(Rewrites throughout with CEO comments on the economy)

By Brad Dorfman

CHICAGO (Reuters) - H.J. Heinz Co Chief
Executive William Johnson said the global economy was in the
worst state he has seen during his 35 years in the consumer
goods industry and that he would focus on deals in emerging
markets to boost company sales.

Johnson also indicated that Heinz's second-quarter earnings
could fall below analysts' estimates, though the company stood
by its full-year forecast.

"The near-term economic outlook for the U.S. and Europe
remains pretty dreary, marked by high unemployment and low
consumer confidence," Johnson said during a conference call on
Wednesday following the release of the company's first-quarter

"Many consumers have gone into what I like to term as
economic hibernation, eating at home more often, eating out
less, reducing spending and worrying more about the future," he

Johnson said the company, maker of Heinz ketchup and
Ore-Ida french fries, is focusing on areas where it can see the
best long-term returns.

The company has relied on growth in emerging markets, which
accounted for almost 18 percent of its sales in the quarter
ended July 28. That helped offset performance in the U.S.
market where retailers and manufacturers have resorted to steep
promotions to lure cash-strapped consumers.

Heinz sees more acquisition opportunities in emerging
markets now than in the last five yeas, Johnson said.

"We are not spending much time looking for M & A
opportunities in the United States and Western Europe. Our
focus is almost entirely on the emerging world," he said.

While Johnson would prefer to buy a smaller business and
grow it, he did not rule out making a larger acquisition.


Heinz has said it plans to generate at least 20 percent of
its global sales from emerging markets by 2013, but it may be
possible to reach that goal sooner, Johnson said.

Sales in emerging markets like Russia, India and Indonesia
rose 21.9 percent in the first quarter, excluding the impact of
acquisitions, divestitures and currency fluctuations, compared
with global growth of 3.6 percent, the company said.

Sales rose 4.8 percent at North American retailers, with
volume up 5.3 percent. But prices were down 2.7 percent, and a
quarter of the volume increase came from sales at Wal-Mart
Stores Inc, which discounted Heinz ketchup to attract

Gross margin rose to 36.6 percent from 35.7 percent a year

Heinz confirmed the preliminary earnings data it released
Tuesday. Net income rose to $240.4 million, or 75 cents per
share, in its fiscal first quarter from $212.6 million, or 67
cents per share, a year earlier.

Sales rose 1.6 percent to $2.48 billion.

Johnson said he expected second-quarter profit to mirror
that of the first quarter. Analysts on average forecast 81
cents a share for the quarter, according to Thomson Reuters

Heinz shares were up 3 cents at $46.27 in morning trade on
the New York Stock Exchange.
(Reporting by Brad Dorfman and Martinne Geller; Editing by
Derek Caney and Ilaina Jonas)