consecutive year.

In the UK consumers are saying they will not give up Heinz ketchup, beans, and tomato soup in a recession. Again Scott will have more on this later. Even consumers who have altered their shopping behavior are saying they will return to brand names as the economy improves. That’s why we must continue to innovate and create new products that resonate with consumers.

Strong brands are needed by the retailer customers who also need innovation to bring traffic to their categories. The ultimate casualties of changing consumer behavior as I said at Cagney, will be weaker brands that do not innovate. These brands are likely to be among the first culled as customers work to reduce their number of SKUs.

Turning to another important C, commodities, Heinz anticipates significantly higher costs this year for potatoes and tomatoes, partially in response to the phase out of European government subsidies for tomatoes, as well as higher cost for tin plate, meat, and beans.

We do expect some easing in commodities like resin, dairy, and oil. Given our global operations currency cross rates are in some cases exacerbating the inflationary effect of commodity prices resulting in higher cost of goods. This is particularly true in the UK, New Zealand, Poland, Canada, and Russia.

Our procurement team is managing our commodity portfolio effectively. We have now locked in prices for approximately 50% of our fiscal 2010 commodity purchases while retaining some flexibility for the remainder. Overall we currently anticipate commodity inflation of roughly 7% to 8% in fiscal 2010 including the impact of unfavorable cross rates.

Beyond consumers obviously the most problematic C for Heinz in the new year is likely to be currency. Given that approximately 60% of our sales and the majority of our net income are generated outside the United States, the impact of unfavorable translation rates will make reported year over year financial comparisons difficult. Art will have a great deal of detail on this later.

Comparisons will be further complicated by equally significant unfavorable moves in cross rates. In fiscal 2009 we obviously benefited from our strategic decision to hedge currency, but hedging was not a viable option into fiscal 2010 because of the mark-to-market accounting rules. We know that currency changes are cyclical and these headwinds will not last forever.

Therefore the global breadth, balance, and strength of Heinz are how we should be valued. These remain a long-term competitive advantage for us and we expect continued organic operating excellence as I think you’ll see in both Scott’s and David’s presentation. We will do our best to convey our progress on a constant currency basis while being as transparent as possible in how currency is effecting our results.

Importantly we are not going to make major changes in the way we run our business due to currency and we are not going to disinvest to compensate. We will however take prudent action in fiscal 2010 to conserve cash and reduce costs starting with our target of at least $250 million in productivity savings.

To that end we are reducing operating costs in fiscal 2010 by freezing the pay of virtually all salaried employees, reducing the annual performance based bonus opportunity by around 20%, and eliminating a number of executive [purchases]. We are also aiming for flat fixed costs on a constant currency basis in our developed markets with a goal of holding fixed cost increases in emerging markets to less then half the rate of sales growth.

Additionally we are aggressively pursuing reductions in the more then $2 billion we spend on indirect and discretionary items which Art will elaborate on further. We will continue with our expansion of SAP across the company’s business units focusing in 2010 on Northern Europe. This is a key part of our long-term plan to make Heinz more efficient and effective.

Now that I’ve discussed the changing environment I’d like to share a long-term outlook and provide some guidance for fiscal 2010.

Over the long-term we expect to deliver 3% to 4% top line growth and 6% to 9% earnings growth on a constant currency basis. In the short-term focusing specifically on fiscal 2010, we expect constant currency sales growth of 4% to 6%, constant currency growth in operating income of 6% to 8%, constant currency EPS growth of 5% to 8%.

Based on recent average FX rates this would translate to reported earnings per share of around $2.60 to $2.70 for fiscal 2010. We also expect another strong year of cash generation with operating free cash flow of around $850 million to $900 million. We will continue to execute our long-term strategy in fiscal 2010 but given the current environment we will focus more selectively on continued investments behind our core brands and big ideas.

Managing the balance between innovation and consumer value, one cannot be done at the expense of the other. Continued investment in emerging markets to underwrite our long-term growth plans. A heightened emphasis on cost control and global productivity, and an aggressive focus on cash to support a higher dividend, reduce debt, and provide the resources for small, opportunistic tuck in acquisitions.

Investing for growth is still a priority. We will continue to support our core brands and proven ideas and consequently expect to increase marketing on a constant currency basis, by 7% to 10% while also funding a 30 to 40 basis point increase in deal spinning. These are all reflected in our range. Over the last three years we’ve driven growth in our core portfolio through increased innovation and much more aggressive marketing.

We’ve also capitalized on the growing consumer preference for products that help people lead healthier lifestyles. We will make some short-term tactical adjustments this year primarily through innovation that delivers greater value to consumers like our economy sized ketchup bottles shown in the forefront there. We will also continue our unrelenting emphasis on health and wellness initiatives particularly focusing on [inaudible] in beans, soups and ketchup.

A good example of our long-term thinking and agility in sharing ideas across the globe at greatly improved capability at Heinz is grown not made. This ketchup campaign was very successfully launched in Europe last year. Grown not made which David will speak in detail about later conveys Heinz’s leadership in tomato growing and processing, from field to fork.

Through our HeinzSeed program we are the clear leader in traceability and sustainability when it comes to tomatoes. Our grown not made campaign is now underway in the US supported by the most aggressive media spend for US ketchup since our memorable anticipation campaign 25 years ago.

We expect continued growth for Heinz ketchup in fiscal 2010 building on the more then 9% organic growth we achieved in fiscal 2009. To accelerate our growth we will continue to explore bolt-on M&A opportunities. Our strategy is to compliment the growth of our core portfolio while sustaining our current credit ratings with acquisitions that enhance capabilities and deliver cost synergies, greater scale and leverage, and other benefits particularly in emerging markets.

In December for example we took an important growth step in Asia Pacific by acquiring Golden Circle in Australia. Heinz Australia has been probably our top performing company over the last five years and Golden Circle gives us the opportunity for a further step change in that business. With this acquisition the combined sales of our Australian and New Zealand business units will approach $1 billion US making Heinz one of the best-positioned and largest companies in that region.

The acquisition adds two excellent brands, Golden Circle and the Original Juice Co. It’s a great fit with our increasing global focus on health and wellness and with our procurement expertise in vegetables and fruits. Golden Circle is an Australian icon with very high awareness and strong brand equity. The company manufactures a range of excellent fruit based products and beverages.

We plan to drive incremental growth through more aggressive marketing and innovation and we see a terrific opportunity to expand the reach of Golden Circle across Asia Pacific leveraging our scale and infrastructure. The integration of Golden Circle is proceeding well, synergies are on track, and we are excited about the long-term growth potential of this iconic business.

Beyond M&A we are continually looking for ways to further streamline and simplify our mix of businesses. We are currently analyzing the potential impact of several small divestitures and related productivity initiatives and we’ll be back to you shortly as we finalize our plans.

Emerging markets represent a key long-term growth engine for Heinz. We were heavily criticized years ago for these moves, but I think we were among the first to recognize their potential and we are uniquely positioned to add to our first mover advantage in a number of these markets. We plan to continue investing in R&D, marketing, new capacity, and talent and systems upgrades to drive disproportionate growth in these markets and we will continue to evaluate potential acquisitions to expand our reach and capabilities.

Emerging markets generated 14% of our sales last year and about one-third of our organic sales growth. We remain on track to grow emerging markets to around 20% of Heinz total sales by 2013. We have very strong businesses in these markets led by our rapidly growing business in India, which features two well-positioned nutritional beverages; Complan and Glucon-D.

In India, sales of Complan have doubled over just three years and we are approaching $100 million behind a very effective communication strategy focused on the growth and health of children. In Indonesia, our ABC brand of soya sauces, chili sauces, and cordials, is pushing towards $250 million in sales. We see significant growth potential in Indonesia because of the strength of our brand, our management team, and our distribution base.

In Russia, the world’s second largest ketchup market, for years I’ve said our goal was to become number one. While we are a leader in ketchup condiments and sauces with multiple brands and we became number one in value share in the most recent eight-week period.

Our shares in the key cities of Moscow and St. Petersburg have reached nearly 40% and we are leveraging our grown not made campaign and our relationship with McDonald’s which is very strong in Russia to drive share growth in other cities as we build distribution throughout that massive country.

In Poland, we achieved record sales for the 12th consecutive year driven by the strength of the Pudliszki brand ready meals, cooking sauces, ketchup, and other tomato products as the Polish grocery market continues to outpace growth in other markets in Europe.

Latin America, with double-digit organic sales growth in 2009 represents one of our fastest growing businesses. We have recently launched baby food and ketchup in Mexico behind the new baby food line in Guadalajara. In just over a year Heinz has already built an 11% share in Mexico in ketchup, one of the 10 largest ketchup markets in the world.

In China, our infant/nutrition business grew organic sales at a healthy double-digit rate in fiscal 2009. After recovering from the industry wide melamine issue, we have significant innovation planned for this year. We also expect Long Fong our Chinese frozen dumpling business to regain momentum in 2010 following some significant management changes last year.

China by the way isn’t the only market where our growing infant/nutrition business is thriving. Worldwide this category achieved 9% growth in fiscal 2009 on an organic basis driven by innovation, higher sales in emerging markets, and very solid performance in Italy. We expect emerging markets to continue driving a disproportionate share of Heinz future growth as the middle class expands in these areas.

We are very enthused about these markets. We will leverage our global scale in distribution and continue to strengthen our position in these markets behind solid infrastructure and a very successful focus on new product development and R&D.

In summary I want to reiterate a few key points, first over the last three years Heinz has delivered consistent performance and strong growth culminating in record profits and sales in fiscal 2009. In fiscal 2010 we expect another year of growth on a constant currency basis. Heinz is a healthy company with a high performing and focused global portfolio of leading brands and categories where we are positioned to win.

We are delivering disproportionate growth in emerging markets and we are very well positioned for the long-term. Our developed markets are adapting resiliently and successfully to the current environment. Our management team led by Art, Scott, David, Mike Milone, and Chris Warmoth have shown a proven ability to adapt quickly and successfully to changing market conditions through nimble, fact based and I want to add, unfettered decision making.

As a leader in food quality, safety, and sustainability, we remain a trusted brand of households across the world. As we celebrate our 140th anniversary we will continue to fulfill our commitment to Heinz shareholders to create value through superior operating performance with a strong focus on cash flow.

I have never had more confidence in Heinz and its future. We have world-class iconic brands, a proven plan that is delivering growth as proven over the last three years, and a very strong position in emerging markets. And we have most importantly one of the best, longest tenured teams in the food industry.

So at this time I’m going to turn the presentation over to Art, to review our fiscal 2009 fourth quarter results in detail.

Art Winkleblack

Thanks William, good morning everyone. I’ll take you through a full review of the FY09 results and just a brief recap of Q4 performance. As William indicated we are very pleased with the strong results that we delivered.

Key highlights for the year include 5.5% organic sales growth, EPS of $2.90 which was at the high end of our range, operating free cash flow of $880 million including significant incremental pension funding, and ROIC up 160 basis points. All achieved in this tougher economic environment.

To provide more depth let’s first take a look at our P&L scorecard, despite a significant headwind from currency translation, sales for the year were up about 1% largely driven by the 5.5% organic growth. Gross margin at 35.3% was down 120 basis points as commodity costs increased at a double-digit rate.

Consumer marketing was down for the year primarily reflecting the impact of currency. Reported operating income was down almost 5% but was up 3% excluding the effects of foreign exchange translations and up almost 6% when also adjusting for the major transaction cross rate changes in the UK.

And finally EPS was up double-digits as we offset the majority of foreign exchange losses through translation currency hedges.

