Mayo wars: how the big two are try­ing to splat­ter each other

The big two are toe-to-toe in bat­tle, us­ing price cuts and un­sub­tle new prod­ucts to bat­ter each other. But the truth may be that the mar­ket’s salad days are over, says David Mill­ward

The Sunday Telegraph - Money & Business - - Front Page -

Amonth ago, Heinz an­nounced its lat­est prod­uct – choco­late may­on­naise. It was a lov­ingly made con­coc­tion, com­bin­ing the finest Bel­gian choco­late with a creamy white condi­ment. It was, the com­pany said, “se­ri­ously good”.

There was just one snag. The whole thing was an April Fool’s Day prank by the UK press of­fice – and like all re­ally good hoaxes, com­pletely be­liev­able.

The fact that so many peo­ple fell for the joke is not al­to­gether sur­pris­ing, given that a fu­ri­ous bat­tle has erupted be­tween the two big­gest play­ers in the may­on­naise mar­ket.

One New York tabloid has spo­ken of “mayhem in the may­on­naise aisle” as Kraft Heinz and Hell­mann’s – or Best Foods as it is known west of the Rock­ies – fight it out.

Be­tween them, the com­pa­nies have cor­nered more than three quar­ters of the US mar­ket, ac­cord­ing to the lat­est fig­ures pro­duced by Min­tel.

But they are feel­ing the pres­sure. Euromon­i­tor cal­cu­lates that US may­on­naise sales fell by 6.7pc be­tween 2012 and 2017.

The mar­ket is also be­com­ing crowded with su­per­mar­kets pro­duc­ing their own may­on­naise which, in com­mon with most store brands, is likely to be cheaper.

Then there are the smaller in­de­pen­dent in­ter­lop­ers such as Stonewall and Pri­mal Kitchen, which are of­fer­ing their own ar­ray of flavoured may­on­naise.

Whether it is for health rea­sons or a de­sire for change, cus­tomers have been look­ing for va­ri­ety. Jostling for space along­side tra­di­tional may­on­naise are al­ter­na­tives rang­ing from chipo­tle flavour to a ver­sion made with av­o­cado oil.

The re­sponse from the big two was to launch a price war, with may­on­naise prices re­port­edly fall­ing by 0.6pc over the past year. Heinz dropped first and Hell­mann’s – still com­fort­ably the mar­ket leader – fol­lowed.

“We’re en­gag­ing toe to toe,” said Graeme Pitkethly, chief fi­nan­cial of­fi­cer at Unilever – Hell­mann’s par­ent com­pany – on a re­cent in­vestor call.

But a cou­ple of months ago, the scrap took a slightly sur­real turn as the two ri­vals parked their tanks on each other’s lawns.

The first shot in the war came when Heinz de­cided to start sell­ing “Real May­on­naise” un­der its own la­bel in March – along­side the longestab­lished Kraft brand, which had been in stores since 1930, and Miracle Whip, which dates back to 1933.

This, the com­pany said, was a prod­uct made from “cage-free eggs” and was as good as a may­on­naise made from scratch in a cus­tomer’s own kitchen.

Just to em­pha­sise the point, the new prod­uct was sold in a bot­tle shaped like an egg.

The mes­sage was hardly sub­tle. Hell­mann’s was not tak­ing this ly­ing down, an­nounc­ing it was launch­ing its own brand of “Real Ketchup” – a prod­uct that it clearly re­garded as su­pe­rior to the ven­er­a­ble Heinz ver­sion.

Hell­mann’s made great play of the fact that its ketchup con­tained only toma­toes, honey, vine­gar, spices, onion pow­der, and salt.

“We saw this as an op­por­tu­nity to el­e­vate an Amer­i­can sta­ple by strip­ping it down to only the most es­sen­tial in­gre­di­ents,” said Rus­sel Lilly, Hell­mann’s mar­ket­ing di­rec­tor.

