question archive Organization management Case study: Planning function: strategy management The Ketchup Wars: McDonald’s won’t serve Heinz anymore 1 By Lydia DePillis Last week, two iconic American brands parted ways: McDonald's and Heinz, which had supplied red goop to the golden arches for 40 years
Organization management Case study: Planning function: strategy management The Ketchup Wars: McDonald’s won’t serve Heinz anymore 1 By Lydia DePillis Last week, two iconic American brands parted ways: McDonald's and Heinz, which had supplied red goop to the golden arches for 40 years
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Organization management Case study: Planning function: strategy management
The Ketchup Wars: McDonald’s won’t serve Heinz anymore
1 By Lydia DePillis
Last week, two iconic American brands parted ways: McDonald's and Heinz, which had supplied red goop to the golden arches for 40 years. The reason? Heinz's new private equity owners had installed Bernardo Hees, formerly CEO of Burger King Worldwide and currently still a board member, as the company's new chief executive. It's not an unprecedented food fight: When PepsiCo owned fast food brands like Taco Bell, other franchises engaged in proxy wars by allying themselves with different soda companies. Here are a few fascinating facets of the nowruptured relationship.
1. Heinz and McDonald's have been through this before.Back in the early 1970s, Heinz supplied most of McDonald's ketchup. But in 1973, a tomato shortage struck, and Heinz prioritized its glass bottle customers over its bulk fast food accounts. McDonald's abruptly terminated their agreement. "From there on after, we've been on the outside looking in," a Heinz executive told the Wall Street Journal in 2006. Indeed: Heinz's investors pressed the company to sell more to McDonald's, before it was purchased by a partnership of Berkshire Hathaway and Burger King's parent company, 3G Enterprises (some analysts predicted that would create problems with the world's biggest fast food chain).
2. Heinz could be hit hardest overseas. U.S. 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 businessand 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.
3. McDonald's was still a small part of Heinz's businessMcDonald'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 U.S,, 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.
4. 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 has licensing agreements with restaurants like T.G.I. Friday's*, owns lines of food like OreIda potatoes, and makes diet foodslike Smart Ones. The loss of one ketchup customer isn't going to hurt too badly.
5. The rivals aren't that huge either. In fact, McDonald's inhouse ketchup may be the second biggest one: While Heinz says it did $5billion in sales for all ketchups and sauces in 2012 (it doesn't break them out by condiment),ConAgra's Hunt ketchup only did $69.5 million between May 2011 and May 2012, and has 14.6percent market share.
Question to the case study:
1.Name the factors of internal environment of both McDonald’s and Heinz
2.Name factors of both external environment for both enterprises.
3.What would you do if you were MacDonald’s CEO in this case?
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Answer:
1)
Factors of internal environment of Heinz:
The brand name is strong with an extensive portfolio of products sold
The distribution channels are strong
Strong financials that support healthy growth
investment in R&D is robust
There is a high demand for healthy products
There is an extensive millennial market
Increased emerging markets
Step-by-Step explanation
Factors of internal environment of McDonald's
Has a strong brand equity
Developed a string overseas market
There is consistency of food with the successful one's being Fries, Big Mac, Happy meal
There is an international expansion for the company
Increased innovation
2.
Answer:
According to the attached document in the case above, the information has been provided and the two mentioned enterprises, considered main, are McDonalds and Heinz. Others include Pepsi-co, Burger King among others many. Therefore, it is worth noting that the external environmental factors are factors that may affect a business but from the external sector. According to this case, they include competition, weather and climate, merging and partnerships among others, hence this led to the collapse of the merge between McDonalds and Heinz, with a fact that Heinz still collaborated a lot with the competitors of McDonalds including Burger King and Pepsi Co hence the issues and how they originated. Therefore, these are some of the factors that can be looked at a longer extension as much as this assignment is concerned.
Step-by-Step explanation
The above listed factors are case studied and the evidence for this is the attached document in the case above. Competition may involve production of similar goods and services, however in this case, competition has come in terms of hiring the best performing experts as CEO's among other workers. In this regard therefore, this forces Heinz and McDonalds to have conflicts despite their business merge. Merging and partnerships bring an issues since Heinz is attached to McDonalds and therefore the former needs to be patient enough and work with McDonalds, however, Heinz start merging again with Burger King hence the conflicts.
3.
Answer:
In this case Macdonalds CEO should not pursue any deals with Heinze Ketchup.
Step-by-Step explanation
The reason for this is that Macdonalds will always be at the outside looking in, in that Heinze will give preference to consumers over fast food chains, as a result, Macdonalds can source their condiments from other suppliers and establish better relationships with those that are seeking to build a partnership with Macdonalds.
