Reinvesting in brands brings new bounty to ad budgets

Steve breakdown: Getting “behind brands that can get bigger than themselves” is the mantra at Kraft Heinz now-a-days. They plan product extensions everywhere they look in their portfolio and we think that could mean agency opportunities.

Maybe you could even present the agency’s ideas for brand extensions . . .

CHICAGO, IL & PITTSBURGH, PA: Kraft Heinz is looking to invest in brands with both geographic reach and the potential to cross into other food and beverage categories, according to CEO Bernardo Hees. He discussed the company’s current reinvestment phase during a Sept. 5 presentation at Barclays 2018 Global Consumer Staples Conference, and Seeking Alpha posted the transcript.

Brands with these qualities are ones “that can travel,” Hees said. “For sure there are situations within categories that don’t change and varies country by country, but I think Heinz is a good example, I think Kraft is a good example, I think Planters is a good example,” he said. “They are the brands that are more local and that’s fine, extremely important to the portfolio and important for us. But what I mean by brands that can travel, brands that have the awareness and have the potential of doing something bigger than themselves.”

According to Food Business News, Heinz has branched out from mainly a ketchup brand to entering the mustard and barbecue areas. The company debuted Heinz mayonnaise earlier this year. The company also reintroduced Planters Cheez Balls and Cheez Curls on a limited basis this summer.

Hees noted Kraft Heinz is shifting from the integration phase that followed the 2015 merger between Kraft Foods Group and the H.J. Heinz Co., and is moving into reinvestment mode. As a result, the company is adopting more of an organic growth agenda. It’s brought on about 300 in-store operators and is putting more money into c-stores, club stores, dollar stores, gas stations, e-commerce and food service, according to Food Business News. Hees said those channels are growing at a faster pace than traditional retailers.

At the same time, Kraft Heinz plans to continue examining its portfolio and making sure its scale and presence are appropriate for each of its brand categories, Hees said. And, if there are opportunities driven by growth and category consumption, the company will be closely looking at those.

Kraft Heinz introduced Heinz Real Mayonnaise this past spring, which the company said is manufactured using cage-free eggs, oil, vinegar and lemon juice. It initially didn’t make a huge splash with the product, according to the Pittsburgh Post-Gazette, and the company engaged in more fanfare about a condiment that won’t be available in the U.S. until later this year. That product is “Mayochup,” or a cross between mayonnaise and ketchup, and the social media buzz was seen as a savvy way of generating chatter about the product long before it hits retail shelves.

The company has also been enhancing the nutritional value of some of its larger brands and trying to attract millennials with healthier, and more convenient, options. The reformulations — along with brand innovations and reintroductions of classic products such as Cheez Balls and Cheez Curls — could keep Kraft Heinz current in today’s hyper-competitive climate where sales are falling and CPG companies are doing whatever they can to meet consumer demand and generate growth.

These approaches seem to working. In the company’s last earnings report, Kraft Heinz’s overall net sales trended upward for the second quarter of this year, although its U.S. business slipped 1.9%. Speculation is the company is looking to make a major move on the M&A front, perhaps by making a bid for Campbell Soup. Reports are the two firms have discussed such a deal, but no decisions have been made. Kraft Heinz may want a sweeter deal than Campbell is willing to make, and the CPG giant may also be looking at bigger fish with fewer problems, but only time will tell.

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