To understand the magnitude of the currency impact on FY09 we’ve laid out constant currency results versus the reported [indicies] you just saw on the prior chart. Note that we have adjusted here for both currency translation and UK transaction impacts. This analysis shows that we posted very strong results on this constant currency basis.

Sales for the year were up about 7.5%, gross margin while still down was 50 basis points better then the reported numbers. Marketing was down only about 3% as we held back some spending in the turbulent months of February and March. Operating income was up almost 6% and EPS increased about 18%.

In order to provide full transparency on how we are looking at the business, here we have provided the bridge between reported and constant currency results. This is the key chart you’ll want to keep in order to fully understand our FY09 results. Cutting through the detail, currency translation lowered EPS by $0.29 for the year but was largely offset by a $0.21 gain on our translation hedges.

The net was a reduction of $0.08 versus the prior year. The other major element of the currency dynamic is the cross currency rate movements in the UK. The dramatic decline in the pound combined with the fact that more then one-third of our inputs in the UK are sourced from the US and the European continent created significant FX related cost headwinds for the company. This impact was an additional $0.10.

Turning to the full year P&L on a reported basis, I’d like to draw your attention to three lines. First, a key factor to our success in FY09 was our stringent cost controls in SG&A. SG&A excluding marketing was up only 1% and flat as a percent of sales at 17.2% despite higher spending on project keystone, increased fuel cost, wage inflation, and a number of bolt-on acquisitions.

Second, net interest and other expenses were $154 million lower then prior year driven primarily by two key items. We had a $107 million mark-to-market gain on the translation currency hedges and we recognized favorable mark-to-market gains on the total return swap associated with our remarketable securities.

With the improving debt markets these gains totaled $20 million for the year and largely offset the higher coupon on the remarketable securities. And the third key line to note is the tax rate, our effective tax rate came in at the low end of our range and was better then last year at 28.8%.

Now for your modeling purposes, the next chart summarizes the quarterly impact of the mark-to-market gains I just mentioned. Again, the currency hedges enabled us to overcome the unfavorable translation impact on both profit and cash flow. And the total return swap helped to offset the higher coupon on our remarketable securities in FY09.

This will important as you track our year on year performance in fiscal 2010. Now shifting to revenue our organic sales growth was very close to our 6% goal despite the tough global environment. Volume was down 1.5%, net pricing increased by 7%, acquisitions contributed almost two points to growth while Forex was a hit of about 6.5%. Excluding US food service, organic growth would have been 7%.

Turning to sales by segment, we delivered organic growth for the year in all reportable segments with the exception of the US food service. Keys for the year include 6% plus organic sales growth in our large European and North American consumer products businesses, better then 30% growth in our rest of world region, organic growth by our top 15 brands of more then 7%, and almost 16% growth in our emerging markets.

Brief highlights in each segment include the following; organic growth in Europe of 6% was driven by a 7% increase in price. European volume was basically flat. Acquisitions increased sales by 2.5% while unfavorable foreign exchange translation rates decreased sales by 12%. North American consumer products posted organic growth of over 6% with pricing of almost 7% and virtually flat volume.

Unfavorable Canadian exchange rates decreased sales by 2%. Asia Pacific organic sales were up almost 5% for the year reflecting a 6% increase in price. The acquisitions of Golden Circle and La Bonne Cuisine increased sales by about 7% while unfavorable translation rates decreased sales by roughly 10%.

David will talk more about US food service shortly for the year but pricing was up 3.5% while volume declined 6%. And in the rest of world segment organic sales grew a very strong 32%. Volume increased by 5% and pricing was up almost 28%. Foreign exchange decreased sales by five percentage points.

Gross margin was down 120 basis points for the year as 5.5 points of pricing and productivity was more then offset by about 6.5 points of inflation. We estimate market inflation on our basket of commodities was approximately 11% for the year led by significant increases on packaging, potatoes, and tomato products.

Additionally the cost for inputs in the UK sourced from Europe and the US were impacted by the changes in cross rates which on its own, accounted for a third of the total company’s drop in gross margins. For the year, productivity gains were partially offset by production cutbacks to reduce inventories, and by unfavorable contracts on some commodities.

The balance of the margin change is primarily driven by the new acquisitions which have lower margins then our base business but represent and opportunity as we go forward. Now turning to operating income each of our businesses posted very strong growth, again with the exception of US food service.

Operating income in North American consumer products grew almost 7% overall and achieved 9% growth on a constant currency basis as strong organic sales growth was effectively leveraged with a 60 basis point improvement in operating margin. Europe was faced with almost 12% headwinds this year from currency translation and another 7% from cross currency transaction movements in the UK. As a result operating income was down almost 12% but without these currency headwinds OI would have been up a very healthy 7%.

Our constant currency operating income in Asia Pacific grew almost 9% while reported OI was down 6.5%, again reflecting the unfavorable impact of currency translation. US food service was down to prior year by 24%. The reduced earnings largely reflect the impact of lower traffic at restaurant customers, limited pricing, and significant commodity cost increases.

And finally rest of world delivered strong profit results this year, up 17% constant currency and 15% on a reported basis.

Now let’s move to the full year balance sheet scorecard, CapEx at 2.9% was slightly lower then prior year despite increased investments in our global process and systems blueprint. In response to recent changes in economic conditions across the globe the company has been carefully reevaluating all non-critical capital projects.

The cash conversion cycle increased seven days from prior year, five days of which was due to payables and about two days from receivables. The payables decline was impacted by three days for the net investment hedges that were a liability at this time last year and have since been paid.

Going forward we’ll be narrowing this definition of CCC to focus solely on trade receivables, trade payables, and inventory to make this a better operating metric. For the year DII was flat to prior year reflecting very strong inventory reductions in the last four months of the year. Operating free cash flow hit $880 million and the ratio of net debt to EBITDA improved to 2.3x.

Finally we continue to improve our after-tax ROIC up 160 basis points. Importantly even if you exclude the ROIC benefit of the translation hedge gains, ROIC would have improved by 50 basis points.

Now turning to cash, our operating free cash flow was $30 million ahead of plan despite about $65 million in incremental pension funding during the year. This result is on par with last year and largely reflects the impact of higher net income, offset by increased pension contributions.

Cash paid for acquisitions of almost $300 million relates primarily to the Benedicta, Golden Circle, and La Bonne Cuisine deals. Now let’s take just a quick look at our performance for Q4, Q4 results were in line with the high end of our expectations. On a constant currency basis, the quarter was very strong, sales were up 8%, operating income up almost 12%, and EPS was up 23%.

This excludes the currency translation impact of 14%, 17%, and 25% at sales, operating income, and EPS respectively. Additionally it excludes the UK transaction cross rate impact of 6% at operating income and 8% at EPS. On a reported basis sales OI and EPS were all down.

Now diving deeper into the year over year sales change, organic sales for Q4 were up more then 5% reflecting net pricing of 7.5% and a volume decline of about 2%. Excluding food service organic sales would have been up more 6%. Acquisitions contributed three points to the top line while currency translation reduced sales by 14 points.

As a final note on the quarter we completed our new bank credit agreement, two-thirds of which is for three years and the remainder of which is for 364 days. After receiving commitments for more then $2 billion we ultimately accepted $1.8 billion. Importantly we brought a number of new financial institutions into the credit agreement which provides a strong backup to our commercial paper program.

And with FY09 completed I’d like to provide some context as to what the company has achieved over the past three years, in a nutshell its been a great run. Organic sales grew at an average annual rate of slightly better then 5% and we posted a new all time record for reported sales in FY09. EPS has grown 38% over three years. That represents a cumulative average growth rate of better then 11%.

We generated $3.5 billion in operating free cash flow over the last four years which averaged almost 110% of net income. After-tax ROIC improved by 360 basis points to 18.4%. By all measures the company has performed extremely well and we’re looking forward to the next three years.

Now with that said, I’d like to turn it over to Scott to discuss our plans in Europe.

Scott O’Hara

Thanks Art, and it’s a pleasure to be here with all of you today. Although I must say it’s a tough act to follow. I was with the Queen of England last week at our Kitts Green facility in England, 50 years to the day after the Queen Mother opened that site for us and I have to say it was a real honor for me and the Heinz company to have her visit the site.

Today I’ll discuss how Heinz is performing in Europe and the actions we are taking to enhance our future growth and success in this key market. In fiscal 2010 we are focusing our resources and talent on winning in a difficult environment in Europe where the global financial crisis and recession have effected consumer confidence, spending and behavior.

There are currency related issues that run through the European P&L and Art has taken you through them just a few minutes ago. I will focus my presentation today on the organic health of our business which continues to be strong.

I’d like you to leave the presentation today with a better understanding of the underlying performance in Europe, the strength of our brand portfolio, brand equity, and our plans to continue to invest behind these brands despite the difficult current economic environment. We will also focus on driving cost out of the business resulting in a strategy to manage our business as one integrated European operation while maintaining the competitive advantage of strong autonomous business unit.

First let me give you a snapshot of the business, Heinz generated roughly 34% of the global sales in fiscal 2009 or $3.4 billion. And as you can see the UK and Ireland generated almost half of our sales in the past year followed by the Benelux in Italy where our Plasmon brand is the number one brand in infant/nutrition. In fact these three businesses represent about 75% of our European sales.

In addition if we split out our emerging markets in Europe they now account for about 11% of our sales in Europe. I say this because Russia and Poland are two of the company’s key emerging markets and Heinz is well positioned for accelerating growth in Russia as its economy strengthens due to our leadership in ketchup, condiments, and sauces, and our partnership with McDonald’s.

I’ll discuss Russia in more detail in a few minutes. Looking at sales by category about 95% of our sales in fiscal 2009 came from the three core categories and this is in line with the company average. This is noteworthy because it illustrates the success of our initiative in fiscal 2006 to transform, streamline, and simplify our portfolio and our business structure in Europe to create a more focused growth platform.

Let by our strong Heinz brand our top six brands generated 72% of our sales in fiscal 2009. And importantly our number one brands represents 78% of our retail sales and span many markets and categories such as Heinz ketchup in the UK and many European nations, Heinz beans and Heinz soup in the UK, Plasmon infant/nutrition products in Italy, Pudliszki the leading producer of ketchup in Poland, and Honig the leading brand in The Netherlands, also Orlando in Spain.

Now that I’ve given you a brief overview of our business and brands, let’s take a look at our fiscal 2009 results. I’ve provided the same bridge as you saw from Art earlier and will focus my comments on a constant currency basis. Net sales rose 8.5% driven primarily by price. Operating income increased 6.9% and gross margin was lower due to the impact of transaction currency and our UK frozen business.

The UK transaction cross rate represented 110 basis points of the lower gross margin performance. Unfavorable currency reduced our reported results however our underlying results in Europe for fiscal 2009 were solid in a difficult economic environment.

Heinz streamlined its business in Europe in fiscal 2006 to enhance our performance and I’m pleased to tell you that the plan has delivered. Over the last couple of years compound annual growth in sales has grown by 7.4% on a constant currency basis and during the same period, compound annual growth in operating income has grown by 5.8% on a constant currency basis.

Underpinning this performance has been a disciplined approach to taking out cost and as you can see we’ve made great progress on C&A and G&A. Heinz has achieved sustained organic sales growth over the last three years. The volume price mix has changed especially in fiscal 2009 as inflation exceeded 11% but the end result in every year has been higher organic sales.

By the way, I was encouraged by our improving volume trend in the fourth quarter of fiscal 2009 and in fact if you strip out the UK frozen business, volume was about flat. We expect volume trends to stabilize in fiscal 2010.

