CASE ANALYSIS

HEINZ KETCHUP: PRICING THE PRODUCT LINE

Under the Guidance of: Submitted by:

Dr. D. D. Swain Navneet Goel
Professor – Marketing Regd. No. 11PGDM-BHU005

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INTRODUCTION

The Heinz brand ketchup was introduced in the year 1876 by the H. J. Heinz Company headquartered in Pennsylvania and is the most global US based company. The Heinz ketchup has been in the leadership position from the year 1960’s. The Heinz ketchup was the flagship brand of the company’s food products portfolio. The company owned 15 brands which generated revenue of more than US $100 million in sales. The ketchup generated 30% of sales revenue. The ketchup was served with American favourites such as hamburgers, hot dogs and French fries. It was distributed across the globe and mainly in U.S. through all major grocery retailers.

ISSUES

The threat by the retailers loomed large in front of Heinz and it faced the issue on how to increase the net sales of the Heinz ketchup and how to increase the profits. The issues which the company faced are as follows:

• The reduced shelf space because of the display of the retailer products

• Impact on the prices of the Heinz ketchup because of increase in the prices of oil and natural gases

• Slow growth of the sales of the ketchup

• The market was saturated and the category was matured

• Competition by the Private labels of the retailers

• Constant pressure to offer trade deals to the retailers since the retailers needed to be motivated to sell Heinz products. They instead made better margins by selling their own private labels

• Heavy expenses being incurred on promotions

• Cutting down margins so as to enable higher sales volume

• Customer expectations for promotional sales of the ketchup

RECOMMENDATIONS

Some of the viable recommendations to scale up the performance of the Heinz ketchup are as follows:

• The company needs to undertake a market research so as to find out the issues that the product is facing. This could be because of the difference in the perception of the U.S. consumers towards the packaging and promotion of the ketchup bottles.

• The company should focus on building customer based brand equity by having a proper marketing program and integrating the brand into it in an efficient manner. This would give them a better market and enable customer loyalty. The consumer perception would add value to the product.

• They should have a strategic brand management which would involve designing and implementation of marketing programs and activities to build and manage brand equity.

• Heinz should define desired brand knowledge structures in terms of point of parity and point of differentiation.

• They should create better trade off in terms of price, convenience and quality; taste and low calories; variety and simplicity.

• It should look for alternate means of manufacturing the ketchup since the prices of oils and natural gases has been increasing. This control of prices would lower down the manufacturing cost and give them a better control over profits.

• Heinz should look forward to exploit emerging markets. A first mover advantage would add to Heinz’s cause and this would help them gain a comparatively larger market share.

• They should come up with new products say ketchup in ginger or onion etc flavours and should also work on the packaging of the ketchup bottles so as to ward off competition by being innovative.

• Heinz should use ads and promotion medium to highlight some essentialities of the ketchup say that it is devoid of artificial preservatives, colours, flavours, emulsifiers. This would create a health conscious brand image of the product.

• They should offer better incentives to the retailers so as to show case their products. The distribution should be revamped and display incentives can be given to retailers so as to get more face off.

Thus these factors would help the company become sustainable and deliver economic profit.