Reference no: EM131124963

Pricing and Communications

Respond to the following discussion starter

In late 2013, the H.J. Heinz Company was sold to its new owners Berkshire Hathaway and 3G capital of Brazil, who then engaged in a massive cost-cutting programme. This included the closing of its Canadian tomato processing facility in Leamington, Ontario. Heinz simply moved its production and sourcing to the United States. This caused about 1000 permanent and seasonal job losses in this small agricultural community. The facilities processing was later sold to another company, but the production of ketchup processed with Canadian tomatoes was not continued by the new owners.

An overview of what transpired in the following months is very well documented in the following web report:

https://calgaryherald.com/storyline/how-a-misstep-by-heinz-laid-the-path-for-frenchs-quest-to-become-canadas-ketchup-king

How a misstep by Heinz laid the path for French's quest to ...

calgaryherald.com

In November 2013, managers at H.J. Heinz Co. gathered their workers in the cafeteria of the company's century-old plant in Leamington and broke some bad news.

As noted in the article featured in the web report, French's decided to enter the ketchup market in 2014 and after Heinz had sold its Canadian processing facilities, French's committed to producing their ketchup with tomato paste from the same Canadian processing source. Perhaps of greater significance was that the French's product opted to be free from additives, high fructose corn syrup, and gluten, unlike the competition's brands. In March 2016, French's also committed to bottling its ketchup in Canada.

While a small player in the Canadian ketchup condiments market compared to Heinz and the Loblaw's President's Choice house brands, there was consumer appeal for this new entrant. This was solidified when an employee revealed that Loblaw's had decided to drop the French's brand from their shelves ostensibly due to poor consumer demand. However, the reality, or at least the appearance, was that the Loblaw group simply wanted to maintain shelf space for their own ketchup lines as well as those from Heinz (all of which were produced from US tomato stocks) and viewed the new French's line as cannibalizing their house brand.

When this information was leaked to the public through social media, there was an immediate and large protest demonstrated by many shoppers who demanded that Loblaw's reintroduce the French's brand, which was accomplished after several weeks of bad publicity.
In addition, the A&W fast food restaurant chain in Canada dropped the Heinz brand in favour of French's products in support of the Canadian sourced initiative:

https://www.theglobeandmail.com/news/national/aw-switches-to-frenchs-ketchup-mustard-in-canada/article29421005/

Even with its Canadian-sourced, natural-ingredient-based ketchup and Canadian bottling facilities, French's is going up against the ketchup giant, Heinz, and another well entrenched brand in the President's Choice ketchup. As such, French's is facing some significant challenges as it expands into and attempts to gain significant share of the Canadian market. With this in mind, assume that you were brought in to advise French's management. Suggest a revised pricing and communications strategy that will help them to succeed in this expansion.

Although specific consumer pricing information is not available, it would be reasonable to assume that the Heinz brands are marketed at a premium price and that the French's products have been marketed at a somewhat lower average price, likely similar to the prices usually charged by the President's Choice or other supermarket house brands, although each brand is subject to promotional pricing offers from time to time.

With respect to an ongoing promotions and communication strategy, you may wish to consider how French's can move forward to present its ketchup, which may stimulate greater demand pull from the Canadian population. One suggestion could be to consider some specific strategies employing the use of social media; another perhaps is to invoke some unique promotional strategies consistent with brand and product image the company wishes to communicate.

In summary, provide your own original suggestions for changes to the Canadian pricing policies for French's ketchup, and also consider how you would communicate any changes to the Canadian consumer. Please note that if you are of the view that there was no need to modify the current Canadian pricing strategy, then you should justify your choice and focus your attention on marketing communications. "Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers-directly or indirectly-about the products and brands they sell" (Selected Texts for MKMT-504, p. 214). In suggesting a revised communications strategy, keep the above definition in mind, and be sure to include to whom the communications should be directed, the communications' objectives, and the modes of communication that you would recommend.

Please formulate your responses based upon the information that is available. You are encouraged to also scan the Internet for additional current input on French's in constructing your contribution.