'Consumer-obsessed' Kraft Heinz puts bigger bets on marketing as path to growth
Kraft Heinz was in the midst of an overhaul under new leadership when the coronavirus pandemic hit. Now, as it caps off a year in which its products have been more popular, it's setting out to deepen its relationships with consumers by spending more on marketing, placing bigger bets on its big brands, and shaking up its agency roster.
As part of its plan, the company has tapped Johannes Leonardo to lead creative for Oscar Mayer, Kraft macaroni and cheese and Kraft Singles starting in January, adding major pieces of business to the roster of Kraft Heinz brands the agency began working on nearly a year ago. The shop replaces Dentsu McGarryBowen on Oscar Mayer in a significant blow to the Dentsu-owned agency, which had worked on the high-profile brand for years. Dentsu declined to comment on the loss of the account.
The packaged food marketer wants to “elevate the consumer-centricity of our approach,” says Sanjiv Gajiwala, who joined Kraft Heinz in August in the newly-created role of U.S. chief growth officer. “Maybe in the past we were about ‘this is our product,’” says Gajiwala. Now, he says, Kraft Heinz aspires to be more about “consumer obsession.”
Kraft Heinz already claims that 97% of U.S. households buy its products, a level of household penetration that far exceeds the 65% average for companies in the food and beverage industry, according to data presented by the company in a recent investor presentation. To put it simply, its goal is to get people to buy more of its products more often.
Kraft Heinz is leaning on a smaller roster of agencies to work on its most storied brands, a plan announced months before Gajiwala joined. Perhaps the biggest shakeup is that Johannes Leonardo will begin working on Oscar Mayer. Johannes Leonardo also won Kraft macaroni & cheese, which recently worked on projects with various agencies, including VaynerMedia and Mischief @ No Fixed Address this year. In 2018, Droga5 won the account after it was held by MDC’s CPB.
Along with Johannes Leonardo, which has an expanded roster of brands to work on, Kraft Heinz continues to work with Wieden & Kennedy, VaynerMedia, Gut and Leo Burnett.
“They’re all agencies that I believe will help us be more consumer obsessed and be more uncomfortable ourselves,” says Gajiwala.
More to spend
Kraft Heinz has been resetting its strategy under the watch of CEO Miguel Patricio. The former global chief marketing officer at Anheuser-Busch InBev joined the food giant in 2019 and has been putting marketing in more focus. “Before, we treated marketing as a cost,” Patricio said during an investor presentation. “Today, we are viewing it as a strategic and creative business investment it is.”
Like many other food companies, Kraft Heinz turned off much of its advertising earlier in the year. With products practically flying off the shelves at supermarkets and long waits for grocery delivery early on during the pandemic, there was little need to promote products or attention to introduce new ones. And as people spent more time at home, they turned to products they knew, including many in the Kraft Heinz portfolio.
“Our brands are in a lot of households and people are potentially reacquainting themselves with them,” says Gajiwala.
Now, the company has a bigger budget to work with as it tries to retain and grow that base. Marketing investments in the second half of 2020 are up 70% versus the first half of the year and are up 40% from the second half of 2019, says Gajiwala.
The increase in spending isn’t a one-time boost. In September, Kraft Heinz said its plans include increasing spending on marketing by 30% over the next five years, off a base of roughly $1.1 billion. It is also shifting more spending to working media.
Kraft Heinz has reset the way it thinks about its products, moving from more than 55 product categories to six so-called platforms: Taste Elevation, Easy Meals Made Better, Real Food Snacking, Fast Fresh Meals, Easy Indulgent Desserts, and Flavorful Hydration (the last four in the group are focused on the U.S. and Canada).
Wieden & Kennedy will lead creative for Taste Elevation, the biggest platform, where it already worked on Heinz, Kraft Mayo, and Grey Poupon. Johannes Leonardo will lead creative for two platforms, Fast Fresh Meals, which includes Oscar Mayer, and Easy Meals Made Better, which includes mac & cheese.
Oscar Mayer's moment
Oscar Mayer is getting renewed attention with plans for a masterbrand campaign, backed by double-digit media investments, slated to begin in 2021. “This is a $2 billion dollar brand so energizing it can really make an impact on our results,” Carlos Abrams-Rivera, U.S. zone president at Kraft Heinz, said during the September presentation.
