• With: Bill Johnson, Chairman & CEO, H.J. Heinz Company

    NEIL CAVUTO, HOST OF “YOUR WORLD”: Well, shoppers getting grilled ahead of a busy barbecue weekend. Burgers, buns, ketchup, you name it; you are likely paying more for it.

    And doesn’t Heinz know it? The company may have poured on the profits in the latest quarter, but higher commodity costs are putting on the squeeze, so much so that the company announcing 1,000 job cuts today, warning of higher prices to come.

    Heinz CEO Bill Johnson here with me now.

    What’s going on here?

    BILL JOHNSON, CHAIRMAN & CEO, H.J. HEINZ COMPANY: Commodity costs, Neil.

    Commodities are increasing all over the globe. And with fuel prices up -- and logistics costs are going up, so, virtually, the price of everything we put in our products has increased. And so we have to offset it. And the way we offset it obviously is to price up and take as much cost out of the business as we can to remain competitive.

    CAVUTO: But you absorbed it in the latest quarter. And some were surprised by that. You just think that that’s tough to repeat?

    JOHNSON: Well, we look -- I don’t look backwards. I look forward.

    And it -- to remain competitive -- the market’s getting more difficult -- and so I think we have to continue to make changes. Business is like everything else. You have to evolve. If you sit still, they catch you. The goal is not to sit still.

    CAVUTO: You know, Bill, you are closer to this than anyone on the Fed or any academic or economist. And they all tell us inflation’s not a problem, food inflation way overstated.

    JOHNSON: They’re not talking to the people who go to the grocery store.

    The consumer is adjusting to this probably better than they did maybe three or four years ago, but the reality is, with fuel prices up and food prices up, what I call personal inflation is having an impact. People are not going out to eat as much. They’re changing their shopping behavior.

    So, regardless of what the Fed or the government says, the reality is that the average consumer, the average person is feeling a significant pinch in their pocketbook.

    CAVUTO: Could I ask you a dumb question?

    Do you know what’s in the government food basket? Because it’s not in my food basket.

    JOHNSON: I don’t know what is in the government food basket, but it’s not the stuff I put in my shopping cart when I walk through the store.

    CAVUTO: You don’t walk through the store?

    JOHNSON: I actually do walk through the store.

    CAVUTO: Do you really?

    JOHNSON: Well, sure. I look at our products.

    CAVUTO: Oh, OK.

    JOHNSON: In fact, I’m known -- I’m known to leave messages to some of our people.

    And when I leave voice messages to them saying I was just in certain - - either in Publix in Florida or Giant Eagle in Pittsburgh, all sorts of wheels start to turn...

    (CROSSTALK)

    CAVUTO: Oh, I bet they do. Oh, my God, the boss is on the line. Get out. Get out.

    (LAUGHTER)

    CAVUTO: I’m wondering, though, if the Fed and other powers that be in this country say inflation isn’t a problem, for whatever reason, what do we risk being behind the proverbial curve. Obviously, we have to raise rates eventually, but we -- but the economy is still dicey that, if you raise rates, the argument is you go into something worse.

    JOHNSON: Well, I think rates are eventually going to have to go up. I’m not an economist, and for which I am very thankful, by the way. But I do think, from a business standpoint, we are seeing inflation.

    And there’s simply no other way to cut it. The cost of everything we do is going up. Diesel fuel, the logistics is up significantly. And we have to find ways to offset it. Now, an unemployment issue like we have in the states, if costs continue to rise, unemployment’s going to get worse.

    The jobs report today was not good. GDP is not particularly stellar. And so I think...

    CAVUTO: We should explain. Jobless claims are still hovering very high, well over 400,000.

    JOHNSON: Over -- well over 400,000.

    CAVUTO: Very high, over 400,000.

    Volatile as it is, the GDP report worried folks because it’s almost half what it was from the prior quarter, so, indicating things are slowing. Do you look at a double dip?

    JOHNSON: I don’t that we’re going to see a double dip.

    But I do think we have never really climbed out to the degree that people would like to think we have. Consumer confidence is still very low. The manufacturing index is not good. And if you look in the latest GDP, inventories were another key part of the growth in the GDP. That will eventually find an end. So, I think...

    CAVUTO: We should explain -- you’re a genius at this -- when inventories build up, it’s just what dealers’ stores are putting on their shelves in anticipation. And if it doesn’t pan out, they’re screwed.

    (CROSSTALK)

    JOHNSON: Then you’re stuck with it, and then you have got another problem.