Heinz chilled soup dwarf is killed
Seems the 1st brandgym blog Hit 'n Miss prediction for 2009 my be coming true. Heinz are putting the gun to their chilled Farmer's Market soup, according to an article in Food Manufacture I was interviewed for.
The soups were launched a year or so ago, at £1.49 for a 600g carton vs. £1.99 for Covent Garden, the dominant leader in chilled soup. I posted on them here, predicting them to last no more than a year.
This is a good illustration of the issues we've raised regarding the business model of brand extensions. Many of us in marketing would have asked "can Heinz do a chilled soup?". I'm sure that a company as professional as Heinz had loads of consumer research showing the answer to this question was "yes".
However, the real question should have been "Can we make any bloody money out of chilled soup?!" Here's why this was probably so hard for Heinz:
1. No economies of scale in chilled soup: Heinz does canned soup really well, but has no competence in the UK in chilled soup
2. Lower price: had to offer a lower price vs. Covent Garden = less gross profit for marketing
3. Trade margin: this is a guess, but I reckon they had to offer a better margin that Covent Garden to get listed, and this means even less profit
4. New part of store: where Heinz have no presence. "Putting up a tent in front of a skyscraper" I call this!
5. No added value: versus Covent Garden, that does a great job and has been doing for 20 years
6. Cost of re-wiring peoples' brains: it would have taken more millions than Heinz had to get loyal Covent Garden fans to not only try Heinz chilled soup, but keep on buying it
The Farmer's Market concept will apparently live on, but in the core canned soup business where Heinz has a much better chance of making money from the concept.