H. J. Heinz: Estimating the Cost of Capital in Uncertain Times

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UV5147 Rev. Nov. 15, 2013 H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES To do a common thing uncommonly well brings success. —H. J. Heinz Founder Henry John Heinz As a financial analyst at the H. J. Heinz Company (Heinz) in its North American Consumer Products division, Solomon Sheppard, together with his co-workers, reviewed investment proposals involving a wide range of food products. Most discussions in his office focused on the potential performance of new products and reasonableness of cash flow projections. But as the company finished its 2010 fiscal year at the end of April—with financial markets still in turmoil from the onset of the recession that started at the end of 2007—the central topic of discussion was…show more content…
This case was prepared by Associate Professor Marc L. Lipson. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  2010 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.  Heinz and the Food Industry -2- UV5147 In 1869, Henry John Heinz launched a food company by making horseradish from his mother’s recipe. As the story goes, Heinz was traveling on a train when he saw a sign advertising 21 styles of shoes, which he thought was clever. Since 57 was his lucky number, the entrepreneur began using the slogan “57 Varieties” in his advertising. By 2010, the company he eventually founded had become a food giant, with $10 billion in revenues and 29,600 employees around the globe. Heinz manufactured products in three categories: Ketchup and Sauces, Meals and Snacks, and Infant Nutrition. Heinz’s strategy was to

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