Heinz Beans
Heinz Baked Beans as a UK Brand
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Heinz Beans, UK Branding
1.0 Introduction
- J. Heinz Company was started in Sharpsburg, Pennsylvania, a suburb of Pittsburgh, USA, by Henry John Heinz in 1869. The initial product was horseradish followed shortly by vinegar, pickles and sauerkraut, all delivered to local stores in horse drawn wagons. In 1914, Heinz salad cream was developed in the United Kingdom and remains a viable product in 2010 as a dressing for salads, vegetables and cold meats; by 1914 Heinz tomato soup was also an important UK Product. By 1920 Heinz was exporting ketchup, spaghetti and most important, in terms of this project, baked beans. In 1920, Heinz opened its first United Kingdom production facility, which produced ten thousand tons of beans in its first year of operation. (Heinz, 2010)
The underlying subject here is the development of Heinz beans as a brand in the UK. The 2010 annual report management discussed marketing investment. The example used was, “In the U.K. we launched, “It Has to be Heinz,” a campaign to enhance our leadership in categories such as soups and beans. … Heinz has increased marketing, presumably marketing expenditures, by more than 60% since 2006 to protect and build our great brand equities.”
In 1901 Heinz beans were considered as a luxury item sold by Fortnum and Masons at the 2004 inflation-adjusted price of about £1.50 a can. Recently, a restaurant operated by Jamie Oliver put beans on toast on the menu at £7 a head, though baked beans are still an inexpensive product and one that will be in almost every kitchen in Britain. The demographics of bean consumption have changed markedly over the past century. In a 2004 study, the UK market was shown to consume about 1.5 million cans per day, and roughly half of the adults in the United Kingdom ate beans at least once a week. The total UK market according to this study amounted to £203 million 2004. (Ethical consumer, 2007)
2.0 The Target Market
The target market is the United Kingdom shopper who is looking for good value in a premium quality product. An example is the 415 to 420 gram can in a four-pack. With Heinz the cost of the product per kilo is £1.30 while the Sainsbury house brand comparable product is £1.04. Branston Baked Beans in a 410 gram single can is £1.44 per kilo, compared to £1.54 per kilo for Heinz, but bought in quantities of 3 cans for £1.00 comes to approximately £0.823 per kilo. These prices were all recovered from the Sainsbury grocery site. (Sainsburys, 2010)
Target markets are usually identified in terms of demographics. Typical demographic segments include age, gender, family size, income levels, ethnic backgrounds, occupation, education, religion, sexual orientation and socio-economic background. In the case of Heinz beans, age above infant, income levels, and socio-economic background are probably the most relevant descriptions. None of the other segments are particularly important to Heinz beans. (biz/ed, 2010) As discussed above, the target market is clearly not the very lowest income strata, but beans are such a cheap product comparatively that, even at low income levels, the price is probably not a major determinant of brand choice in the UK.
It should be noted that the United Kingdom represented a market of US$1.519 billion or about £1 billion in the fiscal year ended April 28, 2010 just slightly less that the revenues of 2009, and US$210 million less that fiscal 2008. Overall company revenues were up in each of these fiscal years. (Heinz 10-K, 2010)
3.0 Brand equity
Philip Kotler et al in their classic “Principles of Marketing” proposes that a brand is more than a name or symbol. Rather, it is the key element in a company’s relationship with the consumer. Brands exist not in company advertising or labels, but in the mind of the consumer. The power of a brand is based in its ability to capture customer preference and loyalty. Kotler defines brand equity as, “the positive differential effect that knowing the brand name has on the customer response to the product of service.” (Kotler et al, 2008 p. 522.) “Brands have higher brand equity when they have a higher brand loyalty, name awareness, perceived quality, strong brand associations and other assets such as patents, trademarks and channel relationships.” (Kotler et al, 2008 p. 522.)
Heinz Baked Beans clearly have considerable brand equity in the United Kingdom. The 2004 value of the total UK bean market was approximately £203 million and Heinz dominated this market with a share of 50% of the total. (Ethical Consumer, 2007) The basic equity is that the consumer seems to feel that they taste better and are of better quality than very similar products offered by the competition. The brand equity presumably rests primarily with the recipe for making baked beans. This is in some respects similar to the patent mentioned above. Customers apparently are willing to pay at least a modest premium to eat Heinz baked beans in preference to alternative brands of beans. A study found that 72% of customers were willing to pay a 20% premium for their brand of choice. The same study found that 40% were willing to pay a 40% premium. The same study also showed that customers for some particular brands such as Heinz were willing to pay a100% premium for their favourite brand. This is apparently a US study and the reference is based on two sources, Scott Davis, “Brand asset management: Driving profitable growth through your brands,” (Davis, 2000) and Ailawadi, Lehman and Neslin, “Revenue premium as an outcome measure of brand equity.” (Ailawadi, Lehman et al 2003) This is supported by the pricing of Heinz and competitive products by Sainsburys referred to above.
