Business Lunch: Heinz Ketchup

7 11 2011

If you prefer a brand of ketchup other than Heinz ketchup, we’re going to have words. First introduced in 1876, Heinz continues to dominate the market; Heinz has a 59 percent share, dwarfing store brands, which account for 21.8 percent, and Hunt’s, with 15.1 percent. In his 2004 article in The New Yorker, “The Ketchup Conundrum,” Malcom Gladwell stated that ketchup appeals to all fundamental human tastes: salty, sweet, sour, bitter, and umami – a condiment that pushed all five of the primal buttons. However, just as any business must evolve and mature over time to strengthen its brand and generate loyal customers, Heinz is a great example of a longstanding successful company to learn from.

Ketchup with balsamic vinegar, launching November 14, 2011. Not only is it interesting that Heinz is producing a new version of its ketchup, but it’s also trying out a new selling tactic as well. As the label states, “Heinz tomato ketchup, blended with balsamic vinegar,” is the first new Heinz ketchup flavor variation in almost a decade. Do you remember the Heinz “Blastin’ Green,” “Funky Purple” and “Stellar Blue” ketchup colors featured in EZ Squirt bottles? Then Heinz admitted to a likely cannibalization of existing products, but it’s now claiming that the new balsamic ketchup is unique enough that consumers will buy it in addition to the bottle already in their refrigerator door. As for the selling tactic, it will only be available for sale through the Heinz Ketchup Facebook page before further distribution in December.

Dip and Squeeze packaging, launching January 2012. Heinz for decades has searched for better single-serve packets and has landed on a new version aimed to solve existing complaints about its packets being messy, hard to open and not providing enough ketchup. Heinz believes that this new packaging will increase orders for fries at drive-thrus and hopefully dramatically expand its market share by having McDonald’s feature its brand of ketchup. Apparently, a supply spat between Heinz and McDonald’s during a 1973 tomato shortage resulted in a Heinz lockout from most McDonald’s U.S. locations; more here on Heinz’s courtship with McDonald’s. (Interesting too, here’s a tasty bit of trivia on McDonald’s brand of ketchup.) Trouble is, the new packaging is more costly to produce, and when ketchup is generally thought of as free to customers, an increase in cost matters a lot.

Worldwide condiment domination. This year more than 20% of Heinz’s revenues will come from emerging markets such as China, India, Indonesia, Russia, and Brazil, versus less than 5% a few years ago. From soy sauce in China to a ketchup in the Philippines made from bananas, longtime Heinz CEO Bill Johnson describes his strategy for growing sales in developing economies through different modes of due diligence and a focus on diversification that helps mitigate not only the political risks but also currency risks. With such a mature brand, and one that is so successful, it’s interesting to learn how Heinz continues to evolve by entering into new markets around the world. Click here to see an acquisition timeline, it’s amazing to see how they’ve distinguished the core condiment for each culture.

From a small business perspective, there’s a lot to emulate from Heinz’s operations. Heinz may be an incredibly large and financially successful business, but it continues to develop new products, adapt its packaging to meet market demands, and expand its reach globally to access new customers. None of these concepts are foreign from what a small business owner thinks about daily, it’s just that Heinz has a lot more money to play with when doing so (and they play on a much larger playing field). Not every move that Heinz has made has been a home run, but it’s interesting to acknowledge what they thought about going into each tactic and what they learned from the experience. It’s often hard to rest with the fact that, even though we have an immense amount of information at our fingertips, time and experience grants answers so many questions. And with Heinz, it has had a lot of time to mature.

Video courtesy of The Early Show.

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