The stork's rebirth is, of course, contingent upon the completion of Heinz's deal to purchase the $250 million Vlasic pickle brand from Vlasic Foods International. The company announced last week it had finally succumbed to its longtime financial woes and filed for Chapter 11 bankruptcy, and will sell both its Vlasic brand and its $20 million regional Open Pit barbecue sauce to Heinz for $195 million. Pending the closure of that deal, the stork will be placed front and center in extensive advertising and promotional efforts, said Heinz North America Senior Communications Manager Michael Mullen.
Heinz is considering whether to keep the Vlasic account with True North Communications' FCB Worldwide, New York, Mr. Mullen said. But it's likely Heinz will move the business, which had billings of a paltry $2 million in 2000, to Bcom3 Group's Leo Burnett USA, Chicago. Burnett was awarded the $50 million Heinz ketchup global account in 1998.
"The stork is such a great icon, and one that fits well with our existing family including Charlie the Tuna and Morris the Cat," Mr. Mullen said. "Vlasic [would] be part of a $9 billion company where we have the resources necessary to grow the business," he said.
Resources are just what Vlasic lacked as it attempted to grow the various under-marketed businesses it received in a spinoff from Campbell Soup Co. in 1997, said Kevin Lowery, VP-public affairs and investor relations for Vlasic.
"Our bankruptcy proceeding is a result of one number and that is $560 million: the amount of debt we were given when we were spun off. That debt meant that we were limited in the types of investment we were able to pour back into these brands that had already been suffering after years of neglect," he said.
Vlasic did attempt to grow its pickle business by expanding its Sandwich Stackers line with a new Hamburger Stackers innovation in 1999, and had "probably 100 other ideas for the business we couldn't afford to implement," Mr. Lowery said. As a result, its flagship pickle line saw a 6.5% sales decrease in food, drug and mass merchandisers last year.
Likewise, there were few funds to build Vlasic's Swanson franchise-which may be run as a standalone business or divested as part of the bankruptcy filing. Vlasic did manage to introduce a Swanson Boneless Fried Chicken Dinner, which became a top seller, and developed a line of Swanson Potato Topped Pot Pies. But the efforts were not enough to combat the company's enormous debt load.
Industry observers, however, see great potential for Vlasic under Heinz, which would become the largest pickle producer in the U.S. and build its meager $19 million existing pickle business with the addition of the brand. According to Prudential Securities analyst John McMillan, "Heinz will spend more the right way, not on promotions and discounts but on ads and brand development that will reduce the commodity aspect of the [pickle] business."
Research done by FCB shows that the stork is immediately recognizable to 95% of consumers and that heavy ad spending on Vlasic, especially when linked directly to new products, has been able to drive great sales results.