Brand equity really represents a set of loyal and profitable customers. “The proper focus of marketing is building customer equity—extending customer lifetime value—with brand management serving as a major marketing tool.” (Kotler et al 2008 p. 523)
4.0 Brands in Depth
The concept behind brand depth is the concentration on the satisfaction of a single set of consumer needs as opposed to a breadth strategy that attempts to satisfy a broad range of needs. The use of a clearly defined brand image serves as the basis for a successful marketing effort. First developing and then maintaining a well defined and clear brand image is vital to any successful marketing and communications campaign. Images that clearly communicate the needs satisfied by the brand contribute to brand equity and aids in combating brand parity. Normative brand image management models suggest that marketing should be base on images conveying a single set of consumer wants and desires or a depth strategy as opposed to trying to satisfy multiple sets of wants and needs as in a breadth strategy. The extent to which depth strategies outperformed breadth strategies was investigated for U.S. consumer goods exported into international markets in terms of annual change in sales volume, profit margin, and market share. These markets investigated were varied in terms of their level of economic development, cultural context, and competition. While the results indicate that depth strategies do tend to perform best. (Roth, 1992)
Heinz Baked Beans and the marketing approach to them clearly reflect the application of depth. Heinz is simply trying to make the best tasting canned baked beans available in the market place at anything approaching a competitive price. Their brand equity would seem to indicate that the British public appreciates the approach, and purchase the Heinz product in preference to alternatives.
5.0 Current issues
One of the most interesting and surprising elements in the research for this project is the importance of corporate social responsibility in product marketing. An Internet site sponsored by BSD global (Business and Sustainable Development: A Global Guide) points out that their research indicates that companies that fail to acknowledge their social responsibilities risk the loss of market share. This trend is already well established in North America, but its importance in Europe and other markets is less clear. The survey of 20,000 people in 20 countries offers some interesting and valuable insights into the interrelationship of corporate image and perceptions and purchase decisions. The survey revealed that particularly in North America consumers are likely to vote with their wallets against companies that they view as poor corporate citizens. The survey reveals that while 42% of North American consumers have punished companies for social irresponsibility, the proportion in Europe is “only 25%,” but such trends tend to begin in the United States and migrate to Europe over time. The survey also supports this view as, “it … suggests that in coming years companies will come under even greater public pressure to deliver on their broader social responsibilities’.” (BSD global, 2010)
The ‘ethical consumer” site provides a “Buyers guide to baked beans.” This has nothing to do with product quality although there are implications that part of ethical behaviour on the part of a company is the production of quality products. It ranks bean producers according to an “ethiscore” scale that is a tool to help the reader determine the most ethically produced products to buy and the ethically worst companies to avoid. The scale is graded from 1-20 as shown below:
Roughly speaking, a score of:
15 to 20 is good
10 to 14 is average
5 to 9 is poor
0 to 4 is very poor
The table below ranks various Baked Bean products on the ethical scale show above.
Branston Baked Beans suffered some specific ethical problems with an advertising program that was dubbed a “fake grassroots promotion.” It was an advertising campaign that was presented very soon after the brand was introduced in 2005 based on what were presented as spontaneous online eulogies for the new beans that were revealed as the invention of a public relations firm.
This ethics problem has some parallels involving product recalls that can impact brand sales and images. There is no indication that ethics are a problem for Heinz in the United Kingdom or any other market at the present time, but it is a growing trend apparently, and one that corporate managements in general and marketing managers in particular must be aware of. (ethical consumer, 2007)
This also relates to the communications revolution that has occurred in the past twenty to thirty years with the growing importance of the Internet. Heinz beans have long been important in supermarket ads in the United Kingdom, but while there is a Heinz UK Internet site its importance in the overall marketing of the products is probably minimal. Under advertising its sole component is a copy of what is apparently a television ad base on the there, “It has to be Heinz.”
One of the key elements in the management of marketing for a company like Heinz is that it has probably never sold a product direct to an end user. It must negotiate a complex supply chain that begins at a farm and ends at the consumer’s table only after a torturous trip through a complex supply chain where Heinz real customer is the supermarket who in turn sells the product. While this is common in consumer product marketing it makes for a complex and changing market environment to which the company is connected only indirectly.
