Building brand equity at Heinz
A Heinz case study

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Page 2: The changing market place

Heinz 2 Diagram 1Today’s market place is quite different from that of the past. If someone who lived in the last decade of the nineteenth century were to visit a large, modern supermarket, they would be astonished at the variety of food products on sale. There is not only a great variety of products, but also a wide range of similar products. Additionally, in most towns there are several supermarkets to choose from.

Heinz is one of the most important competitors in many of these food lines. These range from baked beans, spaghetti, soups, macaroni, ravioli, pasta shapes, tomato ketchup, barbecue sauces, pickles, relishes, sandwich spreads, salad cream, mayonnaise, baby food, juices, tuna, frozen pizzas and many others. However, when we look at each of these lines, we find there is an increasingly complex structure. This complexity is a feature of the 90s and needs to be understood if we are to appreciate why Heinz has changed its marketing strategy.

In the 1970s the picture was different from today. Then, competition was mainly between brands. For example, in baked beans and soups, Heinz competed with Crosse and Blackwell and similar companies. Today, this is no longer the case. Now, in most categories of food items, the main competition for brands like Heinz Baked Beans is the retailer’s own brand. Food lines in the 1970s were characterised by a market leading brand competing against a secondary brand and then a tertiary brand. In a number of cases the manufacturers of secondary brands switched their production resources into own label and this has, of course, led to the increase in quality of own brands.

B brands and own labels 

A development which is by no means new, but which has become very important in recent times, has been the development of budget or 'B' Brands. These are those products which are at the bottom end of the market e.g. 'B' Brand beans and 'B' Brand detergents. They are produced in large quantities, to different specifications and may be sold as loss leaders.

Own label brands are initiated and owned by retailers or wholesalers. The main feature of these brands is that it is the retailer who is identified with the brand and not the manufacturer. In recent times, supermarket own label products have moved up the value chain. In other words, many of these own label products are no longer second rate substitutes for branded products. Increasingly, they have started to compete in terms of quality and taste with the market leading brands.

Heinz 2 Diagram 2What we then have today is a four tier category with ‘B’ Brands at the bottom, then secondary brands, followed by own label, with The Brand leading the market. At the same time, choice within each grocery category has mushroomed. We can see this effect if, for example, we examine the case of bottled sauces. Until a few years ago, the purchasing decision was limited to tomato ketchup or brown sauce. Today, consumer choice extends to Hot Ketchup, Texas Hot Ketchup, Curry Ketchup, Worcestershire Sauce Ketchup, Sonic the Hedgehog Ketchup, Curry Sauce, Chilli Sauce, several varieties of Barbecue Sauce and a whole host of other spicy sauces.

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