Heinz Case

America is a country defined by many national icons, anythings from sports teams to particular brands. One of these great American icons is Heinz ketchup, which has been produced since 1876 and became an icon in the 1960s when it became the industry leader, a position it has not given up. However, in the current market there is a lot of pressure on Heinz to maintain its success and profits in its most important segment, the ketchup market. Heinz also owns many other food items which compromise other segments of its product lines. Adding to the pressure on their ketchup line is the existence of not only major label competitors but also store brands, which are currently being marketed against the main players in the industry like Heinz. Heinz has however found an interesting phenomena in the market, where if consumers are convinced into buying more ketchup, than their use of ketchup also increases. Heinz can combat some of the increase in packaging costs by selling larger bottles less frequently. So the big question for Heinz, who sells nine different size and style containers, is how to price the line of ketchups so as to promote selling larger size, without increased cost of shelf space in stores among other difficulties.

One interesting thing to note in the case is the percent gross margin across Heinz’s ketchup line. One solution to Heinz problem with pricing the product line so as to promote the larger sizes, is for Heinz to cut the product line size to exclude those lines with a low percent margin. In doing so, the line could be cut down to four or five items, obviously keeping the Red Rocket bottle in the small and original size, one of the EZ Squeeze bottles and maybe two of the larger size bottles. This solution has an advantage in that with less products to stock on shelves, Heinz can utilize the space better in attempts to sell the larger size bottles. This solution also presents another advantage in that with less products Heinz can focus its promotion and marketing attention on the large size bottles. Heinz has its loyal followers and the normal size will always succeed, but in order to maximize profits they need to sell the larger bottles. A major disadvantage to cutting the product line is that private label store brands which provide competition for Heinz not only in sales but also in shelf spacing, will likely follow suite and thus compete head to head with Heinz. Another potential disadvantage is that customers may see the cut of the product line as a problem with Heinz’s overall brand, not as an attempt to focus sales