Last year I shared the strength of our ketchup business across Europe and as the European’s say, we’ve gone from strength to strength. Heinz is number one in eight European markets and the growth has been impressive with sales growing between 65 and 19% versus last year. And our success in Europe is built on a solid foundation of strong brand equity, effective marketing, and enduring consumer loyalty to Heinz.

William mentioned earlier that in the UK a December, 2008 poll examining the impact of the recession and in this survey consumers ranked Heinz ketchup and Heinz baked beans as the first and second products that they would not give up in a recession. Heinz cream of tomato soup ranked seventh. No other company had more then one brand in the top 10. And speaking of the UK, in addition to ketchup Heinz is a market share leader in other categories which remain a stronghold for our company and the Heinz brand.

Heinz is number one in soup and beans, where sales grew 12% and 8/% respectively versus last year. Elsewhere in Europe in addition to the Heinz brand we have many strong local brands, what we call local jewels that are number one starting with Plasmon, our iconic infant/nutrition brand in Italy where sales grew 5% to Honig in The Netherlands where sales grew 8%. Over to Spain where the Orlando brand leads and continues its impressive growth with sales up 10%.

And finally over to Poland where the Pudliszki brand continues to resonate with consumers and sales grew 19%. Now that I’ve reviewed our business and its performance, I want to focus for a few minutes on the current landscape and economic environment Heinz faces in Europe.

You’ve heard William talk about the five C’s and how we think about them. Today I’ll focus on three of the C’s; the consumer, commodities, and currencies. As in other regions of the world Europe has been effected adversely by the global recession. The economy has contracted in countries across the European Union and GDP growth has faltered.

Rising unemployment is another consequence of the recession in Europe and it is a trend that is showing no signs of abating at this time. With high unemployment and the economic downturn consumer spending has tightened considerably and there’s no question that consumers are becoming more value focused, that they try to stretch their Euro and pound for purchases including groceries.

The consumers’ pursuit of value is effecting retailers and triggering increased channel shifting. We are seeing share gains by discounters such as Aldi and Lidl, and other price focused retailers like Asda and Morrisons in the UK for instance. Fortunately our top brands in Europe have continued to perform well which we believe will continue in fiscal 2010.

To be sure private label is gaining momentum especially in the fourth quarter of fiscal 2009 and there’s no question that many budget conscious consumers are attracted in the current economic climate to private label. The chart on the left hand side of the slide shows that during the 52-week period ending in March 2009, the green bars, Heinz is growing faster then private label; 8% versus 7%.

However during the last two weeks ending March 2009, the blue bars, private label was growing faster then Heinz at 14% versus 12%. Despite this you can see that on the right hand side of this slide the strength of our brand equity has kept Heinz share strong. And Heinz has proven it knows how to compete and win in this type of environment with one main branded product and private label.

While we are seeing some movement to private label we are also seeing a dramatic shift within private label. You can see this shift is from premium private label to budget private label. We believe the category is becoming quickly bifurcated where strong number one brands and private label will perform well and number two and three brands continue to be marginalized.

Our goal in this difficult economic environment is to continue to drive consumers to our top brands and we believe Heinz has a long-term competitive advantage over private label because our brands deliver better quality, taste, nutrition, innovation, food safety, and ultimately value.

The broad based economic downturn has also weakened key currencies such as the Euro and British pound and let to the unfavorable impact from currencies. And in addition to these currency headwinds commodity prices remain at high levels for tomatoes, tin plate, potatoes, and other key commodities after rising sharply in the past year. Tomato prices in particular in Europe rose after the phase out of government tomato subsidies which began in 2008.

Our UK business purchase of commodities and finished goods in currencies other then the British pound is approximately a third of their total purchases. Commodities like beans from the US and tomatoes, tin plate and resin from the European Unions and finished goods like ketchup, condiments, and sauces, and baby food from the European Unions.

Now I’d like to review some of the actions Heinz is taking to bolster our business during this difficult environment. Let me start with the strength of our European leadership team, the bulk of the team has been together for the last three years and continues to grow, develop, and deliver. Each is a local in their respective markets. And I’m a big believer in having local business leaders because they have a deep understanding of the market, the customers and the consumers within it.

And this is a great foundation to build on and is more important then ever given the difficult environment in Europe. To continue winning we are focusing on the following themes in fiscal 2010; investing behind our leading brands, partnering with customers, leveraging our scale, expanding our emerging markets, accelerating productivity, and driving cash.

Let me take you through those in a little more detail, our first theme is investing behind leading brands. We will continue to invest behind the strength of our brands and brand equity in Europe. And we are planning for marketing to be up high single-digits in dollars on a constant dollar basis. In addition we are taking advantage of declining advertising rates with cost per GRP down between 10% and 15% across the European market.

And we are committed to this based on the strong results we delivered this year. Let me share a couple of examples of the successful programs that we will leverage in fiscal 2010. In the UK Beanz [inaudible] and we sell over 1.5 million cans of beans per day. With our integrated marketing strategy and creative TV commercials the brand really responded. Heinz achieved a 57% volume share post this TV campaign, our highest share since 2007. And the number two brand declined from 20% to 8%. We will continue to invest behind Beanz in fiscal 2010.

In Italy behind the Plasmon brands, consumers really responded to the change we made to our fruit products. Consumers significantly preferred our fruit product in blind taste tests versus our key competitor. And in addition consumers loved the value of our 30% bonus pack and the result here was the highest volume share since 2007. Again we will leverage the insights from this program as we build our 2010 program in Italy.

Our second theme is partnering with customers, knowing that customers are becoming more selective and value oriented when they shop for groceries, Heinz is increasing point of sale promotion to reinforce our brands and influence their purchase decisions. One of the keys to our future growth and success will be to also leverage the trend of channel shifting. As I’ve said before we want to be where the consumer shops.

Heinz is increasing our range of products with major discounters in Europe in response to this change in consumer spending and behavior. In addition to retail we are partnering with our food service customers to leverage the strong brand equities of many Heinz brands by increasing visibility in the front of house to help drive traffic. And in spite of the challenging economic environment our UK food service business continues to perform well.

Now this has been driven largely by new business wins in fiscal 2009 with Subway, Burger King, and Spirit among a number of others, resulting in sales in the UK growing 7% on a constant currency basis. Our third theme is leveraging our European scale.

One way we are leveraging our scale is through marketing. Our grown not made packaging and marketing plan has helped drive the impressive growth in our ketchup business across Europe and we have executed the marketing plan across Europe with the common European TV commercial. [video]. For those of you who may not have known, that was an execution from The Netherlands.

Another means of leveraging scale is through packaging. As consumers see greater convenience and value Heinz is responding by creating innovative new packaging and improving packaging such as PET bottles for salad dressings in Europe and Doy packs for ketchup, mayonnaise, and dressings in Russia. We have also leveraged PET packaging from our TK with a twist product to our salad cream product in the UK and our glass tomato sauce bottle to a range of Heinz soups in The Netherlands.

We are also looking to transfer innovation from one package type to another. Here you can see an example of our smart cap from our cordial business in The Netherlands to our infant/nutrition business in Italy. Our proven packaging prowess stands out as consumers seek products that are fresh, safe, and easy to use.

Our fourth theme is expanding into emerging markets and as I mentioned earlier Russia and Poland are two of the key emerging markets for Heinz. With strong businesses and leading brands in these markets Heinz is well positioned to accelerate growth. These markets continue to perform well and are growing in importance.

On the left hand side of this slide you can see that emerging markets percent of total European sales increased 230 basis points versus fiscal 2007, and on the right hand side of the slide you can see that the growth rate has been impressive with an 18.7% increase on a compound annual basis. In Russia our marketing strategy is driving the growth of Heinz ketchup and by the way if you look closely you’ll notice that the Heinz ketchup bottles in the roadside display and in the print advertising feature our new labels with the red ripe Heinz tomato on a vine, leveraging the grown not made concept we developed in Europe.

Our marketing plan in fiscal 2010 airing new TV commercials in Russia that adapt a very successful and engaging spot that stars a duck who dips a young boy’s french fries into Heinz ketchup. And you may have seen a version of this commercial used in Canada, which is another example of how we are leveraging our international marketing. [video]

To further drive growth in emerging markets we are focused on increasing our distribution beyond the major metro areas. In Russia for instance Heinz is focused on improving and expanding product distribution after achieving success in key cities of Moscow and St. Petersburg. In fiscal 2010 our goal is to cover all big cities and move further into the smaller cities through our expanded sales forces.

It’s a simple equation really, if we can reach more potential consumers in Russia and other emerging markets, faster and more efficiently, we believe we can achieve greater growth in sales and volumes. Our fifth theme is to accelerate in productivity, we continue to focus on driving cost out of our business in Europe. In addition to our base productivity improvements we are leveraging Heinz global programs to accelerate our productivity efforts.

In fiscal 2008 Heinz launched a global supply chain taskforce to identify opportunities to leverage our supply chain scale and in fiscal 2009 we launched two initiatives in Europe as part of this global supply chain taskforce. Tailwind a comprehensive program focused on driving efficiency and indirect procurement and HGPS, or Heinz global performance system, a program aimed at driving efficiency in our manufacturing site.

In fiscal 2010 we will layer on top of this keystone. This is a program focused on driving common processes across the Heinz world supported by a common system platform, SAP. And we are working with the global team but leading the rollout of this program across Europe. An example of our productivity strategy is our sauces center of excellence manufacturing strategy across Europe the red sauce center of excellence in The Netherlands is being supplemented with a plastic center of excellence satellite in Russia and a glass center of excellence satellite in Poland.

These are new lines in existing facilities to support the local market. This strategy has the added benefit of limiting our currency exposure in these markets. We also have a white sauce center of excellence in France and a tetra pack center of excellence in Spain. To further drive productivity and simplify our business we expect to cut an additional 15% of our lower margin SKUs bringing our total SKU reduction program to almost 30% since fiscal 2008.

And our last theme is driving for cash, to increase cash flow in fiscal 2010 we have initiatives in place which we believe will deliver on a percentage basis a reduction in days of inventory by high single-digits, a reduction to our cash conversion cycle by low double-digits resulting in a low double-digit increase in cash flow.

We expect another year of organic growth in fiscal 2010 and given the currency and commodity headwinds I mentioned we expect to hold onto our fiscal 2009 pricing and institute new pricing as appropriate in select markets. As always we will seek to achieve the right consumer value equation and balance the extent of our pricing actions and the impact on volumes.

Based on these plans on a constant currency basis we expect to deliver in fiscal 2010 an increase in net sales, an improvement in gross profit margin, an increase in operating income, and an increase in our operating cash flow. However Q1 in particular will be a challenge for us in Europe. We’re lapping our strongest quarter from last year, we have the transaction cross rate issues that Art mentioned, and we also have manufacturing variances related to lower production volumes at the end of last year.

That said, we expect fiscal 2010 to be another good year. In summary, the underlying business in Europe is performing well and our brand equity remains strong. We continue to focus on the growth of our leading brands in our core categories in both the developed and emerging markets of Europe and Heinz is well positioned to achieve accelerating growth.

As the economic downturn continues we are taking action to reduce costs, improve our productivity, and minimize the impact of currency issues so that Heinz Europe can emerge from this recession as an even stronger, integrated, and more competitive business.

Thank you for the opportunity to share my insights on Heinz Europe and our businesses and brands. I look forward to your questions. We now have a short break. After the break David Moran will take you through our North American business and Margaret will come up to give the logistics.

David Moran

Welcome back everyone, I’m excited to share the results for North America and talk a little bit about how we’re going to keep winning into the future. For perspective and background is under $5 billion in sales and about half the company. For my portion I would wish that you have two takeaways from my presentation, that NACP will continue to deliver very strong performance for the corporate and that we will have another record year on virtually all financial measures.

