Laura Orcutt, Kraft Heinz Plans Marketing Binge to Lift Sales

Kraft Heinz will be increasing its marketing spend by 30% this year with television ads and other consumer-oriented marketing while reducing ‘less-visible expenses like agency fees’. This comes in response to another year of declining sales and reduced profits. Overall, the big food maker industry has had increased levels of competition due to many store brands entering the market. They are now adjusting their strategies. For example, Hershey and Kellogg’s ran 2020 Super Bowl commercials aka as the ‘big leagues’ of advertising with the average 30-second commercial costing approximately $5.6 million dollars, per a Feb. 2, 2020 USA today article.

Mondelez (maker of Oreo) also increased their marketing budget last year by roughly 5%. This may seem small, but for years many companies have only been relying on decreasing expenses to increase their profitability which has not addressed declining sales.

Last July, Kraft Heinz added a new CEO, Miguel Patricio, who recognized the need for change. He said in an interview “You need to nurture brands, take care of them, to keep them meaningful after 150 years.” He continued, “We want to invest in our brands”. He also said he would challenge the current supply chain to increase efficiency and simplify its enormous operations. The savings would then finance new investments. At the very least, Kraft Heinz isn’t being conventional. Last year, they created their first ever global ad campaign to celebrate their 150^th year anniversary and brought along music star, Ed Sheeran, to create a limited-edition ketchup, named “Edchup”.

I believe Mr. Patricio has clearly analyzed the External Market and is aiming to differentiate Kraft Heinz by significantly investing in his marketing department. I image his investment would also ensure a sizable amount is allocated for more marketing research into the customer’s ever-changing dietary preferences. 

I thought this was an interesting article because over the years I have noticed that every grocery store has their own brand(s) and they’re often just as good, if not better and still less expensive than the most recognized brand item. I remember when the only choice was the well known brand or the no-name generic item. As a consumer, I think it’s great that this competition is forcing big food makers to drive efficiency in their operations which will hopefully bring down cost even further and increase novel items and quality. This is clearly relevant to our class and also to me as an accounting major because it’s a real-life example of how strong profits are not the only relevant line item on financial statements; sales have to also be considered for long-term success. I also didn’t know Ed Sheeran has a Heinz Ketchup tattoo! 

Article posted at https://www.wsj.com/articles/kraft-heinz-reports-weaker-sales-as-cheese-cold-cut-shipments-fall-11581598139?mod=searchresults&page=1&pos=6 on Feb. 13, 2020 2:33 pm ET.