Wattie's Ltd. History
New Market, Auckland
Telephone: (9) 573 0720
Fax: 9 573 0698
Sales: NZ$773.76 million (US$400 million)
SICs: 2037 Frozen Fruits & Vegetables
Wattie's Ltd., which became a subsidiary of the multibillion dollar American firm H. J. Heinz in October 1992, is the largest and most important food processing company in New Zealand and in the Australasian territories of the southern hemisphere. With numerous markets in the Pacific Rim and in Europe, approximately half of Wattie's sales are derived from exports.
The story of Wattie's success goes back to founder James Wattie. A native New Zealander whose home was the country's North Island city of Hastings, on Hawke's Bay, Wattie was born and grew up in what happened to be New Zealand's richest fruit growing region. Fruit grew so bountifully on the Heretaunga Plains that year after year much of it lay rotting on the ground.
Entering the working world at age thirteen, during the years of the First World War when jobs were plentiful, Wattie eventually was hired by the cooperative Hawke's Bay Fruitgrowers Ltd. in Hastings. He rose through the ranks until, by the onset of the Great Depression, he had become a manager. With New Zealand in the depths of the Depression, it was the least propitious time to start up a new business, much less a new industry requiring capital and expensive machinery.
Nevertheless, Wattie came across a startling fact that led him to establish his own business. An Australian jam manufacturing firm in Auckland was importing fruit pulp from Australia, two thousand miles away, while an abundance of fruit lay rotting on the ground in nearby Hawke's Bay. Though neither Wattie nor anyone else in the Fruitgrowers cooperative had experience in processing fruit, Wattie made up his mind in 1934 to use surplus New Zealand fruit to make jam for New Zealanders.
Persuading fellow directors of the Hawke's Bay Fruitgrowers coop to raise the capital for a canning plant was a formidable task, particularly given the hard financial times in the nonindustrialized region of New Zealand. Wattie personally went from bank to bank in search of a loan and asked the cooperative to rent him a four room cottage for ten dollars a year, where the new "cannery" could be set up. The members agreed, and Wattie Canneries Ltd. was established in Hastings in September 1934.
The director of the jam manufacturing company in Auckland agreed to buy the fruit pulp processed in Hawke's Bay if it matched the quality of that imported from Australia. The company was pleased to find that it did. Importing the fruit pulp ceased, and the new Wattie Canneries Ltd. had at least one major customer.
Certainly the beginning of the new business in Hawke's Bay was rough. Wattie purchased the necessary machinery to process the fruit secondhand. However, unable to afford to manufacture its own cans, Wattie Canneries was forced to purchase them, and now and then a flawed can would turn up to the chagrin of the consumer. Fruit processing was, moreover, a highly labor intensive industry. Fruit was peeled and cored by hand, which meant that virtually every can of processed fruit was handpicked. Lastly, the fruit supply was highly dependent on the weather. One bad storm could wipe out an entire fruit crop, as happened repeatedly in the first few years of the company's existence. Overshadowing those early years was the knowledge that an earlier attempt to establish a fruit processing plant in Hawke's Bay had failed.
Nevertheless, Wattie's talents seemed to unfold once he became head of the new industry. A personable man, he knew each of his workers on a first name basis and maintained an amicable and productive relationship with them. Also, Wattie abounded in ideas and initiative. Only ten months after the company's arduous beginnings, Wattie's showed a healthy profit of nearly two thousand dollars.
Such modest success led to expansion of facilities and improved machinery. Soon new boilers were installed and processing was mechanized to the point where, by 1937, approximately 25,000 cans a day rolled off the assembly line. Wattie Canneries already was making an important contribution to the New Zealand economy.
The market for canned fruit and jam was by no means limited to underpopulated New Zealand in those early years. Though an independent country as of 1907, New Zealand had close financial and cultural ties to its mother country, Great Britain, and as a member of the British Commonwealth, New Zealand theoretically had access to markets in Great Britain and worldwide. Speculating that Great Britain would provide a good market for canned vegetables, Wattie soon was searching for land on which to raise peas, asparagus, and tomatoes.
These new product lines were extremely successful. On the eve of World War II, which New Zealand entered in September 1939, the worst of the Great Depression was over and new competitors had arrived. Though five years old, Wattie's company and the Wattie's brand had gained national recognition. Radio proved the best medium for advertising in those early years.
Wartime demand for Wattie's food was enormous, and the challenge of meeting it would turn Wattie's from a small scale regional industry to a giant company. While in 1939 the company's production was worth $72,000, that figure had climbed to over one million dollars by 1944. Nevertheless, the challenges of producing canned fruit during wartime seemed insurmountable. Not only did the industry experience an acute labor shortage, but the raw materials indispensable to the canning, such as the all important sugar, were also difficult to come by.
Government rationing of food turned out to be one solution, while the labor shortage was gradually surmounted by the purchase of more machinery, especially for peeling and coring Wattie's fruit. The money for expansion and new equipment came when the U.S. Congress approved the Lend Lease Act in 1941, which provided Wattie Canneries with ample funds to at last establish its own can making machines capable of churning out thirty million cans annually. The company was also able to purchase land for its own farms and equip them with modern machinery, as well as to expand its original plant. Expansion was necessary once the United States entered the war, since all of Wattie's productive capacity was sold to the U.S. Joint Purchasing Board to feed the allied armed forces stationed in the Pacific.