We’re off to a very fast start and we expect Q1 to be very strong. Second, the capabilities we’ve added and the changes that we’ve made in our US food service business are paying off and we expect profits to grow in fiscal year 2010. We’re making good progress in this unit. Let me start with consumer products, this is a large and very focused portfolio.

Five brands make up 70% of the business and we’ve been growing along at about a 10% clip. Over the last seven years we’ve had a consistent approach in how we run the business. First we upgraded most of the top 100 leaders, we’ve refocused them on innovation, customer partnerships, and importantly, research.

Today we are a smarter, more capable organization. Second we’ve been consistent in how we run the business, the beliefs that we run the business with. We believe in organic growth, selling products off the shelf at full price without a discount, every line of the P&L must improve every year, and importantly we innovate to enroll consumers and customers in our brands and businesses and also to throw off our competition.

Finally we have an integrated structure where people are empowered to lead and to make decisions. Bluntly I think we’ve nailed this component of the business. This is the number one reason for our success as its enabled us to retain, recruit the very best in the industry. Since fiscal year 2003 we have grown sales by more then $1 billion and profits by $272 million, yet as I look back I see two very distinct periods in terms of consumers’ health and our input costs.

In the first period consumers were strong, their wealth was growing and they were willing to trade up the power curve and pay more for a better experience which we offered. Then things changed over the last two years and input costs really took and the consumers’ financial situation turned much worse. Regardless and I know you’ve heard this from William, our brands and people have been able to adapt and change to this new environment and to continue to win.

I think it’s a credit to our structure, our culture, and our leadership model here at Heinz. One of the biggest win has been our seven-year strategic emphasis on full priced sales. We value consumers and customers that are willing to pay full price for our product and not cherry pick us on deals. As you can see we’ve taken our full price consumption from 77% to 87%.

We believe there is no better validation of a brand’s health, its management team, or the ability to execute in the marketplace then this percentage. For perspective we believe we believe this 87% is higher then any of our competitors. But as you think about the future we do have new threats, the biggest of course is private label. How big of a threat is it? Well as you heard from William and Scott and Art, we believe its real.

And as you can see private label was flat for a number of years but when the consumers’ confidence nose-dived about a year ago private label really exploded. Rather then recap the private label story which I know you know so well and have heard from others, I would rather focus my time on how we’re going to deal with this new reality.

Let me share with you our beliefs as these beliefs are guiding our business choices, first private label is a real threat. Second is is that second and third tier brands are in real trouble. Third we believe that consumer frugality will stay even when the economy turns and finally, leading brands can win and win big in this environment but they must do what brands do.

They must innovate, talk to the consumer, and also add value to retailers which private label cannot do. Consumers are eating more meals at home and our portfolio is incredibly well positioned. As you can see seven of our eight top categories are experiencing sales growth. Now for fiscal year 2010 we’re going to have five drivers; new, better tasting, and healthier products. That’s the backbone of our plan.

We’re going to push the packaging envelope with new people, new thinking and capabilities. We’re going to increase our working media by 70% in fiscal year 2010 versus FY09 actual spend. And as you’re going to see we’re going to continue to make great progress on our productivity, the backbone of our business.

Consumers are eating more meals at home and our comfort foods portfolio is a perfect match for them. We’re introducing a new red skin potato to our steam and mash line. Additionally Classico and Heinz gravy have improved taste profiles and something that’s very important to me, over the last seven years roughly 80% of all of our products have had an improved taste formula in terms of how we make the products.

For consumers that want the ease and taste of a restaurant experience at home our portfolio plays well here also. We’re launching grab and go anytime quesadillas and two new skillet meals SKUs from our Friday’s brand. We’re also expanding our Nancy’s product line and refreshing the packaging. Smart Ones continues to expand its offerings with four new product lines. We continue to drive the Smart Ones 24/7 strategy with new day part eating occasions and our great R&D team has developed new flatbreads and pizzas that deliver a softer bread with a crispier crust out of the microwave using a proprietary technology.

These products were preferred 70/30 in blind taste tests. In Canada where Smart Ones is already a strong number two, only after just being introduced, we’re launching the brands’ first line of canned soups with zero points for the consumer. Now health and wellness has been a priority for our company since H.J. founded the company. We’re working to simplify our ingredients which can be seen with Classico line of pasta sauces.

In addition to adding the things that consumers want like fiber and pre-biotics, we’re focusing on removing ingredients consumers don’t want such as sodium. Consumers not only evaluate our brands on taste they also want ease of use. That’s why we work so hard to improve the ease of opening and dispensing mechanisms on so many of our products.

We’re also embracing our consumers’ and customers’ desire for less waste and more efficient packaging. Our shareholders also benefit from this choice. In fiscal year 2010 we expect to reduce 15 million pounds of landfill waste. To communicate with customers that we are spending more behind our brands then ever as I shared, we’re going to increase the working media by about 70%.

Our biggest TV spend will be on Heinz ketchup and I’ll share more about that in just a minute, but let’s take a look at the three North American commercials that are currently on air. [video] Just as a side note in the two weeks that that Ore-Ida add has been back on air, our consumption has jumped 28%. I think we’re going to keep it on for a while.

Also we’ve been developing great capabilities in print which has proven to be very effective for us. Two of my favorites are up here. The Classico ad shows consumers the natural quality ingredients of Classico. And the vinegar ad teaches consumers that some cheaper vinegars come from petroleum while Heinz vinegar is from all natural ingredients like corn and apples.

We started this vinegar campaign in mid April and the business has popped 11% as we started running those ads. We’re also linking all of our ads with an internet strategy. This enables the consumer to dig deeper into our story. For example, Heinz vinegar site gives more detail about the all-natural Heinz vinegar option. Now I’d like to share with you our FY10 plans for two of our larger brands; Heinz ketchup and Smart Ones, let me start with ketchup.

Both the US and Canada have exciting plans for ketchup this year. Heinz ketchup will likely have an all time record dollar sales, dollar profit, and dollar media spent in both countries. In the US we’re leveraging our unique Heinz seeds advantage. In Canada we’re celebrating the brands’ 100-year anniversary.

Heinz has competitive advantage in our seed technology and this seed technology puts us out in front of our competition. Since the 30’s we’ve been the industry leader and produce almost 50% of all the tomato seeds grown in North America. We have virtually 100% traceability from the seed to the farm and to the finished product. This is something the consumer is valuing more and more.

We’re marketing our Heinz seeds competitive advantage with our grown not made integrated campaign across both CP and food service. It reminds mom that Heinz ketchup not only tastes great but is a wholesome mealtime enabler that she should feel good about serving her family.

In Canada we’ve kicked off the celebration to mark the 100-year anniversary. Our program includes in-store, restaurant merchandising, television advertising, and special recipes. The second brand I want to highlight is Smart Ones. Over the last 10 years this great brand has grown by almost $500 million in retail sales with the compound annual growth rate on volume of 8%. Our penetration is up 25%, our buy rate has more then doubled, the numbers of SKUs on shelf has more then doubled, and our awareness is up four-fold.

However the frozen nutritional meal category is consistently mirrored consumers’ confidence and this recession has been particularly painful as this graph shows. Even in these challenging times we believe that focusing on full price sales is the best response. As consumers with stretched budgets have left the category, all brands have suffered.

Heaving discounting by a leading competitor during this time period has failed to bring these consumers back to the category. Instead this activity has traded down remaining loyal consumers down to a lower price point and resulted in erosion of category dollars. As you can see at the bottom of the slide dollar sales are down twice as much as penetration. This is due to overly deep discounting.

So in fiscal year 2010 we’re going to stay committed to our core strategies of 24/7, full price sales, innovation, and winning on the taste of our products. We’re launching 11 new SKUs, our marketing investment is likely to be up 30% and I’d like to address something that I know is on your mind. Finally, we don’t think its in our brands’ best interest to add promotional spending. We certainly could, we certainly could wrench share for the short-term, but our strategy that has served us so well for so long, seven years, and this brand has just never been stronger.

But we’re going to monitor this situation very closely and we could change our minds and change our plans if we feel its in our best interest. At this time we believe our plan is correct and frankly we are glad we sidestepped this promotional war. I don’t think that the brand would be in any better for it and I’m sure we could have sold a few more cases but we’d have less money in our pockets if we had.

In summary the North American consumer products business had another record year in fiscal year 2009, eight of our 10 largest brands achieved all time records. In fiscal year 2010 we’re predicting new records will be set on virtually all financial metrics. We expect sales growth of low single-digits and OI growth in the high single-digits.

New profit records will be set and achieved likely in nine of 10 brands. So we feel great about the brands, the people, and all of the things that we’re doing back in Pittsburg to run this business. Now let me turn my attention to the US food service business, six brands make up 60% of the income of this important unit and its no secret that our food service business has had several disappointing years.

But the food service business remains core to Heinz and in North America and we’re excited about the next phase of running this business. The industry is experiencing one of the most difficult times in history. Traffic is down significantly, sales are off 5%, really the lowest its been since the last 1970’s.

But in addition to the industry contraction we’ve had three issues of our own that we needed to address. We had too much complexity, we had minimal innovation on our core brands, and too much proprietary emphasis and we were locked in six price contracts which were difficult for us when inflation hit. So in fiscal year 2010 we’re going to focus on simplifying the business through a complete reinvention.

Our ketchup, condiments, and soup portfolio will get significantly more attention and we’re going to have a stronger, flatter, more capable sales organization. The build up in complexity was a burden that really had to be addressed. Over the last years we’ve really gotten after it and we plan to even make more progress in fiscal year 2010 by reducing the number of SKUs by 40%, simplifying cash application and taking three days out of receivables, cutting distribution centers, and the other things listed on this slide.

The ketchup, condiments, and soup business is the majority of our brands. In fiscal year 2010 we will work to redefine how we sell these products focusing on branded innovation instead of custom products. We now have 80% of our food service R&D resources focused on branded products and that’s up from 30% two years ago.

We’re also going to sell our customers differently, really on the value of our products bringing to their operation. Instead of viewing as an expense we’re going to leverage data to prove that our tabletop condiments drives post food orders. Over the next two years we plan to upgrade every food service ketchup package. This will improve the experience for the consumer.

We’ll focus on driving our tabletop business and expanding the front of the house presence with new branded bulk dispensers. We’re also applying the health and wellness approach to food service by reducing the amount of sodium by 25% on many soups. We’re also driving the Heinz ketchup message very hard to restaurant operators. We know that consumers have a more favorable impression of a restaurant if Heinz ketchup is on the table and we’re using dedicated print advertising to reinforce this message in key food service magazines.

Last year I said we would segregate our customers more then ever and invest resources and ideas disproportionately and more strategically. That strategy is paying dividends as we’re winning new business and strategic partners at exciting rates. We’re also partnering with customers’ marketing leaders for more integrated campaigns such as this Burger King ad and program. We’re making the necessary and appropriate changes and have made strong progress while doing business in somewhat of a difficult environment, but I’d like to walk you through the food service algorithm in terms of our volume and our business trends for fiscal year 2010.

We do expect traffic to be down again another 5%. We also expect unit contraction of about 1%. We’ve elected to exit unprofitable volume. In addition we’re cutting 18% of the SKUs. We are adding substantial new business and putting in a lot of new business initiatives. We’re going to have better pricing to fully cover all inflation. This will yield likely a minor sales decline of a couple of points but we expect gross margin expansion of about 200 basis points and importantly we should achieve profit growth this fiscal year.

