100-Year-Old Industry Changing With Market : Ketchup Makers More Innovative

A revolution--well, perhaps that’s too strong a word--has been taking place in the ketchup business.

When you went to the grocery store in the old days, you would find the standard 14-ounce glass bottle of regular ketchup.

Now you find new-and-improved ketchups, a low-calorie version, numerous sizes and even plastic squeeze bottles.

What has happened to this 100-year-old, oh-so-American industry over the last several years?

“We’ve become more innovative recently,” says William Johnson, vice president for Heinz USA in Pittsburgh, the leading ketchup maker.

“This was a stable, prosaic business in which interesting marketing has had some tremendous effects,” says Clinton Mayer, a food analyst with the investment firm of Bear, Stearns & Co. in New York.

But this type of transformation--which also affected the food service side--is not particular to the ketchup industry.

Stimulate Market

George Pierides, an analyst for Standard & Poor’s in New York, says: “Food consumption is not a terribly great growth business. What they (food companies) have to do is come out with new products and try to stimulate a segment and steal market share from competitors. That means coming up with packaging innovations and product line extensions.”

In the current low-inflation environment, the food companies have to spur volume because they cannot rely on price increases, Pierides adds.

The result in the ketchup business has been two-pronged. The entire industry has grown, but Heinz has benefited the most, Mayer says.

In the past five years, the company went from a 44% share of retail ketchup sales to about 50%, Johnson estimates.

And 85% of those sales are in sizes or varieties that did not exist 20 years ago, he says.

Ketchup is found in 95% of American homes, according to San Francisco-based Del Monte, another ketchup maker.

Americans consume the equivalent of 840-million 14-ounce bottles a year, Del Monte says. That translates into four bottles annually for each woman, man and child.

Consumers bought $491 million worth of ketchup in 1984, down 0.4% from $493 million a year earlier but up 32.6% from $370.4 million in 1980, according to Selling Areas Marketing Inc., a grocery business information company.

The mustard business is about a third the size of the ketchup industry, but it, too, has grown at a rapid rate.

Heinz USA, which is a subsidiary of H. J. Heinz, says that, in terms of volume, its total ketchup business is half retail, half food service.

Hunt’s brand ketchup, which is made by Hunt-Wesson Foods in Fullerton, a unit of Beatrice Foods, has 15% of the retail market, and Del Monte, a unit of R. J. Reynolds Industries, half of that, says George Novello, a food analyst with the investment firm E. F. Hutton & Co. in New York.

There are also numerous private labels.

Larger Sizes

Heinz’s successes have spurred competitors to reformulate their ketchup to make it “new and improved,” Mayer says.

And on the store shelves, you also see a lot more of the larger sizes.

“The more people have at home, the more they are likely to use, is the thinking,” Mayer says.

It works, says Heinz’s Johnson. “The larger sizes seem to do better proportionally over the smaller ones.”

In 1971, the company introduced its 32-ounce size, which currently represents 50% to 55% of its total bottle sales, Johnson says. A 44-ounce version was unveiled in the late 1970s, and that now represents 15% to 20% of bottle sales, he says.

Heinz is introducing a 64-ounce version of its highly successful plastic squeeze bottle, which was introduced in 1983 and has already captured 10% of Heinz’s bottle sales, Johnson says.

The squeezable bottle is lighter, so it is easier to handle and cheaper to transport. There is less waste through breakage, too.

Anthony J. F. O’Reilly, president and chief executive of H. J. Heinz, says:

“This is a dramatic break with the traditional glass packaging, dating back to 1876, even though recent years have seen a wild proliferation ranging from individual packs in foil to bulk shipment in bags to glass containers in all sizes.”

Heinz’s low-calorie ketchup was introduced in 1979 and is available in 4% of the country. That product, which is also low in sodium, has 8 calories per tablespoon, versus 16 calories for the regular ketchup.

The company’s hot ketchup, which was introduced about 15 years ago, is available nationally but only sporadically, Johnson says.

Behind Its Time

Together, those two products represent only 2% of Heinz’s retail ketchup sales.

Not all innovations are major successes.

A disaster was the Mexican ketchup that Heinz tried to launch in 1981 in Denver and Dallas. That spicy variation was withdrawn within a year, Johnson says.

And take the 12-ounce wide-mouth container that Heinz introduced in the mid-1960s.

“The wide mouth was introduced as a way to allow people an opportunity to spoon the product out because we are perceived as so thick that it was hard to get out of the bottle,” Johnson says.

“Unfortunately it was a product behind its time and nobody really needed it.”

To back up its innovations, Heinz has stepped up its advertising considerably.