A recent study in the US concerning food-shopping goals in the US involves the concern of shoppers concerning weight management. Their concern is the loss or maintenance of weight – ironically, as Americans are by far the most obese in the developed world. This causes many shoppers to seek out foods and beverages that trumpet their high-fibre, low-calorie, low-fat and low-sugar properties. Just how well Heinz beans fit this profile is questionable. While this is a US study it will probably be mirrored in the United Kingdom and Europe soon enough. Heinz has already introduced a low sugar and salt variation and “Weight Watcher beans” in the traditional baked bean products, and emphasises that, even with high sugar and salt levels, baked beans are still a healthy source of protein, iron, B vitamins and fibre.
Still another current marketing issue for a consumer products company like Heinz is the movement toward relationship marketing. Based on the discussion above of the indirect relationship of the company to the end user the development of relationship marketing is a challenge for a company like Heinz. The actual relationship is indirect, and the impact of this on branding and brand loyalty is important to the long term marketing success of any company that depends on indirect relationships with the end user of its product.
6.0 Competitors
“A web site entitled, :ciao from bing” introduces Branston’s Baked Beans with the statement, “Think of baked beans and most of us will instantly think of Heinz. The two things have become synonymous with each other, and I’m sure I’m right in saying that Heinz have the monopoly in the UK baked bean market. However, Heinz is not the only producer of baked beans by any means. There are plenty of others out there – from supermarket own label beans to Weight Watchers and Organic brands.” (ciao from bing, 2006)
One of the lesser-known names has to be Branston Baked Beans introduced in 2005. Branston is part of the Crosse and Blackwell group and were well known as producers of tinned soups, pickles and sauces. As it says on the tin: “Branston is famous for its pickle and we’d like to become famous for our beans.”
There are numerous brands of organic baked beans including Whole Earth, and the Tesco house brand. Whole Earth price per 420 gram can is £1.49 and the Tesco brand at £0.45 compared to Heinz Organic beans at £0.74. Several other brands of organic beans turned up in the research, but none seem to be produced in the United Kingdom.
7.0 Why people buy it
Heinz beans have the advantage of being the original “baked bean product” and there is almost a tradition involved in British consumers buying Heinz beans in distinctively coloured and designed tins. It is a well-established habit and is in part simply because people are used to buying Heinz beans. The second part of this equation is that the particular flavour of the Heinz product is effectively the benchmark standard by which other beans are judged. If it tastes like Heinz it is good; if it does not taste like Heinz it is inferior. This is a simplistic approach to the strength of the product of Heinz beans.
The secondary explanation is the marketing strength of Heinz and their ability to garner shelf space in supermarkets. The product is available virtually everywhere, and it is almost inconceivable that a supermarket would run out of the product.
It is easier to illustrate reasons for purchase that have little or nothing to do with the purchase of beans. Martin Holbrook in, “Consumer Value: A Framework for Analysis and Research” provides a good list of the usual motivations of consumers in brand selection. He mentions the value of time in the context of waiting and delay. The desire of the consumer for instant gratification is what is under consideration. How well this applies to the purchase of beans is conjectural. The universal availability of Heinz beans is based on its ability command supermarket shelf space. The second of Holbrook’s criteria is value and excellence in the consumption experience. Again this is the concept that good baked beans taste like Heinz beans. His third criterion is status. It is doubtful that having Heinz beans in the cupboard conveys status to the purchaser, but neither does it confer lack of status: “Everybody buys Heinz beans!” Holbrook also suggests, “Possessions, Materialism, Other-Directness in the Expression of Self.” This sounds more like a reason to buy a Jaguar or a Bentley than for a reason to buy Heinz beans. He then suggests, “The Dangers and Opportunities of Playful Consumption.” This has no obvious relationship to beans. He then discusses aesthetics. Again, there is no relationship to the bean business. He also includes the concept of ethics into the consumption decision. This goes directly back to the discussion above the ethics in consumer decisions discussed above. There is no indication that the consumer is punishing the questionable ethics of Heinz indicated in the work of the “ethical consumer’ discussed above that accorded Heinz low marks for corporate ethics.
In short, none of the usual psychological reasons for making purchase decision except those discussed in the first two paragraphs seem to apply particularly well to Heinz beans.
8.0 Models and concepts
In terms of marketing concepts such as those of the Boston Consulting Group the product would seem to fall into the cash cow quadrant of the BCG matrix. Its growth is slow and its market share high. Heinz can fund any number of European products with the surplus cash flow generated by its baked bean business.