So that’s the commercial side of North America, but I would like to talk a bit about how we work and importantly the productivity measures we’re driving. As I mentioned earlier, our culture has been a key enabler for us. We built a model that values ideas, execution, teamwork, and personal accountability. We focused on building powerful capabilities and supply chain sales, R&D, HR, and finance and they all contribute to our culture.

Driving productivity is at the very backbone of our success. Over the last seven years we’ve reduced unprofitable SKUs, closed factories, entire distribution networks, distribution centers, and suppliers and yet at the same time we’ve grown sales by $1.2 billion and improved service to our customers.

Our sales function is a strategic weapon in the marketplace and the success here shows up in the numbers both bottom and top line that we’ve been talking but it also shows up in the leadership work that we’ve done around D&A reduction and the overall efficiency of this great function. The company decided years ago that we’re going to win with our brands. We’ve doubled our investment in R&D and the payback is also seen in the top and bottom line numbers that we’ve been sharing.

This slide sums it up well, we’re about $1.2 billion larger in sales and yet we have about the same number of employees. We’ve reduced our working capital needs to become more efficient and our ROIC progress pulls it all together. As I’ve said before North American consumer products anticipates we will have another record year in fiscal year 2010 with most of our brands achieving all time record sales and profit records.

Our progress in US food service is paying off and we expect to return to profitability and growth this coming year and I thank you, and I’ll turn it over to Art now for a deeper dive.

Art Winkleblack

Thanks David and good morning again. Okay its time to get out your currency calculators, [inaudible]. Let me see if I can take you through this. In this segment of the review I’ll take you through the key elements of our plan for fiscal 2010 and we’ll try to be very clear about the primary building blocks. We’ll cover four main topics; currency dynamics, P&L drivers, the balance sheet, and finally put our plan into the context of the two year high performance plan that we launched at this time last year.

The key messages to take away from our plan today are that we are driving for solid top and bottom line growth on a constant currency basis. We expect currency to be a sizable headwind for the year, both from a translation and transaction standpoint. We are very focused on productivity and generating cash in light of our tougher economic environment. We’re continuing to invest in the business and finally, we’re growing our dividend while driving the strength of the balance sheet.

Let’s start with our review of currency, before looking forward I want to take a step back and establish the foundation upon which the FY10 P&L will be built. Going back to fiscal 2008 which was the baseline for our high performance plan, its important to understand the foreign versus domestic mix of our business. Overall foreign operations accounted for 61% of our total sales, 64% of operating income, 78% of pretax income, and 82% of net income and EPS.

The growing foreign mix of profit below OI reflects the fact that the bulk of our debt resides in the US and therefore the related interest expense. Obviously the cost of our world headquarters in Pittsburg are based in the United States and lastly the corporate income tax rate in the US is significantly higher then that of most foreign jurisdictions.

As a result net income denominated in foreign currencies is extremely important to our corporate EPS. To expand on this last point, from our 10-K for FY08 you know that 78% of our NPBT and 82% of our net income came from outside the US. The difference is obviously income tax. The average foreign rate is about 27% while the effective rate in the US is 42%. That latter reflects the 35% statutory rate plus state income taxes and the tax associated with repatriating foreign earnings.

Net, net the US already has the second highest corporate income tax rate in the industrialized world behind only Japan. With this FY08 baseline in mind you know that foreign currencies drop precipitously versus the US dollar in the past nine months. The movement has been unprecedented in terms of both speed and magnitude and here you can see the movement in four of our key currencies from the first day to the last day of fiscal 2009 which was on April 29.

The best performance of the four was the Euro which only dropped 14%, while the pound, New Zealand and Australian dollars dropped about a quarter of their value. As discussed we hedged these currencies early in the year enough [inaudible] most of the EPS impact in FY09. Since we operate on six continents, we have exposure to other currencies as well.

The Polish Zloty lost one third of its value while the Canadian dollar, Indian Rupee and Indonesian Rupiah dropped between 15% and 20%. These reductions did have an impact on FY09 EPS as we did not hedge any of these currencies for translation purposes.

As a result of the strengthening dollar versus almost all other currencies foreign net income dropped to 60% of total earnings in FY09 or 64% after you exclude the impact of the hedge gains that were executed in the United States. Translating these changes in market currency rates to our P&L, we’ve laid out the average rates effecting Heinz results for FY08 and FY09 as well as recent average rates which we’re utilize for our FY10 outlook today.

Let’s take the UK pound as an example, while the translation rate for the pound dropped from an average of $2.01 in FY08 to $1.66 in FY09 our hedges protected the effective P&L rate for FY09 at $1.99. More recently the average rate for the pound has been at about $1.55. So as we look at FY10 if the pound were to maintain the recent average rate, we would be translating UK profit back to the US at a rate almost 25% less then that in FY08.

I won’t go through the rest of these currencies here, but you can see that all of the major currencies declined versus the US dollar during the fiscal year but much of the impact was offset through hedging. In order to put the current dollar translation rate for the pound in context, we’ve gone all the way back to the [Bretton Woods] agreement to examine the long-term averages. As you can see the averages vary between $1.65 and $1.80 and generally around $1.70.

Interestingly the pound averaged well over $2.00 for much of the decade of the 1970’s and hit its high water mark versus the dollar at about $2.60 back in 1972. In the last three months the pound has been as low as $1.38 and has been rebounding with a recent spot rate of about $1.60.

Now so far we’ve been talking about translation rates, the other key currency impact to understand particularly with regard to the pound relates to transaction rates. As Scott mentioned we buy a significant portion of our UK ingredients and packaging from the US and the from the European continent. The weakening pound versus the dollar has significantly increased the cost of ingredients from the US such as Michigan beans.

The same phenomenon but to an even greater degree has occurred on the pound Euro cross rate which is driving up UK product costs on sauces and infant/nutrition. To put this in perspective for the eight plus years following the inception of the Euro, the Euro and pound traded in a very tight band between 0.6 and 0.7 pounds per Euro. About 18 months ago the currencies decoupled and the rates shot up, very close to [parity].

Recently we’ve seen the rate moderate but its still at around 0.87. With regard to our P&L we began FY09 with a cross rate about on par with prior year due to the carryover impact of pound Euro hedging we did in FY08 but we incurred much higher costs in the latter half of the year and we expect to incur further cross rate headwinds in FY10. With that as a primer, let’s now take a look at the plan starting with the P&L.

As William mentioned on a constant currency basis we expect to deliver sales growth of 4% to 6%, OI growth of 6% to 8%, EPS in a range of 5% to 8% with a wider range largely reflecting higher net interest costs. On the right side of the chart we have provided the potential currency impact on these growth rates related to both translation and UK transactions.

This assumes that the recent average rates on our currencies remain relatively constant through the year. These currency impacts grow as you go down the P&L from about 4% of sales to 8% at operating income to around 15% at EPS. Netting all this together would yield an EPS between $2.60 and $2.70 for FY10. But again I would point out the currency rates are very likely to keep moving.

To help provide even better visibility into our outlook here we’ve shown how currency could effect the FY10 P&L. Assuming the recent average rates hold for the rest of the fiscal year we estimate that FX could impact results by $0.46 at EPS. This includes $0.35 from translation and $0.11 from UK transactions.

Hopefully these building blocks will help you better understand our expectations and our results as we go through the year. Okay, now let’s talk about the business. In terms of sales we expect to generate 3% to 4% organic growth and 4% to 6% growth in constant currency. We expect flat to 1% growth in volume as increases related to value based innovation, stronger marketing and growth in emerging markets are largely offset by reduced volume in US food service.

Net pricing is expected to grow 2% to 3% largely reflecting the carryover impact of price increases taken throughout FY09. Recent acquisitions should contribute about two points of growth while currency is likely to reduce sales by 4%. Putting it all together, this is expected to result in a new all time record for reported sales, up 1% to 2% from FY09.

And as William mentioned emerging markets are a key driver for us. Over the last couple of years emerging markets generated a third of our total organic sales growth and are targeted to account for more then 40% of this growth next year. Another revenue driver is higher marketing and R&D spending. Looking at past recessions it is those companies that continue to invest in their products and brands that emerge from a downturn even stronger.

With this in mind our plans call for strong constant currency increases in R&D and in marketing. In R&D we’re also shifting the spending mix to more value based innovation and value engineering. And with regard to marketing we should be able to get good bang for the buck as we expect the cost for GRP to be down in developed markets.

In this environment of tight consumer spending and difficult pricing, productivity is ever more important then ever. Thus we are accelerating the efforts of our taskforces and augmenting them with other belt tightening across the business. Overall we’re targeting productivity of 2.5% of sales. About three quarters of our productivity will come through gross margin where the combination of pricing and productivity are expected to offset the impact of commodity inflation.

So we expect gross margin to be flat year on year as approximately two points of pricing and two points of productivity offset about four points of inflation. Note that this inflation includes an impact of 50 basis points from UK transaction costs. To achieve our productivity target, we’re continuing to drive our two main global initiatives. These are the global supply chain taskforce that has mapped our supply chain strategy, and is prioritizing our efforts.

And project keystone which is designing the global processes and systems for how the company will operate. Under these initiatives we have eight major areas of focus that are being worked around the globe. Again the target delivery for these efforts is about 2% of sales in FY10 and growing from there. Turning to commodities you can see that inflation has ramped up over the last four years, from 3% in FY06 to 11% in FY09. For FY10 the inflation rate is expected to slow down to 7% or 8%. This reflects lower inflation in local markets partially offset by a growing impact of the transaction cross rates that we’ve been discussing.

Breaking down the pieces, local market inflation is running at about 4.5%, almost two thirds of which relates to just three commodities; tomatoes, potatoes, and tin plate for cans. The transaction cost impact of currency cross rate movements is adding 2.5 percentage points, more then half of which is borne by the UK. So when we talk about the impact of transaction cross rates, this is where it hits our P&L.

Finally high inflation in parts of Latin America could add up to another point of inflation. Through more global procurement, SKU and spec rationalization and other productivity initiatives, we expect to claw back about two points of this market inflation. Turning to SG&A we’ve made significant progress over the years. Importantly for FY10 we’re targeting about 60 basis points of gross productivity but even after the impact of increased pension costs and other inflation, we expect to reduce SG&A ex marketing by 30 to 50 basis points as a percentage of sales.

This reflects tight control on all discretionary spending which among many other things, includes no merit increases and reduce annual incentive opportunity for the year, acceleration of efforts on the global procurement of indirect items, leverage of lower fuel cost and strict limits on non customer related travel.

In this tougher environment we believe it prudent to hold fixed costs to a minimum, thus our plans call for flat fixed costs in developed markets excluding the impact of any acquisitions. Now let’s talk pension for a minute, over the last couple of years, the combination of pension and post retirement and medical costs has been about $29 million per year. Given the poor returns across global equity markets last year, our pension costs like many other companies would have increased very significantly in FY10.

We expect to limit the increase to about $11 million on a pretax basis or about $0.02 at EPS. We’re doing this through incremental pension funding in FY09 and more planned funding in FY10. Last year we raised the contribution to $134 million and expect to infuse about another $250 million in FY10. importantly this is fully covered in our operating free cash flow projections as we anticipate offsetting the incremental pension infusions through securitization of accounts receivable.

Now a quick update on project keystone, as you may remember in FY09 more then 80 people came together in Pittsburg to design our global process blueprint. This was successfully completed on time and on budget. We are now translating this process blueprint into SAP and will be implementing it in Northern Europe at the end of FY10. Additionally because we feel there is significant opportunity to accelerate savings we are moving up the implementation of the SAP indirect procurement module in many of our largest markets.

