David Jason’s voice wafts into British living rooms as images of everyday life fill the screen. ‘Some things in life just have to be,’ he intones. It’s not meant to be prize-winning creative work. It’s the latest part of Heinz’s increasingly successful strategy to fight private labels. The food giant offers a playbook on how to survive and prosper in an age of own-label brands.
First you must focus. Heinz might be famous for its ’57 varieties’, but that was a portfolio for a long-lost age, when stores sold your brands, rather than competed via offerings of their own. Today, Heinz manages a tight global portfolio in which 15 brands account for 70% of sales. In the UK, that portfolio includes the Lea & Perrins and Weight Watchers ranges. Like the rest of the Heinz stable, these brands have been selected on three criteria: strong brand equity, top two in terms of market share and operating in categories in which private label is relatively weak. Former cash cows such as Linda McCartney’s range and StarKist tuna, which failed these tests, have been jettisoned.
The resulting slender portfolio allows Heinz to focus marketing and research and development resources on the brands with the most profit potential. The strategy hinges on Heinz being able to build and maintain equity in these brands. The ‘It Has to Be Heinz’ campaign is designed to do that by making Heinz products as familiar and trusted as Jason’s mellifluous voiceover – and it’s working. Heinz Tomato Ketchup consistently appears as the brand that British consumers least want to give up, followed by Heinz Beanz. Despite attacks from Tesco’s various ketchups, a rejuvenated Sainsbury’s version and Aldi’s deep-discounted sauce, Heinz still has a 75% share of the category. Nobody has that kind of share anymore – especially when the product costs up to four times more than own-label rivals.
While Heinz is reinforcing its brand equity by playing on heritage and familiarity, it is also underpinning its brands with innovation. Creating a bottle that stands on its head, thus reducing the annoying delay before the sauce hits your plate, is testament to Heinz’s customer-focused approach to innovation. EZ Squirt Bottles, Spicy Flavors, a ‘trap cap’ that eliminates watery ooze and Mystery Colors for kids all aim to appeal to consumers, while providing vital differentiation from private-label competitors.
Heinz has also successfully targeted emerging markets such as India, China and Poland. Within three years, these developing markets will account for 20% of Heinz’s total revenue. That is important in the fight against private label because, unlike developed European markets, where store brands can claim up to 50% of sales in a category, there is little if any threat at present in developing markets.
Heinz has been quietly producing own-label products for supermarkets for years. It’s a growing business, but again Heinz has done it the right way: sticking to categories such as soup, while avoiding products such as ketchup, where the risk to its success outweighs the profits available.
There is nothing revolutionary about any of this. Tighten your portfolio, build brand equity, focus on innovation, expand into new markets and manufacture for the supermarkets – these are the quintessential five responses to private label. But Heinz has done them so well. As its founder, Henry John Heinz, noted more than a century ago: ‘To do a common thing uncommonly well brings success.’
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