HJ Heinz is to launch a raft of smaller products in the US as it targets consumers looking to manage their spending on food.
Consumers in the US and Europe, faced with pressure on their income, are turning to smaller pack sizes, the chief executive of the US food giant said.
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Bill Johnson said he had seen a “dramatic shift” towards small packs and he added Heinz had developed new products to meet that demand.
“Half of consumers now are buying smaller sizes with lower and more compelling price points in virtually every category in which we operate,” Johnson said. “We’ve seen it in Europe. It’s now starting to come to the US. Partly, that’s a function of a number of consumers shifting to dollar stores. Partly, it’s a function of price point management with consumers shopping week to week. Partly, it’s a function just of general economic malaise that we get back from our consumers and focus group research. But ultimately, we’re seeing a lot of the categories downsize.”
Johnson’s comments came after Heinz announced its second-quarter results last week. In North America, the company saw its sales increase 0.3% on an organic basis but its volumes fell 2.4%. The Heinz chief said the company’s new products in the US would include “several items” with “compelling price points of US$0.99 and $1.99. Heinz, for instance, is launching a ten-ounce version of its ketchup at $0.99 and plans to sell Heinz-branded mustard, Worcestershire sauce at $1.
“Data shows that 1/3 to 1/2 of unit purchases in many US product categories are now of small-size SKUs as many consumers are shopping from week to week to stretch their food dollars,” Johnson said. “These new products will enhance our ability to serve the rapidly growing number of US households with incomes below $50,000. This income bracket has grown 3x faster than households with income above that threshold.”
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By GlobalDataHeinz will also add to its Ore-Ida frozen potato products range after seeing the brand’s sales slide in recent months. Johnson said Ore-Ida had suffered from the gap between its price and own label but the he also admitted that the company’s marketing plans for the brand had been “a bit feckless and pallid”. Smaller size Ore-Ida products will go on sale, as well as a 1lb packet of French fries at $1.99.
Asked by analysts about the impact the smaller sizes will have on margins, Johnson said “most” products would be “margin neutral or better”. However, he said some products would be “incremental” to sales, including the relaunch of baked beans into the US. It will be the first time in decades that baked beans have been sold in the US and the product would meet demand for “comfort food”, he said.
“I can’t even remember the last time we sold beans here. And I’ve been here almost 30 years. I think the last time we sold beans was maybe the ’70s or early ’80s in the US,” Johnson said.
For more of the transcript of Heinz’s conference call with analysts, visit Seeking Alpha.