In this environment we’re tightly controlling spending on this project but we believe it is essential to continue investing in the business and keep moving down the path toward greater global productivity and leverage. To round out the discussion on the P&L let’s take a quick look at interest and taxes, we expect that net interest costs will reduce our EPS growth rates by one to three percentage points in FY10.

This reflects the impact of refinancings that have resulted in a higher mix of fixed rate debt, higher cost of dealer remarketable securities, the overlap of favorable mark-to-market gains on the total return swap in FY09, and higher costs associated with a new credit agreement. With regard to taxes we expect the rate to be between 28% and 29% for the year which is relatively consistent with the rate we achieved in FY09.

Now let’s take a look at the expectations for the balance sheet, we’ll be keeping a very tight rein on capital spending with a target of approximately 2.5% of sales. We spent closer to 3% over the last couple of years but with slower economies we believe that reduced spending this year is appropriate. With regard to cash conversion cycle, we’re targeting a three day improvement in FY10 primarily driven by reduced inventory. As I mentioned earlier this morning, we finished strong on inventory reductions in the last few months of FY09 and are looking to continue that momentum.

We are also targeting an after-tax ROIC of about 17.5%. This actually represents a slight increase versus prior year after adjusting for the benefit of last year’s currency hedges. And with regard to cash we expect to overcome the significant year on year impact of currency movements and still deliver operating free cash flow this year of between $850 million and $900 million.

In terms of our use of cash our priorities are as follows. First our target is to protect and grow the dividend as evidenced by the increase we announced today. Second we will target lower debt levels. Third is to incrementally fund our pension plans, and finally as always, we continue to look for small, bolt-on acquisitions in our core categories and geographies.

At the end of the day we intend to be prudent stewards of the shareholders’ money in this difficult environment and operate in a manner consistent with maintaining our investment grade credit rating. Now just a quick reminder on the dividend, while currency rates are likely to reduce EPS in FY10 we modestly increased the dividend to an annualized rate of $1.68 per share. This represents the sixth year in a row of higher dividends, an average annual growth rate of almost 8%, and importantly a dividend yield of almost 5%.

Okay, so let’s summarize the financials and plans, the key numbers to remember for FY10 are the planned constant currency growth rates of 4% to 6% on sales, 6% to 8% on OI, 5% to 8% on EPS. At EPS using recent average rates currency translation would reduce our growth rate by about 12 points and UK transaction rates by another four points.

And just for the quick note on [quarterization] during the year, the first two quarters will be very difficult comparisons. We currently expect sequential strengthening of constant currency EPS quarter to quarter and sequential improvement of comparisons to the prior year. And again our target for operating free cash flow is $850 million to $900 million.

Now while the world has changed markedly from when we presented our two year high performance plan at this time last year we wanted to provide a comparative of FY09 actuals and current FY10 plan versus those projections. As you can see from the base of $2.63 we expected to grow EPS between 8% and 11% each year.

For this comparative we’re going to lay out the numbers both on a constant currency and reported basis. Constant currency numbers are calculated using the market rates from around the end of FY08 which were the rates with which the HPP were generated. The key is that despite the economy our constant currency results and expectations stack up very well versus our two year plan. In FY09 had the currencies not collapsed, we estimate our EPS would have been approximately $3.09, well above the range for the year.

And for FY10 the constant currency projections would be $3.21 to $3.31, again well ahead of the HPP targets. Now let’s layer in the reported numbers, for FY09 even after the major drop in foreign currencies, our reported EPS was at the top end of our original range. But as we look to FY10 if currencies remain at recent average rates the outlook is well below the original target $2.60 to $2.70. The return of the pound to its historic norms would help the range significantly.

Let’s take a look at the same comparative for cash, clearly the weaker foreign currencies also impact cash flow. But for simplicity we’re showing only reported results here. The net story is that despite currency changes the weaker economy and incremental pension funding, we’re tracking well ahead of cash flow targets. In FY09 we beat the HPP cash flow plan by $30 million and we expect to beat the number this year as well.

Overall we’re pleased with our cash generation and believe we have plenty of additional opportunities in FY11 and beyond. So with that, I’ll turn the meeting back over to William Johnson.

William Johnson

Thank you Art, well I think you can’t accuse us of not being transparent. I think as you look at the company its clear we have world class iconic brands, we’ve generated organic growth across most of our core businesses, we have a very strong international portfolio, we have an enviable emerging market portfolio and we’ve generated excellent cash flow results and strong returns to shareholders.

The other thing I have to tell you is the Heinz employees have stood themselves proud during these three years. We’ve overcome a lot of adversity and I think delivered pretty darn good results relative to our peer companies. And with a dividend yield near 5%, what else can I say. This is a terrific management team as you’ve seen today, with a lot to say about this company.

So with that I’ll turn it over to Q&A. Margaret will pick the questioners. It keeps me out of trouble. So if you have a bone to pick, pick it with Margaret. For Q&A we’re also bringing Mike Milone up, Mike runs the rest of the world business and he’s also responsible for all of our quality, safety and sustainability initiatives. Food safety is becoming a relatively big issue across the world and I thought if there were any questions on that, Mike would be the appropriate one to answer those.

Question-and-Answer Session

David Palmer – UBS

One thing I noticed from the Europe and then the US comments and the graphs that were shown and we’ve also heard this from say McDonald’s in their presentation about Europe, things have gotten a little worse since March in terms of the economic environment there showing up in certain consumer trends including private label as you underlined. In the US we saw that seems to be reversing. In other words in March into April particularly private label share gain seems to have slowed. I’m wondering how [for real] do we think the private label reversal is in the US in terms of there truly being a reversal of trend, and then also in Europe how long does one this, is this for real and how long and sustained could this be in terms of an issue.

David Moran

I think your assessment is exactly right, it seemed like private label will almost exploded in the December, January, maybe February period. It shows up in the numbers across the entire grocery store. It seems to have waned a little bit since then. We can see it in the numbers. I think a lot of major manufacturers started putting some juice to the D&A line and also people started getting back on air with media and the key is going to be the same thing its been for multiple years, innovation, talking to consumers, and out-executing the guys with retailers.

The one thing that I was going to put in my speech that I didn’t was how much manufacturers bring to the party with retailers that private label cannot and it really got too cumbersome so I didn’t go into it. But don’t underestimate the value that major manufacturers play to retailers in terms of store sets, ideas about how to work the entire aisle, there’s big time ideas that you guys may not see or be aware of that private label I’m unaware of ever in that game.

Scott O’Hara

From a European perspective I think your observation is correct. We have seen a shift and an acceleration in private label in our fiscal fourth quarter. And I’ve said, my personal view is that I think Europe is about six months behind the US in terms of when we went into the recessionary period and I think ultimately when we’re going to come out of it.

The encouraging thing is that while we did see this shift our businesses continued to hold up pretty well and in fact, if you look at the one slide I showed sequentially by quarter our volume while still down year on year had improved from both Q2 and Q3. So I think we’re about six months behind the US. I think its starting to improve a little bit but we’ve got a little ways to go yet.

William Johnson

I think one of the things to note about our business and you saw it today, unlike others with the exception of Smart Ones we have maintained our shares across most of our categories globally. So our business is relatively resilient and the one thing I will tell you that has surprised even me, and I’ve been around a long time, the strength of Heinz ketchup has been extraordinary. What it says is consumers simply are not going to give up for a price differential Heinz ketchup on the table. At 9% organic growth last year and continuing positive growth into this year, the strength of that brand is truly extraordinary which is one of the reasons we are throwing all the incremental support behind the US business.

Terry Bivens – JPMorgan

My question goes to the retail part of North America, William back at Cagney you talked about there would be a time where you had to respond and from what I can see in the numbers the promotional intensity in frozen has remained every bit as high. I think today’s Neilson numbers indicated there’s some slippage on the potatoes side, frozen potatoes as far as private label, so I guess the question is how long can you afford to wait and does the fact, [Nelson] pointed at D&A as being one thing he was very upset with back in the day. Does that hamstring you at all to being able to respond. Is that a factor.

William Johnson

No, we’re going to do what’s right for the business. As I said in my comments, we expect D&A to be up this year marginally, 30 to 40 basis points. It was up in 2009 by a comparable amount. Its just we’re going to be very judicious with it. The one thing you have to understand and I thought David said it very well in his comments we have had an enormous amount of discussion on Smart Ones. The management team responsible for that business feels very strongly that to engage in the short-term profitless prosperity would be a tragic waste of the continued long-term organic growth of that business through innovation, new products and through marketing. So that’s the focus.

Now David also said it and I’ll say it stronger, if this nonsense continues to the point where it is really starting to effect our ability to execute in other areas, we’ll respond. The tragedy of that is its not good for the category and its not good for any of the manufacturers. I will tell you today that if I said to David start spending D&A tomorrow, he could get the Smart Ones share back in about six weeks and we would lose a fair amount on profits and we would lose the momentum we have in creating the 24/7.

The reality is, if you cut through it, the reason our two competitors are responding with D&A, they don’t have anything else to do. They have no new product, they have no news and so as a consequence what are they doing, they’re taking price down. I will tell you showing the chart the most interesting thing, despite significant reduction in price, you’ve seen no improvement in the categories which goes back to the point you’ve got to continue to drive innovation.

Having said that if it continues to erode our business we will react and that loser of that will be our two competitor companies and the overall category because we’ll get our share back. There’s not a single brand that these guys run that if we turn on the D&A spigot tomorrow we couldn’t pick up incremental share. The problem is, all you’re doing is renting it and then we give it back so I think from that standpoint we’re just trying to be as patient as we possibly can.

If our patience runs out, mine will probably run out before David’s, which is why we have ongoing conversations. David’s will probably run out before the management team responsible for that business. On potatoes, I think David was very clear, we’ve gone back on air with the mashed media. Business has responded brilliantly, up 28%. We know how to move that business and again most of that is private label. They’re still one price increase behind us. That will address itself over the next three to four months given the potato increases.

Potatoes is not a business I’m at all concerned about. Its one we obviously monitor. It’s a business where private label has historically run between 35% and 40%. We’re seeing a little growth to that but nothing that’s alarming at this point.

Art Winkleblack

The only thing I would add also on the [potato] spending side is that with a little bit of extra spending in FY10 our processes and systems are much more robust then they were years ago so we have a much better handle on what we’re getting for the spending. So from that angle as we increase the spending slightly we know what we’re getting and why we’re doing it and so I think, as the management team and the Board have been very supportive of moving in that direction if we need to.

Ed Erin – RBC

William you talked at Cagney about the balance of power may be [toasting] a little bit more in favor of retailers and it seems like that could be fixed through some combination of M&A or tertiary brands going away, but it doesn’t seem like we’ve seen a whole lot of examples of that so far. What’s the catalyst for that happening going forward do you think.

William Johnson

Well I think you are seeing it. I think if you looked across Europe there’s a major account in Spain, Mercadona eliminated basically 1,100 A list items to replace it with either better A list items or private label. We’re seeing a number of that activity across Europe. Wal-Mart is getting ready to go through project impact which is certainly going to have an impact on the secondary and tertiary brands.

There is no doubt that if the pressure from the economy continues these tertiary brands are going to go. Now we have peers that will stand up here and tell you that their tertiary brands are safe and they will also have to tell you that their D&A spending has increased considerably. But what’s going to happen and you see the best example in Europe, what Europe has done and which is going to be interesting to watch, Europe is replacing the tertiary brands with budget private label which is a benefit to us by the way because budget private label does not compare on a quality, packaging, just overall appearance standpoint and so the more they shift their own consumers down from their premium private label to budget private label, they’re doing us a favor.

But I think over the next 12 months, and I’ll let these guys comment, you’re going to see some fairly significant axing of SKUs across the retail trade and I think its going to effect the secondary and tertiary brands.

