Heinz Europe Case Study
Page 1: Introduction
The business writer, Charles Handy, illustrates the need for organisations to reinvent themselves by the sigmoid curve - effectively an ‘S’ shape on its side. An organisation which appears to be successful is on the upward growth path of the curve (point A). At this time, the organisation is making high sales and profits and is able to pay healthy dividends to shareholders. You may think, therefore, that there is no reason to change the organisation.
However, this organisation is close to its peak (point B). Beyond this point, the organisation may go into decline and be less successful. The time to change is at or before point A. The intelligent organisation will seek to reinvent itself and come up with new ideas in order to keep ahead of the competition. This is important as competitors will also be seeking to erode any competitive disadvantage that they may have.
This case study focuses on the way in which Heinz, one of the world’s major global companies, has set out to reinvent itself at a time when it is already preeminent in a range of global food markets. The study examines aspects of Heinz’s ‘Project Millennia,’ an international restructuring plan announced in 1997, which chairman Dr Tony Reilly describes as ‘delivering the 21st century early’. In particular, the study considers the way in which Heinz has re-organised its European operations to create a pan-European structure based on eight global categories.
The global Heinz Corporation
Like many global producers today, the Heinz Corporation started off from a small scale and localised business. The first product produced by Henry John Heinz in 1869 was horseradish, followed by pickles, sauerkraut and vinegar. These were delivered by horse-drawn wagons to grocers in and around Pittsburgh, Pennsylvania. In 1875, a new product was introduced which still flourishes today – tomato ketchup.
Over time, Heinz expanded in the USA and around the world, at first through internal growth (i.e. ploughing back profits into investment in new plants and equipment), but since the 1960s, by acquisition and brand building (i.e. taking over well known producers of products and brands that complement Heinz’s existing ones). Today, Heinz has 50 affiliates operating in some 200 countries, offering more than 5,000 varieties.
Heinz has also developed a strong world-wide focus on eight global product categories in which it possesses unique competitive advantages and opportunities:
- infant feeding
- ketchup, sauces and condiments
- weight control
- pet products
- frozen foods
- convenience meals.
Hill was speaking at the IGD Big Debate in London about the acceleration of his company’s product innovation since Heinz merged with Kraft last year, creating one of the five biggest global food companies.
It has launched ranges including Seriously Good Mayonnaise, which is sold in a distinctively shaped jar and aims to bring competition to a category almost entirely dominated by a single brand, Unilever’s Hellmann’s.
But Hill said in order for launches like this to resonate with shoppers, retailers needed to allow the space for elaborate, inventive promotional displays.
He said that the growth in recent years of Aldi and Lidl, which have won over consumers on a model of low prices and simplicity, there had been a movement towards "efficiency" in supermarkets, with a minimum of "clutter" – but that this led shoppers to move around the store on "autopilot", not paying full attention to the products on offer.
"There has to be scope for creativity in store," he said. "Our challenge is to create real theatre – interrupt the autopilot." He added that environments with visually interesting brand displays were "more enjoyable to shop – more stimulating, more inspiring."
Hill added, however, that creating effective brand engagement "starts long before the store" and that the owners of familiar brands needed to find ways to turn their brand equity into conscious thought among consumers – thinking that influenced the recent #cansong campaign for Heinz Beanz.