Magazine article Marketing

The Unique Problems of Heinzight

Magazine article Marketing

The Unique Problems of Heinzight

Article excerpt

The unique problems of Heinzight

Heinz is one of the few food companies in the world that really deserves the description "successful". It wasn't the sort of company which became the subject of stock market crazes and over-the-top press eulogies, only for everything to fall apart a couple of years later. Its record is consistent. Last year, it celebrated 25 years of unbroken profit growth.

But Heinz has a problem. In the UK its brand franchise in such staples as baked beans, ketchups and soups is unassailable. But the UK's 1989 turn-over of around 43m[pounds] represents more than its sales in the rest of Europe put together. Italy, the next largest subsidiary, is about one third the size.

Not surprisingly, for years Heinz's UK marketers could sensibly ignore the company's continental operations. After all, the Continentals find the idea of beans in a tomato sauce out of a tin quite bizarre. But in a market where other companies are increasingly thinking in European terms such an attitude begins to represent a dangerous long-term weakness. In the key markets of France and Germany Heinz's market penetration is too low for comfort. Competitors would move in on potential and existing markets and opportunities for expansion would be lost.

Two years of rethinking and a McKinsey management consultant report later, and Paul Corddry, who heads the multinational food company's operations in Europe, claims things are different now. When he picks up a bottle of ketchup and says he wants to make it a European brand leader, he means it. Making it happen is a different matter.

Corddry's problem has hardly been unique. Virtually every major company has had to sit down and review its product range, potential and marketing priorities in the light of 1992, only to discover that the really difficult bit is the task of overhauling and restructuring the company itself, including its marketing operations, to fit the new priorities. After all, seeing new opportunities and thinking up ways of seizing them is what marketers like doing. Rethinking company structure, redrawing lines of responsibility and breaking down long-established empires and prerogatives are a different matter.

According to a new report out this month, this problem has been exercising most companies. Well over half the 40 companies questioned had made major changes in their structures in the past two years. Some, like Lego or Gillette, which ruled from the centre, have started giving local operating units more flexibility.

Others, like Nestle or Electrolux, which adopted a decentralised approach in the past, have found themselves doing the opposite. Indeed, the distinction between the two structures and cultures has become increasingly blurred. And often it has been a painful process. Persuading senior managers in each country to think on a European scale, or even to co-operate informally with opposite numbers, has been a real problem.

The difficulties of making any changes were high-lighted by Procter and Gamble (P&G) earlier in the 80s. Its centralised tradition and heavy emphasis on brand management worked well for the large, relatively homogeneous country of its home base, the US. But in the fragmented European market it was less effective, because it made each country a separate, profit accountable unit. P&G ended up lacking arch-rival Lever's flexibility, while missing out on the economies of scale it had always used back home. And when it tried to impose a European-wide marketing management to launch its Pampers nappy brand it aroused hostility. Traditional brand managers stood in the way. They were not senior enough to have an overall view of the product, and they were not easily co-ordinated across Europe.

P&G's solution is to create "category managers" in major subsidiaries, with manufacturing and sales under their wing as well as marketing. They report both to the national general manager and a European chief. …

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