Scott O’Hara

I think William is absolutely right, clearly we’ve seen the shift that I showed you within the private label segment from premium down to budget. Over time I think that that’s going to be a challenge for our retail partners because clearly they’re not going to make the same kind of penny profit and likely not the same kind of margin even on the budget products that they make on the premium ranges and we haven’t seen any category expansion as a result of that.

I do think that the group that’s going to be squeezed the most is the number two and number three brands that are caught in the middle and David talked in his section and I did in mine, our job is branded retailers to continue to innovate and bring real value to our retail partners and consumers to make our brands thrive. And that’s our challenge and I think our teams are doing a good job of that.

Robert Moskow – Credit Suisse

I thought William you made a good point that innovation is the key to differentiating versus private label and its how leading brands will continue to differentiate, I thought that the European plans today however were rather light on product innovation at least in comparison to what North America. It sounded like there’s a lot of blocking and tackling to do in Europe on the cost side and maybe rationalization of packaging. So can you comment a little bit on that. Has something changed a reflection of your concern about the consumer in Europe and maybe their lack of willingness to try new things.

William Johnson

You’ve been dissed, do you want me to answer that.

Scott O’Hara

No I’ll take it and then you can build on it if you like, I think your observation is right. That said we do have a fair amount of innovation in the plans. Its less then we had in fiscal 2009 but that was by choice. As we showed you, clearly the currency headwinds are coming through the European P&L on a cross rate basis so we are very focused on trying to drive cost. We also are very focused as you said on the fundamentals, on the blocking and tackling because in this environment that’s critically important.

That said, I tried to give you guys an example of some of the things we’re doing. We’re trying to leverage scale in Europe this year. Take the ideas that have worked and spread them across the rest of the markets that haven’t launched. So things like grown not made across all the European markets, some of the packaging innovation ideas across other packaging formats, so that we can leverage a lot of the ideas that we launched in fiscal 2009 and get more benefit from that and really focus on the core business.

William Johnson

I have a different take totally, I think its one of the great strengths of this company that we have on the ground management in these markets that reflects the needs of the existing marketplace as opposed to some dictate from Pittsburg that says you need to do this and I think as a consequence of that I have to believe our continental European business was the only business in the food industry last year to grow volume.

We grew volume fairly strongly in continental Europe last year predominantly on the strength of our businesses in Belgium and The Netherlands. And I think it really reflects the ability of this team to move very quickly, they don’t have to depend on Pittsburg for decisions and so if innovation is appropriate as it is in the US and as it is in the emerging markets or if value is more of an issue as it is in Europe right now and probably New Zealand, less so in Australia, that’s where I think the strength of this company comes and we’ve reacted very quickly and I think you see that in our results for the last three years.

And I think as a comment on that, if Mike were to talk about his businesses, he’s got a fair amount of innovation. We’ve taken baby food and launched it across Mexico as well as the Caribbean. We’ve launched ketchup into the Mexican market very successfully. We’re going to continue to press those. We’re looking at formula in a number of our markets around the globe. So I think we’ve addressed the consumer. I think ultimately everything begins with the strength and capabilities of the marketplace, the team we have in the marketplace and the needs of that marketplace.

I was commenting at the break I think probably to David Palmer, that one of the things that we’ve done in Europe is launched a small sized ketchup. The focus is really very simple. Change the value entry in terms of the entry price point and allow us to bring people back into those markets. But again that I send to you is that fundamentally across all of our businesses with the possible exception of one or two businesses in Australia, New Zealand, and the Smart Ones issue, we have maintained market share everywhere in all our categories across the globe and I think that’s pretty fundamentally interesting given the strength of our company versus the weakness in the markets in which we’re operating.

[Eric Sirota – Unspecified Company]

Could you talk a bit about the productivity target at 2.5% for this year, listening to your presentation and what you have been talking about for the past year or so, it seems like you’ve got an awful lot of productivity projects that are in the pipeline from taskforces to things you talked about today in terms of reducing complexity, and yet a 25 to 3% target is kind of roughly in line with what most of your peers look for on an ongoing basis, just wondering are you being conservative with that 2 to 3% top line. It sounds like you are based on everything that you talked about today or are there some offsets that perhaps are missing.

William Johnson

No, I think in this environment clearly productivity becomes more important. The focus of the last couple of years has been more on the top line growth and we’ve seen some very strong volume and price growth numbers that we’ve posted, so in this kind of global environment we have shifted more to a focus on productivity. We have a lot of as you say, we’ve got a lot of projects in the pipeline.

I’m particularly excited about the indirect procurement stuff that we’re doing which we’ve made progress on already but with the acceleration of the SAP program to actually solidify and force the discipline on the indirect procurement side. We think that will be a big help. Now the reality is that doesn’t, those systems don’t get implemented until late in the year so they will be more as I tried to allude to in my presentation or prepared remarks there’ll be more productivity coming from that down the road.

So we’ll get some of it in FY10 and then more beyond. But do we think we’re being conservative? Hopefully a little but that’s the target, its $250 and we’ll see how we go and we’ll keep you posted.

Chris Growe – Stifel Nicolaus

I wanted to ask you in relation to pricing you’ve got some tough cost inflation this year especially in relation to other food companies, so I’m just curious have you implemented price increases already, and I’m thinking ketchup for example where tomato costs are up or tin plate is, how are those conversations gone with the retailer and if I look at your gross margin estimates you have, productivity plus pricing, could we see more pricing to offset the cost of inflation there from where the productivity comes to the bottom line.

William Johnson

Let me talk about pricing, because one of the things that’s clearly effecting our commodity cost next year is transaction cross rates. Its about $100 million. So if you back that out our commodity inflation is more in line with our peers. Much of our pricing is simply carryover pricing. Having said that, if you notice Scott did make a reference to the fact that there will be some incremental pricing as necessary across some of our businesses.

In New Zealand we moved very aggressively in April to take pricing to address part of that transaction cross rate impact we’re going to face in New Zealand and somewhat in Australia. We’ve moved in a number of other markets. Having said that, you have other companies standing up here talking about dealing a lot of money back. What we’re trying to do is balance the difference between what our increased D&A and the need to take incremental pricing and turn around and just deal it back.

And I think we feel very good about our organic sales opportunities in fiscal 2010. If commodities continue to increase, if transaction cross rates are exacerbated, if other things change, then we’ll obviously mirror those and monitor those very carefully. I think the other thing I want to comment on, if the UK cross rate issue remains and clearly what’s going to happen over time is you’ll see more pricing in the industry.

But right now rather then react at a point in time and take pricing that could fundamentally injure the business long-term we’re sort of monitoring how this goes. The longer that stays in place, the more likely it is the market in total moves because our peer companies are effected by the same thing. So what you’ve seen and what Art tried to show you is a real balance between pricing, some increased D&A, increased marketing, commodity costs and what we felt would be prudent in terms of offering up guidance for the new year.

Again if costs get worse or they stay where they are, we don’t start seeing some improvement in some of these areas then we’ll look for opportunities to take more price. But I think we have a pretty good balance right now.

Bryan Spillane - Banc of America - Merrill Lynch

In your presentation you made a mention that your expectations are that consumer frugality will stay fashionable and I think that sets you apart from your peer group. I think your peers generally expect a return to normal, whatever normal was. So if you could just talk a little bit about what’s driving those beliefs and have you done some studies that lead you to believe that and also how that lines up in terms of how you believe your retail customers look at the consumer.

David Moran

Those are just beliefs. But virtually every single data source that I have and read and look at and personally have discussions with customers and consumers supports that point of view. Those were heady days a year ago, 18 months ago, and until we see that kind of personal wealth being created because of stock portfolios and housing and other mechanisms, I don’t think its going to happen. Even if it does, I’ll be gleeful. So I’m preparing for the day that it doesn’t happen and that’s why we’ve become so aggressive on productivity.

We shifted a substantial portion of our R&D resources for a nine month period, very defined, to go in and get some cost out of our packaging and a whole host of things, and its hitting the bottom line beautifully and its one of the reasons that the business is going to be so strong next year and we’re able to increase our marketing by 70%.

But I think its wise to think about the worst case scenario and then if it isn’t that way it will be terrific.

William Johnson

There’s a recent Mackenzie report published that basically said that 50% of consumers interviewed said they will maintain their current purchasing patterns and 50% will return to normal. So how you parse that is going to depend on what you’re expecting for the business. We’re expecting the worst and preparing for the best. In food service the Mackenzie report said about a third of consumers will return to their normal eating out habits once the economy returns but about a third won’t so a lot of this is based on a Mackenzie report we’ve read and our own research which indicates that right now at least in the world we live in, consumers are starting to see this sort of as a challenge.

They’re seeing this as a game and I know we stand apart from our peers. We stand apart from our peers virtually every time I open my mouth and I think in context of that I look at three years that these guys have posted a pretty darn good results and I’ll listen to these guys before I listen to my peers.

Andrew Lazar – Barclays Capital

I wanted—

William Johnson

Thank you for letting me in today, by the way it was very helpful.

Andrew Lazar – Barclays Capital

Not a problem, the nightmare comment was a little bit troubling but—

William Johnson

What Andrew basically said was I dreamed that I was an analyst when a guy asked if I was and analyst. And Andrew said only in his dreams and I said no, only in my nightmares.

Andrew Lazar – Barclays Capital

Going back to the 30, 40 basis point increase in D&A for the year, just two questions on that, one is that relatively similar if we were to compare it across North America and Europe and then the second one is that seems a lot less severe then maybe a lot of folks in the investor community might have feared coming into this year given the need to drive volume and given that we’ll have some in general input cost favorability [although] not specifically at Heinz. So I wanted to get a sense of whether you think putting that increase in the context of your peers, do you think that puts you at a maybe a disadvantage relative to your peers or is your sense that the increase in D&A across the industry might be more manageable then investors’ fears.

William Johnson

I really don’t know. I think some of our peers are going to have to spend a lot more D&A to hang on to their distribution and their shelf space. We can’t react to that because ours isn’t hanging onto our shelf space, ours is determining what the right price point is for consumers relative to the other value equation that these guys have talked about.

I think that 30 to 40 basis points is going to vary not only by business but by product. In some products you’ll see a fairly significant increase in D&A and others you won’t see any increase in D&A. When you look at businesses like we have in the UK or even in the US or Canada where we have 75 or 80% market shares, spending incremental D&A to hold onto one or two share points is not a very good use of money.

In other categories like Smart Ones where we’re going to have more of a competitive set where we are planning to spend a little bit more D&A and in potatoes and maybe a few other areas, its just going to depend on the business. I have no idea what my peers are going to do, not a clue. I do know that we’ve been around this horn as you know and we’ve taken a lot of D&A spending out of this company, about 500 basis points in total over the last six or seven years.

I would guess by the this, the economy turns, we’ll have probably increased that over 2009, 2010 and maybe 2011 by maybe back to 100, 125 basis points. But it will be very selective and very dependant on the business. And in some of our business, certainly in the emerging markets we don’t spend anywhere near the company average in D&A spending and we see no reason to ratchet up D&A in those markets given what is a very fragmented trade and where you get very little leverage out of it.

As those markets have gone from 5% of our sales to this year expecting 15% of our sales and 40% of our growth, that clearly has had a depressing impact on the amount of D&A that reflects through across the P&L that we have to show, so there are a lot of mitigating circumstances. But at the end of the day I think if this team hasn’t shown anything, its shown that its very flexible and [malleable] and it will move to what the consumer and what the business needs.