While profits were high by the end of the war, James Wattie had long anticipated the trends of the postwar years: intense competition and the necessity of establishing new markets overseas, in addition to new product lines. With troops coming home, there also was sure to be demands for pay raises and shorter work days, which would dip into company profits. When the war ended in August 1945, Wattie immediately went in search of new markets as well as new technology, particularly during his first visit to the United States.
The 1950s and 1960s were characterized by expansion, mergers, new product lines, and Wattie's entrance into the computer age. When some employees expressed their concerns that the dramatic transformations would turn the company into a giant, impersonal monolith, Wattie maintained that for an industry to make a profit, it had to invest in new machinery, and such machinery was increasingly costly in an age of rising labor costs and shorter work days. Hence Wattie Canneries Ltd. began a program of continuous expansion.
Wattie's biggest market outside of New Zealand in the postwar years was western Europe. The demand for food products, especially canned peas and jams of all kinds, was astonishing. In 1947, Unilever of Great Britain contracted with Wattie's to purchase frozen peas under its Birdseye brand. During this time, frozen foods of all kinds were becoming enormously popular and more profitable than canned products. With the establishment of a new plant at Gisborne in 1952, in an area perfect for the growing of sweet corn, Wattie's became the first food processor in New Zealand to offer both canned and frozen corn.
Other major product lines in years to come would include tuna, baby foods, and pet food. Baby foods quickly developed into an important new industry for Wattie Canneries Ltd. as did pet food. While pet food was well established in the U.S. market, in Australasia the conventional diet of dogs and cats consisted of table scraps. New Zealand veterinarians hailed this new product line and were brought into its development. "Felix" cat food had extraordinary sales in the mid-1950s. At this time a fully staffed and equipped research and development department was established at Wattie's to put new ideas and products to the test.
By the end of the 1950s, Wattie Canneries Ltd. employed over 1,000 people and sold over 75 varieties of food products, including pet food. Sales in 1960 were valued at $10 million. Advertising was pursued aggressively, especially on the relatively new medium of television. By this time, 40 percent of Wattie's products were exported.
Australia was an extremely important market for Wattie's, particularly after the 1965 announcement of the New Zealand-Australia Free Trade Agreement, which displaced the United Kingdom as Wattie's biggest overseas customer. Other Pacific Rim countries such as Japan, Singapore, Malaysia, Taiwan, Indonesia, Borneo, and small South Pacific island nations became well established markets for Wattie's products. Japan in particular became an important Wattie's bastion after 1965, when the government of New Zealand led a goodwill mission to Japan and Taiwan. Frozen foods found the biggest market in Japan. In the 1990s, Japan displaced Australia as Wattie's most important overseas market.
Mergers were also an important feature of Wattie's evolution. In the 1960s, Wattie's took over Thompson & Hills Ltd. and S. Kirkpatrick & Co., Ltd., both subsidiaries of The Henry Jones Co-op Ltd., an important food processing industry in Melbourne with an extensive range of food processing plants in Auckland and other New Zealand cities. Several other mergers followed throughout the decade, and new product lines emerged, including the processing of meat and citrus fruits.
The largest and most complex merger, however, occurred in 1968, when the company teamed with General Foods, Ltd. of New Zealand, which had begun years earlier as a manufacturer of New Zealand's most popular brand of ice cream, "Tip Top," and Cropper-NRM, the country's largest producer of flour and flour products. This merger altered the identity of Wattie Canneries, a name that no longer adequately described the kind of enterprise Wattie's had become. Changing its name to Wattie's Industries, Ltd., the company underwent a complete reorganization in 1971.
Wattie's Industries continued to grow and prosper after James Wattie's death in 1974. By 1987, however, according to the results of a twelve month study of Wattie's Industries, the company had grown too large. That year another radical restructuring commenced, this time turning Wattie's Industries into a holding company with five major subsidiaries: Wattie Frozen Foods, Ltd.; J. Wattie Foods, Ltd.; Best Friends Pet Food Co., Ltd.; Wattie Fishing, Ltd.; and Wattie Irvine, Ltd. A year later, Wattie's Industries merged with the largest food processing giant in Australia, Goodman Fielder. The new company of Goodman Fielder, Wattie's, Ltd., entered the ranks of the top twenty food processors in the world in 1988, and was by far the largest in Australasia.
Although Wattie's half of the new industry generated $400 million worth of sales in 1992, Goodman Fielder of Australia decided to sell off its Wattie's concerns by letting the five Wattie industries (Wattie's Frozen Foods group, Wattie's Tip Top frozen desserts and ice creams, J. Wattie Foods--maker of baked beans, spaghetti, and canned vegetables--Best Friend Petfoods, and the Tegal Foods Division, processor of poultry) to float on the New Zealand stock exchange. The giant multibillion dollar food processor, H. J. Heinz of Pittsburgh, snapped up the Wattie's five food processing concerns for $300 million in October 1992. Heinz extended its foreign markets significantly with the purchase of Wattie's, and soon had a firm foothold in the increasingly lucrative southeast Asian markets. It was without doubt the biggest foreign acquisition in Heinz's long history.
Although a subsidiary of Heinz, Wattie's remained a vital industry in New Zealand, employing thousands of New Zealanders and generating multimillion dollar sales, as well as commanding a 65 percent share of the processed food market in that country. In a country with the highest environmental standards in the world, Wattie's strictly monitored and limited chemical spraying, experimented with the large scale growing and processing of organic foods, and continually sought environmentally sound and less costly alternatives to their production methods. Under the management of CEO and president David Irving, a native New Zealander, Wattie's seemed well prepared to meet consumer and community expectations.
Source: International Directory of Company Histories, Vol. 7. St. James Press, 1993.