The Kraft Heinz Company was formed in 2015 by the reverse takeover of iconic North American food group Kraft by investor-controlled HJ Heinz. It had already been quite some time since the Heinz brand had the 57 varieties championed by its long-running slogan. In fact there are now closer to 570, even if the one most people think of is flagship brand Heinz Ketchup (backed up in the UK by its Baked Beans, of course or Salad Cream). Even before the Kraft deal around two-thirds of sales were generated by products that don't use the Heinz name. In 2013, the group accepted a private buyout (for $28bn) by investment group 3G Capital and billionaire Warren Buffett's Berkshire Hathaway. In March 2015, those investors negotiated an even bolder deal to merge Heinz with rival Kraft. That created a group with an extensive collection of products; not just sauces and spreads, cold meats, ready meals and cheese, but also coffee, beverage mixes, baby food, frozen potatoes, even tinned tuna in some markets. In addition to the wide-ranging Kraft and Heinz masterbrands, the portfolio also includes such icons as Oscar Mayer meats, Amoy soy sauce, Ore-Ida potato products, Kool-Aid drink mixes, Philadelphia and Velveeta cheese spreads, Planters nuts, Plasmon and Farley's baby foods, Maxwell House coffee and Grey Poupon mustard. Household names every one, but also mature brands with comparatively little room for additional growth. Co-owner 3G's traditional strategy - already tested on previous purchases AB InBev and Burger King - of trimming costs and expenses to the bone rather than investing in innovation quickly resulted in a dramatic slowdown in performance. Revenues and profits have both suffered sharp declines and between 2018 and 2019 the group wrote off a staggering $16bn of impairment charges against its portfolio. There was an abrupt overhaul of the management team, including the appointment of new CEO Miguel Patricio who has been tasked with delivering a quick turnaround. In 2019, the group reported revenues of $25.0bn, down 5%. Year-on-year organic decline was over 2%. Net income was $1.9bn, compared to a $10.2bn loss the year before. Condiments and sauces, led by Heinz Ketchup, accounted for more than a quarter of sales, and cheese and dairy products for a further fifth. Despite the merged group's wider global footprint, more than two-thirds of revenues are still generated in the US.
Capsule checked 10th October 2019
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Adbrands Daily Update 24th Mar 2020: Classic Ads: "Village" (2012). One of the many victims of the global Coronavirus lockdown is the advertising production industry. It's kind of hard to make a commercial anywhere that gatherings of more than two people are prohibited. That's not to say there are no new ads surfacing - there are - but there's nothing we've seen so far that's particularly inspiring. So instead, we'll be looking backwards for the next few weeks to ads we have known and loved before. We're kicking off with a superbly funny parody of that classic American novel 'The Scarlet Letter', courtesy of McGarryBowen Chicago. The product is Kraft's - now Kraft Heinz's - Miracle Whip. That's about as close as the US gets to a Marmite-style "love it or hate it" spread. Not as a result of a strong yeasty taste like Marmite, but because Miracle Whip is widely looked down upon in the US as budget-priced mayonnaise-alike that's high on sugar and additives. Still tastes good, though. McGarryBowen's bold approach, under the over-arching concept of "Keep an Open Mouth", was to admit "it's not for everyone", but also to remind consumers not knock it if you haven't tried it. An accompanying spot borrowed a little too blatantly from the "witch" scene in 'Monty Python & The Holy Grail' ("She turned *me* into a newt!") but the 'Village' commercial is perfectly judged and amusingly original. "It carries the pox of tang!" Brilliant.
Adbrands Daily Update 12th Aug 2019: Kraft Heinz wrote down the value of its brands for the second time in six months, reflecting continuing poor performance for the first half of 2019. "The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward," said CEO Miguel Patricio. "We have significant work ahead of us to set our strategic priorities and change the trajectory of our business." The company took impairments of another $1.2bn on top of the shock $15bn write-off in February. The company's stock price has tumbled by almost half since then. "We've been too focused on the present and literally on firefighting," Patricio told investors. "We need to work on our competencies for the future." Net sales fell 5% in the first half to $12.4bn while net income more than halved to $854m. The organic decline excluding currencies and disposals was -2.0% globally, with the worst performance in the EMEA region and the US.
Adbrands Social Media 17th Jun 2019: "Ed's Heinz Ad". Who needs social media influencers when the world's most successful recording artist already professes an undying love for your product? Ed Sheeran even has the Heinz Ketchup logo tattooed on his arm, and it's a sign of just what a down-to-earth guy he still is that he actually approached Kraft Heinz off his own bat with a proposal for an ad for his favourite sauce. Who in their right mind is going to turn down an offer like that? Here it is, and it's pretty damn great. It's hard to know how much is pure Ed and how much the advertising craft of agency David, but the finished results are delightful. Nice one, Ed! A new career awaits if you ever get fed up with the music business.
Adbrands Daily Update 6th May 2019: Chief marketing officer Eduardo Luz is to follow CEO Bernardo Hees out of the exit at troubled Kraft Heinz Company. He will be replaced on an interim basis by Adam Butler, also president of beverages, snacks & desserts. The company's head of strategic projects is also departing. At the same time, the company said it would restate financial results for the past two years in the light of an internal investigation that has uncovered misconduct by members of the procurement department. The corrections are not material and are expected to alter previously reported profits by less than 1% per year.
Adbrands Daily Update 23rd Apr 2019: Kraft Heinz announced the abrupt departure of CEO Bernardo Hees in the wake of the profit warning and asset write-off announced in February. He will be replaced from the end of June by Miguel Patricio, another 3G Capital stalwart, former CMO of Anheuser-Busch InBev and current head of special global projects for the brewer.
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