Heinz CEO: We'll Invest Where We Get Returns

Bill Johnson on job market, Gov. Perry's candidacy

NEIL CAVUTO, HOST OF “YOUR WORLD”: Rick Perry may be late to join the race, but he is sure making up for lost time, going immediately for the presumed front- runner’s job’s jugular. Perry barnstorming through Iowa today saying that the governor of Texas, when he was that governor, and still is, generated far more jobs than former Massachusetts Governor Mitt Romney ever did and vowing to bleed Washington dry of the revenue and regulations it gets from companies so employers can hire more workers.

To the CEO of global powerhouse Heinz on whether that approach would get his fellow CEOs off that pile of cash they’re sitting on.

Bill Johnson joins me right now.

Bill, what do you make of that? One of the centerpieces of the governor, his campaign is, Governor Perry, is get the regulations off your back, for six months, and let you guys have it. Would it work?

BILL JOHNSON, CHAIRMAN & CEO, H.J. HEINZ COMPANY: Oh, I think it might work, Neil.

But the good news about Governor Perry is, he went to Texas A&M and didn’t go to an Ivy League school.

(LAUGHTER) JOHNSON: So, you know, I think he brings some common sense from the heartland of the country.

And there’s no doubt that a lack of certainty right now, the lack of confidence, a lack of leadership and the lack of clarity has created conditions of instability. And business simply isn’t going to invest when there’s instability around them. So I think what he would do is get things calmed down and to give us a stable environment from which to go forth.

CAVUTO: You noticed he talked regulation first off before he could even touch on taxes. I guess regulation is something that I guess by executive order you could waive for limited period of time.

But you’d still have those same regulations later and they would - - I would imagine if any of them are being violated in the interim you’re still going to be penalized after the fact. So what does it prove?

JOHNSON: Well, I think it’s not the fact that there is regulation, Neil.

I think the uncertainty is caused by regulation that is unknown at this time...

CAVUTO: I see.

JOHNSON: ... by the regulatory environment that continues to evolve and change. And it’s not predictable. So when you have an unpredictable environment, you do what people typically do. You pull in your horns and you continue to play it very safe. And I think that’s really what the governor is talking about.

CAVUTO: What do you do and how does it change your strategy? It is not as if business stops here. You have been growing very nicely particularly abroad. What takeovers you have announced, they have been largely abroad, but I believe principally in Asia. So it’s not as if you’re not growing. You’re just choosing your states elsewhere. What are you -- what are you up to?

JOHNSON: Well, we invest where we get our greatest return. And we are opening a new factory in South Carolina in the United States to support our frozen foods business. So we’ll invest where we think we will get maximum returns on the shareholders’ funds.

(CROSSTALK) CAVUTO: Well, what if the NLRB succeeds in going after Boeing for hiring those 1,000 workers? Would that affect your own expansion in that right-to-work state?

JOHNSON: I don’t think it will affect us in South Carolina, but that is part of the regulatory angst that we were referring to a moment ago.

When there is uncertainty, people are not going to put capital to work. And, as a result, we’ve put capital to work in environments where we have a fairly significant view of the future and where we see clearly what’s going to happen. In our case, it has been Brazil and China most recently. But we’re not averse to investing in the United States and we’re continuing to add employment here and around the world.

But it’s that uncertainty regarding the regulatory environment and what’s coming down from Washington that makes us very reluctant to commit too much in terms of capital in these markets.

CAVUTO: If the president offered you a quid pro quo -- and, by this, I mean, we know you are sitting on a lot of money offshore and you don’t want to be penalized at top corporate tax rate of 35 percent to bring it back, it’s being effectively taxed again, but – we’ll get rid of that, but, but you’ve got to hire folks, would you accept that pact?

JOHNSON: No.

And the reason I wouldn’t is it doesn’t deal with the structural issue. These one-off initiatives don’t create the kinds of changes you need to create investment conditions that are conducive to creating employment and improving the environment. So I what be looking for is structural change that would allow us to know the future with more certainty, clear up the lack of confidence and really give us a stable base from which to invest.

CAVUTO: Do you find the world environment more skittish now, the comeback, today notwithstanding, the comeback we’ve seen Thursday and Friday in the markets notwithstanding? Do you buy the comeback the last three days? Or do you remember the last three weeks? What’s on your mind? What’s your worry and/or upbeat thought?

JOHNSON: Well, I don’t view the world from the market’s perspective. I view it from the consumer’s perspective.

And the consumers clearly are in a period of angst, they’re anxious, they’re not certain what’s going to happen. And consumer confidence in the United States hit a three-decade low on Friday. So, I view the world from the consumer’s perspective. And to the consumer certainly in the Western markets and the United States, we never came out of recession, there is lack of certainty in their own lives, and so what they have done is do what all of us do. They’re saving money at an increased savings rate of 5 percent or 6 percent and they’re not buying or investing.

That is how I view the world. The markets go up and down.

CAVUTO: But they are buying your stuff, though. They are buying your stuff.

(CROSSTALK) CAVUTO: Now, many can argue they need food. That is a staple. They need all the stuff that you make. You make so much stuff that’s basic stuff that people need.

JOHNSON: And we make their food, Neil, better by putting ketchup on food.

(CROSSTALK) CAVUTO: Fine. Fine.

(CROSSTALK) CAVUTO: And these days, when you are bleeding a lot of red ink, it is a metaphor for our times.

But I’m wondering whether that goes, too, that eventually if things get really tight and people get really concerned about their own job prospects, they start buying the store brands and not the Heinz brand and then you’ve got a real -- pardon the pun -- pickle?

JOHNSON: Well, we don’t have a pickle at that point in time because we make relish out of pickles now anyway.

But I think from our perspective, people are going to continue to put Heinz ketchup on the table. They are going to continue to put Ore-Ida French fries on their plates. And so from our perspective, as long as we innovate and create value for the consumers, they’ll stay with our brands.

And all you have to do is look at the interesting -- interesting bifurcation that occurs in the grocery store. People will buy very expensive things if they think it creates value or improves their family situation. And they’ll turn to a private label where they don’t think there’s any value added. Our goal is make sure we continue to innovate and continue to add that value that differentiates us from everybody else.

CAVUTO: All right, real quickly, buying back any of your stock or doing anything like that in this environment?

JOHNSON: No. We continue to pay a nice dividend and we continue to invest in the future of this company. It has been around 142 years. I hope it’s around another 142.

CAVUTO: All right, Bill Johnson, thank you very much, the Heinz CEO joining us out of Pittsburgh.

Good talking to you again, Bill.

JOHNSON: Thank you, Neil.

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