Case Introduction

An Icon
Market leader in the ketchup category since 1960s
H. J. Heinz Company records over $10 billion dollars in annual sales
The company owns 15 brands, each accounting for over $100 million in sales.
Out of this, Ketchup by itself accounts for 30% of total sales.

Current Scenario 2007

The product had matured.
The market was heavily saturated.
Heinz was still the market leader.
It relied on innovations product, packaging and pricing
to maintain modest growth.

Heinxe Ketchup was a brand in a commodity

market.
Cost implications were having a direct
impact on Heinzs margins.
Three years of declining operating income
despite being market leader.

Ketchup Wars
Competition against many generic brands. Most
prominently against Hunts.
However, primary competition was with private labels.
Heinzs twofold problem Distribution channel, Shelf
Space.
Heinz began offering trade deals despite eroding
margins.
This helped block the growth of private lables.

The Red Rocket conditioning

The Red Rocket was a retro 24 oz. ketchup bottle by
Heinz.
Heinz adopted trade promotions on the Red Rocket to
block private labels. While compensating the retailers to
offset their margin compressions.
While the category expanded, the price point trained the
consumer to wait to purchase ketchup only during these
promotions.
Meanwhile, the promotions helped the retailers compete
with Walmarts EDLP.

The EZ Squeeze
The EZ Squeeze bottle was essentially an upside-down
20 oz. ketchup bottle that was sold at the price of the
traditional 24 oz. bottle.
The EZ Squeeze bottle introduced in 2002 is proof of
Heinzs innovations leveraging consumer habits.
Consumer research indicated that 7 out of 10 consumers
preferred the new bottle.
But the bottles represented only 12% of the sales. The
reason behind this was unknown.
Intended as a short term profit boost, the plan failed. This
prompted the team to look for new ways to stimulate
sales through product innovation.

The Package Conundrum

Heinzs consumer research brought out an ongoing theme: A modest
increase in ketchup consumption seemed to result when people purchase
larger sized bottles

This was viewed as a way to increase sales and revenue growth.

However, implementation proved challenging, consumers cited

issues with handling and storage.

Twofold problem for the retailers Increased shelf space, Lower

margins.

Discounts could again proves as a viable solution but restocking

would have to be much faster, thus more expensive.

Expanding the shelf space was not seen as a possible solution

considering the onslaught of private labels and the expensive
slotting allowances.

As a whole, the entire idea seemed improbable considering the

required product promotion revamp and potential resistance
from the retailer and consumer.

Preserving the Icon

Despite the tensions among Heinz, the retailers, the competition,
and the buying public. Heinz needed to

1. Maximise net profit by increasing the sales of their highest margin

items.
2. Deal with pushback from the retailers in the form of lowered shelf
space and reduced promotional support.
3. Handle the high consumer demand for the Red Rocket during its
promotion, which had high packaging costs and low margins.