The Porter five forces model is a classic, and can easily be applied to Heinz bean business. There is the threat of new entrants, but the probability of their seriously impacting Heinz market position seems small. The bargaining power of the end user is minimal. The bargaining power of a major supermarket chain such as Tesco is considerable, and if they decide they want to run a promotion on Heinz beans they will have considerable negotiation power on their side. The suppliers have relatively little bargaining power. Beans and tomatoes are agricultural commodities and there is a market price. As a very major customer, there is little question that Heinz has considerable leverage and ‘clout’ in the commodity markets. The threat of new products is minimal. There are some varieties of the product, but Heinz can easily meet any new variation on baked beans that may develop. What all this implies is that there is relatively little competitive rivalry within the bean industry. This is not true of the total prepared or canned food market.
The Maslow Hierarch of needs has been suggested as a concept for the explanation of the success of Heinz beans as a brand. On the following page is a graphic representation of the Maslow hierarchy. The basic physiological needs are the satisfaction of hunger and thirst. Beans may produce thirst, but hardly satisfies this need. The do satisfy hunger, but are most assuredly not the only way of achieving satisfaction of this very basic need. They clearly do not satisfy safety needs or provide a sense of belonging or love. Eating beans is also not a way of satisfying the need for self-esteem nor can it provide self-actualization. This brings the question back to the satisfaction of hunger and possibly eating beans and toast is almost a national trait, so perhaps it can satisfy the need for belonging to British society.
9.0 Branding Activity in the UK
Branding activity in the UK, and much of the developed world depends increasingly on the use of the Internet. With the increasing globalization of the world economy the concept of branding in a single market is decreasing in important. This is illustrated by the examples of the following companies. The importance of traditional communications channels is decreasing and being replaced in large part by online communications with prospective customers. The underlying question is what constitutes effective branding in 2010? In almost every case it is a brand that has had an online success such as Orange that has almost perfectly reflected its offline brand perfectly. A second mark of success is a brand that has successfully migrated 98% of its customer base to the net such as EasyJet. Nike is a brand that has been highly successful by developing a very intense multimedia brand experience. Perhaps the ultimate branding success is Amazon.com that has built a powerful customer franchise exclusively on the Internet.
It is clear that Heinz has done nothing resembling any of these companies. In the case of Heinz at the height of the dot-com bubble of revolution for its 57 varieties it created 57 micro sites. This approach has been rethought, and in the UK Heinz has learned specific online activity is only relevant for core brands such as Ketchup and, of course, beans. For its other brands, it depends on the corporate site, which offers nutritional advice and redemption of promotional activities. In fact, there is relatively little the customer can “do” on any of the Heinz sites. These are important only as information channels, and most consumers do not feel the need of large amounts of incremental information on Heinz products. (Chafey, 2010)
References
Ailawadi, K. Lehman, D. Neslin, S. (2003) “Revenue premium as an outcome measure of brand equity.” Journal of Marketing, October 2003. Pp. 1-1
Biz/ed (2010) “Knowing your Customers – Identifying Market Segments” Recovered 08/10/2010 from: http://www.bized.co.uk/educators/level2/competition/activity/customers14.htm
BSD global (2010) “Corporate Social Responsibility Monitor” Recovered 09/10/2010 from: http://www.iisd.org/business/issues/sr_csrm.aspx
Chafey, D. (2010) “Online Branding success” Recovered 10/10/2010 from: http://www.davechaffey.com/E-marketing-Insights/Customer-experience-management/Online-branding
Ciao from bing (2006) “Bring on the Branston…Beans!” Recovered 10/10/2010 from: http://www.ciao.co.uk/
Davis, S. (2000). “Brand asset management: Driving profitable growth through your brands”. San Francisco, Jossy-Bass.
Ethical consumer (2007) “Buyers guide to baked beans” Recovered 10/10/2010 from: http://www.ethicalconsumer.org/FreeBuyersGuides/fooddrink/bakedbeans.aspx
Heinz, (2010) “Discover the World of Heinz” Recovered 08/10/2010 from: http://www.heinz.com/heinz.aspx
- J. Heinz Company and Subsidiaries (2010) SEC Form 10-K Pittsburgh, Heinz Recovered 08/10/2010 from: http://www.heinz.com/AR_2010/Heinz_10k.pdf
Holbrook, M. (1999) “Consumer Value: A Framework for Analysis and Research.” London, Routledge
Kotler, P. Armstrong, G. Wond, V. Saunders, J. (2008) Principles of Marketing, 5th European Edition. Essex, UK. Pearson Education Limited
Roth, M. (1992) “Depth Versus Breadth Strategies for Global Brand Image Management.” Journal of Advertising, Vol. XXI, 2 June 1992.
Sainsburys (2010) “Groceries” Recovered 08/10/2010 from: http://www.sainsburys.co.uk/groceries/index.jsp