Heinz Ketchup

The Ketchup Wars: McDonald’s won’t serve Heinz anymore

Two iconic American brands have parted ways: McDonald’s will stop serving Heinz ketchup in all of its stores worldwide after the condiments company hired the former head of Burger King as its new chief executive.

In April Heinz appointed Brazilian Bernardo Hees as its new chief executive. The former railway executive, widely lauded for turning around Burger King, moved to Heinz after the $28bn takeover by Warren Buffett’s Berkshire Hathaway and 3G Capital, which also controls Burger King.

McDonald’s said at the weekend: “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time. We have spoken to Heinz and plan to work together to ensure a smooth and orderly transition.”

Heinz could be hit hardest overseas

US burger eaters probably won’t notice much of a difference, since McDonald’s was only using Heinz ketchup in its Minneapolis and Pittsburgh markets; the rest is private label. It will, however, lose out in emerging countries, where McDonald’s has 66 percent of its sales, and where Heinz had had more success in working with it.

North America makes up only 40 percent of the Heinz company’s total sales, and it’s looking overseas for more growth in ketchups & sauces — which it estimates is a $110 billion business — and being cut out of the McDonald’s business could hinder it.

“This category represents the past and future of Heinz and we possess numerous competitive advantages, including rapidly growing businesses in Emerging Markets, upside potential in Developed Markets and our unique, proprietary HeinzSeed capabilities, which deliver superior, great-tasting tomatoes for Heinz® Ketchup & Sauces,” reads its 2012 annual report.

McDonald’s was still a small part of Heinz’s business

McDonald’s won’t give out numbers for the amount of ketchup it consumes globally, but in 2006, it reportedly used 250 million pounds of the stuff in the US, only a small fraction of which came from Heinz. For a rough comparison, today Heinz says it sells 650 million bottles per year worldwide, which works out to 569 million pounds — not including bulk sales to fast-food restaurants.

Ketchup isn’t even most of Heinz’s business.

The company has grown far beyond its horseradish roots. Ketchups and sauces are the company’s largest core category, but not ketchup itself; the company now owns restaurants like TGI Friday’s, lines of food like Ore-Ida potatoes, and lines of diet foods like Smart Ones. The loss of one ketchup customer isn’t going to hurt too badly.

Sources: Washington Post, The Independent