It’s quite a shift from 2019 when Kraft Heinz took a $15.4 billion charge to write down the value of assets including its Kraft and Oscar Mayer trademarks. Oscar Mayer had the highest media spending in the U.S. among Kraft Heinz brands last year, but that spending fell 9%, to $109.5 million, according to the Ad Age Datacenter.
In the four weeks ended Oct. 31, U.S. sales of Kraft Heinz products were up 12.6%, according to Nielsen data reviewed by Wall Street analysts, outpacing growth at companies such as Hormel, Conagra, General Mills, Kellogg, Campbell Soup and J.M. Smucker. Kraft Heinz's growth was driven by products including Oscar Mayer lunchmeat.
Kraft Heinz's efforts, combined with pandemic-driven shopping trips, appear to be paying off. "The company is growing share in over 50% of its categories, up from 40% in the third quarter and a marked improvement over the performance in the first half when the company was losing or holding share in 80% of its categories," Stifel analyst Christopher Growe wrote this week. He questions if Kraft Heinz's sharp increase in marketing spending is enough, as it will still lag its peers in advertising as a percentage of sales, saying "while not all portfolios of brands are created equal, we are left to wonder if a further increase in advertising will be necessary to achieve the growth and consistency embedded in its outlook."
Meanwhile, the company is shedding other brands. It is selling its natural cheese business and some major parts of its cheese lineup to Groupe Lactalis for $3.2 billion in a deal set to close in 2021. Kraft Heinz is letting go of brands such as Breakstone’s, Knudsen, Polly-O, Athenos and Hoffman’s. Kraft Heinz boasts it has already eliminated more than 1,100 individual products, or roughly 20% of its lineup, as it tries to focus on fewer, bigger hits.
The additional work for Johannes Leonardo comes after it won the Kraft Heinz brands Bagel Bites pizza snacks, Classico pasta sauce, Ore-Ida frozen potatoes, and Velveeta Cheese and Shells & Cheese at the end of 2019.
“They're in the midst of a massive creative transformation as an organization and we're in the trenches every day with them working to bring powerful ideas to these brands,” Jan Jacobs, the agency’s co-founder and chief creative officer, said in a statement. “In this climate when more families are turning back to more meals around the table, we have an incredible opportunity at our feet.”
To Gajiwala, the size of the agency isn’t what matters. Johannes Leonardo got new assignments after its team pushed Kraft Heinz strategically and being more focused on the consumer, he says.
VaynerMedia continues to work on brands including Planters, Gut leads on Philadelphia cream cheese, and Publicis Groupe’s Leo Burnett has work within the company’s desserts business.
Kraft Heinz wants to find more ways to connect with consumers in interesting and “little cheeky ways,” says Gajiwala, who was most recently senior VP of marketing at Mike's Hard Lemonade Co., where he oversaw the hit brand White Claw. Two months after Gajiwala joined, Kraft Heinz announced that Nina Barton, its global chief growth officer, is leaving the company.
Brands are already pushing forward with quicker campaigns. Philadelphia launched the “Philly Series 5” this week, a play on the new gaming consoles such as Sony’s PS5, in a campaign from Gut. That effort launched after repeat purchase rates on Philadelphia were up 23% last quarter, with people spending more time at home are eating more breakfast and doing more baking.
Gajiwala did not say whether Kraft Heinz, which ran ads for Heinz and Planters in the 2020 Super Bowl, would return for the next Big Game.
Not all of Kraft's marketing moves have been applauded by the masses. In October a campaign by Mischief @ No Fixed Address called “Send Noods” encouraged people to send boxes of Kraft Mac & Cheese to friends and family. The family brand's suggestive effort drew criticism on social media and Kraft retreated as references to the campaign vanished from its social channels. Gajiwala defended the campaign, saying it generated a lot of engagement from consumers.
Gajiwala’s priorities include looking at some of the most iconic brands and pushing the creative “to be more consumer-centric, to be more breakthrough,” he says, without laying out specific approaches. “I hope you’ll see from us not just a desire to tap into pop culture but to be relevant in the conversation,” he says.