“We’re giv­ing peo­ple a choice when it comes to feed­ing them­selves and their fam­i­lies with a brand they know and trust.”

On April 6 – ap­par­ently Na­tional Tomato Day in the US – the com­pany teamed up with an “au­then­tic Bel­gian fry shop” to dish out free pommes frites with its reimag­ined ketchup to passers-by in New York City. Heinz turned up the heat, an­nounc­ing plans for a new prod­uct of its own, which it called “may­ochup” – a mix­ture of may­on­naise and ketchup.

As in­no­va­tions go it was pretty small beer.

The con­coc­tion is com­mon in Latin America and the Caribbean, and is even sold as “fry sauce” in Utah.

But as a pub­lic­ity stunt, it was re­mark­ably ef­fec­tive.

Cus­tomers were in­vited to mix may­on­naise and ketchup in what­ever pro­por­tion they wished and give their ver­dict on Twit­ter. More than 500,000 peo­ple liked it.

Oth­ers were less than im­pressed, with one Twit­ter user de­scrib­ing it as “dis­gust­ing”. How­ever, there is no such thing as bad pub­lic­ity. The flurry of so­cial me­dia in­ter­est, com­plete with Twit­ter users putting for­ward their own bot­tle de­signs, sug­gests the mar­ket­ing wheeze was prov­ing very ef­fec­tive.

“Heinz was very clever,” says Dawn Sch­nei­der, an as­sis­tant pro­fes­sor of mar­ket­ing at Lewis Univer­sity in Illi­nois. “It was en­gag­ing with its cus­tomers and gen­er­at­ing ban­ter. At the very least it has given new life to the brand.

“It is more about the con­ver­sa­tion in to­day’s mar­ket­ing world and the Heinz name is be­com­ing prom­i­nent in the sum­mer just as peo­ple are buy­ing stuff for the bar­be­cue sea­son.”

Un­der­pin­ning the PR bat­tle be­tween the two be­he­moths is a need to re­main on the con­sumers’ radar, ex­plains Neil Saun­ders, man­ag­ing di­rec­tor and re­tail an­a­lyst at Glob­al­data.

“A lot more brands are com­ing through that are gain­ing trac­tion, which is harm­ful to tra­di­tional play­ers like Heinz and Hell­mann’s. “In ad­di­tion, there are niche brands and high-end brands that are gain­ing ales.”

An­a­lysts such as Bob Allen, food and bev­er­age leader at Grant Thornton, be­lieve the big two had, up un­til now, been slow to re­spond to fall­ing sales.

But the pace has quick­ened over the last few months.

“Every­body is do­ing some­thing new,” says Mar­cia Mo­gelon­sky, di­rec­tor of in­sight at Min­tel Food & Drink. “If you go into a store there are so many dif­fer­ent labels now. There are labels for fash­ion­ista may­on­naise, and may­on­naise pro­duced with cage-free eggs, as well as ve­gan mayo, with no eggs.

“The prob­lem is many peo­ple are flee­ing the cat­e­gory al­to­gether.”

Given the de­cline in the mar­ket, the two com­pa­nies have lit­tle choice but to fight it out, ar­gues Rao Un­nava, dean of the grad­u­ate school of man­age­ment at Univer­sity of Cal­i­for­nia, Davis.

“This cat­e­gory has not been do­ing very well and if you are a mar­ket leader and you see your rev­enue de­cline it dam­ages your po­si­tion.

“It has been a cash cow and when you see it de­cline, you have to fight back.”

But some ex­perts, in­clud­ing John Quelch, dean of the Mi­ami Busi­ness School, sug­gest that both com­pa­nies are wast­ing their time.

“What is hap­pen­ing is they are re­duc­ing their prof­itabil­ity as they slug it out.

“There are only two things for which con­sump­tion does not in­crease when prices are dras­ti­cally re­duced – toi­let pa­per and may­on­naise.”

Fol­low­ing Heinz’s move into may­on­naise, Hell­mann’s launched its own ‘Real Ketchup’

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