And I think we’ve done that over the last three years. Our plans have been dramatically altered every year to reflect the changing market conditions and that will be the same. So we’re just giving you a heads up, its 30 to 40 basis points, it could 50. I don’t think it will be much more but we’ll do what we have to do and allocate funds accordingly.

I should give you credit too David for helping me get in this morning.

[David Driscoll – Citi Investment]

Not at all, two questions, the first one is on advertising spending and the second question was on market share of ketchup in the emerging markets. So on the advertising side, it looks like the fourth quarter advertising spend was down considerably from what the original thoughts were I believe you guys had laid out on a number of the prior calls, can you talk about why this happened and can you quantify that fourth quarter number. I believe it was very significant in the results today but I’m haven’t been able to pencil out exactly what the number is and then again, please go into the rationale as to why second part of the question, was unrelated on the ketchup market share in Russia, can you talk about the opportunities.

William Johnson

We pulled market in February, March and given the collapse of the consumer that we saw in January, we got very concerned about chasing water uphill and we pulled a lot of marketing. Now some of it went back into D&A which was why our D&A in 2009 was up a little bit and some of it we just held on to and was spent in other areas.

But I think overall for the year on a constant currency basis marketing was essentially flat last year down 3%. That’s very unlike a number of our peers where marketing spending on a constant currency basis would have been down pretty significantly. Its going to be back up this year. We’ve now, I think gotten confident that it will have an impact positively going forward but you have to look at January.

Because we walked into Cagney, I remind all of you to go back to those Cagney presentations in general that was one of the most depressed groups of people I have ever been around. And I think our view was the consumer is hiding, is never going to come back. You were hearing stories about retail deload, you were hearing stories about consumer deloading. One of the things we observed the consumers weren’t buying multiples.

So rather then the continuing to spend the money we did we just drew the conclusion as a group we don’t know what we’re chasing here so we pulled it. Now some of it went into other areas. It went into promotion or value sized packaging and so forth, but there’s no doubt advertising came down aggressively in February, March.

Now we started back up in April as David showed you on vinegar and a few other businesses, and in May its really been ratcheted back up as we now think the consumer has found a footing whether that’s a low footing or a high footing, I don’t know, but the consumer seems to have found the footing and its seems to be having an impact.

On ketchup share, we have taken ketchup now into a number of our emerging markets and in Russia we defined it as ketchup, condiments, and sauces because that’s how the category defines and by the way that excludes mayonnaise before anybody asks for whatever reason, that’s how Neilson defines it.

Our shares in Moscow and St. Petersburg where we have full distribution are pushing 405 and we are growing very rapidly. If you know my stated strategy all along in Russia was I was not going to chase margin, I was trying to chase share in the second largest ketchup market in the world and avoid a repeat of the mistake we made in the 80’s in Japan which is now the third largest ketchup market and we’re virtually non existent.

As we continue to expand distribution the upside on ketchup in Russia is significant. We now have a plastic line fully functional, at the [inaudible] factory. Its producing very cost competitive product in fact I suspect we have a cost advantage. We were number three a year ago, we’re now number one. As we expand that I believe our share which overall around Russia is around 21, 22% will grow significantly.

In Venezuela our ketchup business is doing extremely well. In fact we are the market leader and we have about a 50 share. In Mexico we’re up to an 11 share after about 12 or 15 months in the market. We’ve picked up a fair amount of distribution and will continue to push that aggressively and our sourcing net basically out of the US and then we’re looking at sourcing it in Mexico and Venezuela longer-term. Getting product out of Venezuela is very, very difficult.

In China, we are the one of the key suppliers to Kentucky Fried Chicken. We’ve got a ketchup factory in Chin Dao but also produces baby food and we’re looking at growing that. Ketchup may not be the right product of China, maybe soya sauce and so we’re looking at leveraging the ABC business in China. In India we’ve launched ketchup, we’re 25 years behind [Kisson and Maggie]. We’ve got a ketchup line there that we’ve moved to our [Aligarh] factory. We think there’s real upside long-term in ketchup but its going to be a slow built in India.

Its not a huge ketchup market to begin with. Poland we are number one now in combination with our Pudliszki brand and a few other brands so we think ketchup long-term continues to be a great growth opportunity for this company. I don’t want to mention any of our peers but the fact that our most important product grew 9% organically last year globally is a pretty impressive statistic given the world we operate in and I think it goes back to a comment I made earlier, people just don’t want to give up Heinz ketchup.

And I think the grown not made campaign in the US will resonate very well with consumers. So our view is ketchup continues to be a growth opportunity globally.

Scott O’Hara

In the emerging markets the other thing you need to consider with ketchup is in category, category growth because right now in most markets its very under developed. People don’t know what it is and how to use it but as quick serve restaurants expand, teach western eating habits, we’re seeing tremendous growth of the market and creation of even new uses. For example KFC in China, their primary use is with chicken and fries as opposed to hamburgers and fries in the US.

So category growth, not just share growth is an opportunity for us.

Margaret Nollen

If you look in the back of Art’s first presentation we have additional slides and you have all the fourth quarter scorecards to your marketing numbers there.

Unspecified Analyst

Just to put in context with respect to some of the changes you’ve announced today in terms of compensation and so forth, if you take out, from my perspective I mean if you take out currency for the most part obviously food service and some of the other issues you mentioned, your performance has been pretty good. So I’m wondering number one, what sort of message does it send, what are you trying to accomplish in terms of actually making some of the reductions that you’re making in terms of compensation at certain levels in the company. And then heading into the next fiscal year can you talk about the alignment of compensation, what will your incentive comp look like, what are you going to get paid on this coming year and the alignment between that and shareholders and then for Art, quickly just in terms of uses of cash with the stock price where it is, you didn’t talk about share repurchase and I just wonder is that something you’ll be taking a look at here as well.

William Johnson

Let me talk about the compensation, this was a, we took this to the Board before anybody asks if Nelson had a hand in this, we took this to the Board and this was something I felt strongly about and I will tell you we’ve taken it to all or employees around the globe within the last four or five days and I have to tell you I have been extraordinary proud of the way our people have reacted.

Their view is that this is going to be a tough year. The economies around the globe are not performing well. That we’re not announcing mass changes in the way we staff the company and so forth and I think in that context its been very well received by the employees and the message that we’re trying to is, look we recognize things have changed. We recognize it’s a different world and we’re going to take some steps.

This will not effect the 2009 compensation that’s based on last year which was an extraordinary year and I think you’ll see it in the compensation numbers. But we felt as a management team and as a group of employees that it was appropriate to reflect the realities in the marketplace we exist and to take a very difficult step. And believe me this was not a very pleasant thing to do. Our employees have reacted with a great deal of grace and class.

We’ve had virtually no pushback. They understand it. They’re pleased that we were very clear with them on it. The bonus opportunity itself has been reduced by about 20% and that’s very simple. We took the target we promised the street last year of $3.07 even though we did adjust it for currency. We looked at our current range and adjusted our bonus opportunity down to reflect how we compared with that $3.07 which I think is extraordinarily fair and I think appropriate. We promised it. Because of currency we can’t deliver it at least as of today. Who knows what next week will bring.

So I think in that context that the message we’re trying to send is we get it. We see what’s going on in the world. We know how difficult consumers have it. We understand how shareholders are feeling about the compressions in the marketplace. We want everyone to know that we’re prepared to share a little of that pain and our employees are prepared to share with you. In terms of the metrics, they’re going to be very similar to what we’ve been [gold] on previously with a couple of subtle changes.

Our short-term plans are always based on a combination at world headquarters of earnings per share and the operating units and operating income and cash flow and a sales modifier. This year we’re changing the sales modifier and putting more weight on cash flow. In this environment cash is going to be critical going forward to support the balance sheet and allow us the flexibility to do some of the other things that we want.

So on a short-term basis, the modifier of sales we’ll see more of that switched to cash flow but still fundamentally its going to be a profit metric short-term and a cash flow metric short-term, and a sales metric short-term with some different weighting. The long-term incentive is not going to change. The long-term incentive which the Board put in place about three and a half, four years ago, is predicated on return on invested capital and relative TSR, total shareholder return.

And so our long-term incentive is based on how we manage return on invested capital and I think you can see we’ve managed it pretty well. We got the message from the Board and on TSR and I think on a relative TSR basis, certainly in the last two and three years, our relative TSR has been pretty good. There’s no doubt that I’m concerned about that going forward but we’re big boys and that’s the way we feel that we ought to be compensated.

Again, and then there’s a mixture of a few other things but fundamentally, short-term profit, sales, cash, long-term returns that we’re giving back to shareholders in terms of ROIC and relative shareholders return.

Art Winkleblack

I think what we’re looking at in this environment, we want to be very prudent with our cash. We want to maintain our BBB rating that we have currently that is optimized for costs of capital over many years. So we feel good about that and want to maintain it. So as we think about it we have prioritized dividends. We’ve prioritized truing up our pension funding and we also think in this environment that there may be some darn good bargains out there on relatively small acquisitions.

So we want to maintain some dry powder for that. No doubt that we view over the long-term the stock price as being a bargain, but given where we are in the rating and some of the other priorities, we felt that was appropriate.

William Johnson

We talk about this every day because its very tempting.

Unspecified Analyst

Just a quick one, you highlighted in your earlier slides $127 million of total mark-to-market gains for fiscal 2009, how much of that hedge, if that were not mark-to-market accounting that hedge accounting, in other words how much of that is borrowing from future years in terms of the benefit for 2009 kind of coming out of fiscal 2010. If it were hedge accounting in other words would that number—

Art Winkleblack

Really none. The reality is that we only put in place the hedge to the end of April so it was all contained within the fiscal year.

William Johnson

If we could we’d have hedged 10 years out. But the accountants won’t let us do that.

Unspecified Analyst

In your private label comments you had interesting discussions between the United States and then what was happening in Europe, in the United States you had actually shown a private label graph that private label had crested and it was actually coming down and then Scott I believe in your comments you mentioned that private label started to see a ramp up in the fourth quarter. Now we all know that private label is much more well developed in Europe then it is in the United States so there’s something counterintuitive to what’s happening here at least to me. Can you explain why you think that we’ve seen the differences as such in these geographies, the acceleration in Europe and I don’t know if its and actual slowdown, but its crested according to that chart in the United States.

Scott O’Hara

I think its tied to a couple of things. One as I mentioned, I think the recession if you will was delayed by about six months in Europe relative to the US so I think there’s a phasing if you will that’s impacting it and the second thing is, particularly, well actually in all the markets but with more of a focus in the UK the retailers have really focused on private label is an area that they’re trying to drive their business.

And so for example is now putting out there as a banner that they’re Britain’s biggest discounter. Many of the retailers have launched ranges of budget private label that didn’t exist a year ago and it took them time to get those into the marketplace. So I think we’re seeing a little bit of momentum related to that. At the same time because the penetration level as you mentioned was much higher to begin with, you’re not seeing the same kind of growth rate that you would see in the US and I don’t expect that we will.

Obviously that varies by category. In the more commodity related categories you’re seeing a little bit more acceleration there. In most of our categories while we’re seeing some acceleration its not any where to the same degree.

David Moran

Only comment on the US is I think it goes back to William’s comments around the Cagney time period. I think the consumer absolutely almost imploded in the December, January, February, period which is the peak that you’re talking about. They weren’t going to restaurants. They were depleting their panty. And I know that we saw it in our volumes. It literally fell off a cliff the last three weeks of December and most of January. It was a very difficult period and then its been ramping back.

So I think that’s the aberration. The long-term trend though is very clear that private label is a big player and we’re going to have to deal with it as an organization and as an industry.

Margaret Nollen

That will conclude our webcast and for those of you in the room, I just want to thank you for attending today.

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