China Food

21.6 billion yuan for sale, and various products will be eliminated by the end of the year! Kafheinz, the wind changed

Backed by 3G capital and “God of stocks” Warren Buffett, kraft Heinz is experiencing a strategic “sharp turn”.

There are signs that the multinational food giant is speeding up its shift to building a new business model that can drive revenue growth. Under the leadership of the new commander from Budweiser InBev, the company recently announced that it would sell a piece of its business, accounting for 7% of the company’s annual revenue, for nearly 21.6 billion yuan, and planned to eliminate 1100 products (20% of its business) by the end of this year.

Fu Meikai, Global CEO of kraft Heinz (information photo)

At the same time, kraft Heinz has set up many new flags.

Executives at the company’s headquarters, such as Miguel Patricio, Global CEO of kraft Heinz, have unveiled new development plans, including the re division of “six platforms” to manage all its brands and products.

It is worth noting that the Chinese market is also described as the “greatest opportunity” for Kraft Heinz’s international business growth, and seasoning businesses such as Weishida soy sauce and Heinz tomato sauce are highlighted.

According to the official website, at present, the company mainly operates western style sauces such as Heinz tomato sauce, salad dressing and barbecue sauce, and Chinese sauce businesses such as Weishida soy sauce, Guanghe Sufu and Meiweiyuan pepper, as well as subsidiary food businesses such as Heinz baby rice flour, noodles and puree.

Let’s take a look at the latest changes.

“Significant change”

“I’ve been asked many times why I took this CEO job. In fact, what attracts me is the possibility of transformation and turnaround. ” Fu Meikai said at the meeting that Kraft Heinz had developed a new plan “different and aimed at releasing its full strength”, which was a “significant change”.

In terms of product mix, he pointed out that Kraft Heinz still had a lot of work to do to unleash its brand potential. For example, seize opportunities in growth categories and emerging markets.

“The categories and markets we are in are growing globally, from sauces, meat and cheese, meals to coffee, drinks and nuts, which are growing even faster in emerging markets, which account for only about 10% of our sales. Emerging markets, such as China, have great opportunities to accelerate growth. We have already started to do it (see below) He said.

In order to release its growth potential, the food giant has made a major change in its business model: when managing many of its products, it no longer divides its products into 55 categories, but divides it into “six platforms” to manage its product portfolio.

It is worth noting that Kraft Heinz’s investment direction has also undergone a “big turn”.

“We will invest more and invest more effectively to drive growth. This means putting more resources into our core brands to achieve greater results. In the past, we’ve invested a lot of money in new brands that don’t really work. We will not do it again. ” He said.

Fu Meikai also said that in the past, kraft Heinz regarded marketing as a cost, but today, it will be regarded as a “strategic and creative business investment”.

In addition, he also pointed out the company’s growth opportunities in terms of channels. It is revealed that the e-commerce business of kraft Heinz has exceeded US $1 billion and is growing at a rate of more than 100%. “We are taking full advantage of this incredible opportunity for growth.” He said.

“We have begun to rebuild a new culture with a growing mindset. Kraft Heinz has been defending for too long. Take American football as an example. We used to play in order not to lose, but now we are attacking. We are leading rather than following. We are determined to win big victories, not just to play small games and play safety cards He said.

New “six platforms”

As mentioned above, for all its products, kraft Heinz classifies them into six new platforms: taste elevation, easy meats made better, real food snacking, fast fresh meats, easy indigent desserts and flavorful hydration.

“The consumer platform is the core part of our transformation, a fundamental change in thinking of kraft Heinz, and a powerful way to make full use of our cross category scale.” Nina Barton, kraft Heinz’s global chief growth officer, said at the meeting that the new platform approach was a “bold transformation” for Kraft Heinz and a revolution in managing and developing its business.

From the earliest days, she said, kraft Heinz looked at its business mainly from the perspective of “outdated product types,” such as ketchup, gravy or pasta sauce. The company tried to innovate, produce, market and sell a wide range of products, but failed to effectively manage more than 55 categories targeted at scattered consumer demand.

“We fought too many small battles, weakened our efforts and slowed us down.” Barton points out that this narrow vision prevents Kraft Heinz from seeing the bigger, more comprehensive consumer needs that really change its business.

“We’ve learned that consumers don’t view our products through strict category definitions, they look at products from a broader perspective, focusing on how to use them and integrate them into their lives.” In fact, she said, the question consumers care about is, “how can I save time cooking tonight?” “How to make salads better?” What snacks do you want before dinner

To answer these questions, kraft Heinz needs to fundamentally rethink how it should conduct its business. “It’s a simple but meaningful shift. We have reoriented our business based on the perspective and perspective of consumers to create a better eating experience for them, taking into account their dining occasions and wider needs. ” Barton said.

She said Kraft Heinz’s six new platforms are “based on a range of real consumer demand.”. For example, ketchup and peanut butter can increase the flavor of food, and can be used to flavor other foods. They have common characteristics in meeting the demand and using occasions.

Snacks generation noticed that these platforms are modular, and each regional market can build and customize their own. Among them, two platforms are global (i.e. “enhance taste” and “better snack”), while the others are concentrated in the United States and Canada.

They also vary in size. According to Barton, “flavor enhancement” (which includes seasoning and sauces) is the biggest platform, with sales of nearly $7 billion (47.4 billion yuan). Products under this platform include Heinz, a tomato sauce brand, and Weishida, a soy sauce sold in China.

The “better buffet” platform has global sales of $4.3 billion (about 29.1 billion yuan), with Kraft MAC & cheese, Classico and ore IDA brands. The “snack” platform cuts into the market space between dinners and meal substitute occasions.

In addition, the scale of “fresh food fast food” platform reaches 6 billion US dollars (about 40.6 billion yuan), including brands such as Philadelphia and Oscar Mayer. “Enjoy the dessert” platform includes brands such as Jell-O and jet puffed, and “flavor drinks” platform includes Capri sun, Kool Aid and Mio.

“The division of these platforms is based on the way consumers live and eat. We’ve moved from looking after our business through more than 55 different categories to dividing and managing our product portfolio based on six consumer oriented platforms. ” ‘it’s not a vision for the future,’ Ms. Fu stressed. ‘Kraft Heinz is already operating in this way.

These platforms revolve around three key goals: growth, activation and stability, Ms. Fu said.

“Growth oriented businesses, which account for about 50% of our sales, will be our priority investment in the future. These are the platforms that we are already growing in emerging and developed markets. The fastest growth has come from Russia, Brazil and China. ” He said.

As for the activation oriented business, it accounts for about 30% of the company’s sales. These platforms are mainly located in the US and UK, “where we are revitalizing brands that we believe have growth potential.”. Stability oriented businesses account for about 20% of the company’s sales, mainly in the United States and Canada.

“Over the next five years, our overall marketing investment will increase by 30%. The investment will not be evenly distributed among brands that target growth, activation and stability, respectively. In order to maximize returns and ensure that we achieve sustainable high-income growth, we will give priority to investing in high growth platforms with market advantages. ” Barton added.

As you can see, there are some businesses that are directly “abandoned.”.

Last night, kraft Heinz also announced a major sale, selling its natural cheese business in the United States and some cheese brands in the US and international markets to the French dairy giant Landrace group for us $3.2 billion (about RMB 21.6 billion).

The stripped brands include cracker barrel and breakstone’s in the United States, while Kraft Heinz’s cheese and macaroni business in the world is retained. The sales of the brands sold this time in the past year were about 1.8 billion US dollars (about 12.16 billion yuan), accounting for about 7% of the company’s annual revenue.

Kraft Heinz said part of the proceeds from the sale to randies will be dedicated to debt reduction and plans to cut costs by $2 billion over five years.

The Wall Street Journal commented today that the new outbreak highlights the challenge that Kraft Heinz has faced since its merger in 2015: bigger is not always better. Nestle, Unilever and other major food companies have also made large divestitures in recent years to better centralize their operations.

“The pressure to revive sales has weakened the company’s ability to increase profitability as consumers increasingly move towards more fashionable or healthier looking foods, as well as lower priced store private brands.” According to the above report,

To be the “second largest brand of Chinese sauce”

“We have applied the new business model to other markets (outside North America), such as China.” Rafa Oliveira, President of kraft Heinz international, described China as “the best and most exciting example.”.

Xiaoshidai noted that when discussing the growth opportunities of kraft Heinz in the Chinese market at the meeting, the company’s management focused on the seasoning and sauce business, which is the largest business platform mentioned above, “improving taste”.

“It’s a huge opportunity for Kraft Heinz. The condiment market is huge (in China). The $17 billion market is growing rapidly. We have local condiment brands, but penetration is still low. The main product in the local market is soy sauce, which has a high profit margin, but the current market concentration is very low. ” Oliveira said.

He said China has a long history of food culture, and most food is based on many sauces. Kraft Heinz owns the Weishida brand in China, which is a “strong, market leading” local soy sauce brand, but is currently sold in almost two provinces in South China.

Oliveira said popular brands in two of the wealthier provinces could influence consumer following elsewhere in China. “We see huge growth potential to expand Weishida to more provinces. In this process, we will take advantage of other factors that can drive growth, such as distribution model, catering services, high-end, and innovation. “

Kraft Heinz has also set a new “small target” for its business in China.

“Our development plan is to become the second largest Chinese sauce brand in China with our local brand. At the same time, we want us to be the first brand of western style sauce in China, just as we do in other international markets. We believe that our strong Heinz brand will enable us to unleash the great potential of Western seasoning in China. ” Oliveira said at the meeting.

As of November 2019, the top four companies with market share in China’s sauce and condiment market were Haitian and Zhongju hi tech (its soy sauce brands include “Meiweixian” and “Chubang”), Li Jinji and Kafu Heinz (its soy sauce brands include “weijixian” and “chunweixian”), accounting for 7.5%, 5.4%, 3.2% and 2.7%, respectively.

Right now, kraft Heinz is really adding to the Chinese sauce and condiment market. In August this year, KF Heinz Yangxi soy sauce production base was officially put into operation. The total investment of the project is about RMB 700 million, which is one of the largest single investment projects of kraft Heinz in the world in recent years. It is estimated that the production capacity will reach 200000 tons of finished soy sauce every year, mainly producing Weishida series soy sauce, and the products are mainly sold to South China and central China markets.

“We believe we have the right tools to accelerate the growth of our business in China. I’m super excited about our prospects there. ” “For KFH’s international business, the Chinese market is our number one growth opportunity and we are confident that we can seize it,” Oliveira said

Currently, kraft Heinz’s international business scale outside the North American market exceeds US $5 billion, and its EBITDA is close to 20%. In the international business, 60% of sales come from developed markets and 40% from emerging markets.

Referring to kraft Heinz’s overall international business development strategy, Oliveira said the company would focus on “the platform with the greatest potential”, give priority to those “high return areas that can win”, and will “terminate projects in other categories that drag down performance”. Kraft Heinz, for example, will invest more in the “flavor enhancing” platform, which he said is expected to achieve “high single digit revenue growth.”.

“We are confident that this disciplined focus on high potential platforms will bring median single digit growth to the international market over the next five years.” Oliveira said.

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