With the New Year upon us, 2021 will, in the immediate term, see last year’s challenging trading conditions continue as the world grapples with the ramifications of Covid-19 and a tightening of stay-at-home orders. Perversely, that’s good news for food manufacturers like ketchup and baked beans maker Kraft Heinz.

It’s now common knowledge companies selling through the retail channel have largely benefited during the pandemic, now entering its second year, as cooking at home became the new normal in the absence of a fully functioning hospitality and foodservice sector.

That scenario looks set to remain, at least until the majority of us get access to one of the approved vaccines. The disruption already seen to economies around the world may become a prolonged downturn adding to the challenges facing business. However, people need to eat, placing the food industry in a relatively robust position as evidenced by major manufacturers like Kraft Heinz acknowledging their resilience to the last major financial crisis in 2008-2009.

And then, in Europe, there’s Brexit. Speaking to just-food days before the Christmas holiday break as the UK and the EU were in talks over a trade agreement, Jojo de Noronha, who oversees Kraft Heinz’s US$1bn business in northern Europe, said her biggest fears were tariffs and customs checks.

On Christmas Eve, London and Brussels announced a trade deal had been struck, an agreement that, while free of tariffs and quotas, is, in the early weeks of 2021, proving not without its issues in terms of non-tariff barriers, border delays and additional red tape now the UK has left the EU.

“The agreement reached between the EU and the UK on our future trading relationship without tariffs or quotas was very welcome news, although we anticipate a challenging few months ahead with the additional requirements for customs, SPS [sanitary and phytosanitary] and other food-safety needs,” de Noronha tells just-food in post-deal remarks.

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Brexit aside, de Noronha has other issues to contend with this year, key of which, she says, will be inflation and keeping food costs down for customers. Another important factor will be retaining a new cohort of consumers won during the pandemic to ensure the new-found momentum behind Kraft Heinz’s top-line growth continues beyond the crisis, which she says has effectively doubled sales for Kraft Heinz in her region.

De Noronha explains that while inflation may ease or be flat in 2021, her biggest concern revolves around a continued rise in raw materials and packaging costs.

“We expect this year to be a year of inflation, and that will play a role in the cost of goods for any supplier in this market, but obviously the retailers are very conscious about recessive periods when consumers are looking for low prices every day,” she says.

The UK is Kraft Heinz’s largest market within her division, which she took over in 2019 having previously held the position of vice president for people and performance in the wider EMEA region. Her remit also includes Ireland and the Nordic countries, primarily Denmark, Norway, Sweden, Finland and Iceland.

But Kraft Heinz in northern Europe operates a little differently to its North American parent, with Heinz the predominant brand (85% of revenues), a legacy dating back to the H.J. Heinz days – before its merger with Kraft Foods in 2015 – while the Kraft name dominates on the other side of the pond.

As a group, the company generated sales in 2019 of $25bn, comprising $17.8bn from the US, $1.88bn in Canada, $2.55bn from EMEA, and $2.79bn for the rest of the world.

De Noronha oversees only two category platforms of the six recently introduced by group CEO Miguel Patricio under a newly-launched corporate transformation strategy centred on boosting efficiencies across the business, improving scale and agility, investment and reinvestment, and more aggressive product innovation.

She operates in what Kraft Heinz has dubbed “Easy Meals Made Better”, consisting of canned beans, pasta and soups, for example, accounting for two thirds of the company’s revenues in northern Europe, and “Taste Elevation” (a third of revenues), comprising sauces and condiments such as Heinz Ketchup and Heinz Mayonnaise.

And de Noronha also covers a “very small business” in Heinz baby food called “First Food”, a category in which she says Kraft Heinz has lost its number one position in the UK.

“I think that’s a category where we need to put some more forces behind it to regain our leadership position,” she tells just-food.

Innovation

And with the UK acting as an unofficial innovation hub for developed countries for Kraft Heinz in Europe, the company has launched a New Ventures team. Along with its main objective to spur product innovation, the team will also test interest before new products enter the mainstream market in an effort to improve the chances of success and avoid stacking up unproductive SKUs.

In the same breath, Kraft Heinz last year rolled out a direct-to-consumer platform in the UK and Ireland – Heinz to Home – for tinned beans and soups at the height of the pandemic, not just as an alternative method to get products swiftly to consumers during lockdowns but also, the company says, as a means to gain first-hand data insights for future product development.

As part of Kraft Heinz’s innovation strategy, tinned beans are about to get “liberated” from the traditional canned format and taken into new categories to better promote the commodity as a “superfood” given the high fibre and protein characteristics.

De Noronha explains: “I think it’s a very much undermined superfood. People talk about avocado and chickpeas but they don’t talk about beans as much as they talk about these other foods being superfoods. And we believe consumers need to align themselves with beans above and beyond what we sell today. So you will be seeing a lot of innovation that we call liberate the bean from the can – different types of innovation, different types of packaging, and different types of food going forward.”

A common theme reported among food manufacturers during the pandemic has been consumer trust in brands, and it’s been no different for Kraft Heinz, which, according to de Noronha, has attracted new followers during the crisis, particularly the younger generation.

And to retain them, Kraft Heinz plans to utilise its New Ventures team to hone in on consumer-centric innovation and launch products in adjacent categories that are in touch with relevant trends and needs. Communication will play a key part, too, in ensuring the business embraces all channels to engage consumers effectively, new and old.

“One of the greatest benefits we’ve had this year [2020] is gaining new and younger consumers, which we had under-indexed in the past, so that’s fantastic for the brand and our portfolio in the future. Those new consumers want things that are in touch with what they want, which is one of our equity drivers. And we want to make sure we are bringing in innovation that is relevant and has nutrition for our consumers,” de Noronha says.

Kraft Heinz category push

While group CEO Patricio has been cutting the number of SKUs in North America under his new strategy to eliminate dead wood, de Noronha says there are no such plans in northern Europe where the product count has been reduced over the past five to six years.

She is seeking to replicate the UK model across other markets. While the UK is big in Taste Elevation and Easy Meals Made Better, it’s not so much the case in the Nordic countries where Kraft Heinz is predominately a sauces business, mainly ketchup. De Noronha aims to enter new categories in the Nordic region with a view to becoming the number one player in Taste Elevation.

And Kraft Heinz has a similar target for Ireland, too, a market where it is present in all the categories sold in the UK but where the company does not necessarily have the top-selling brands.

“We are sitting on a pot of gold with some brands that have a lot of force in the UK and are gaining force in the other markets in Ireland and the Nordics,” she says.

“I play very much in tomato ketchup [in the Nordic countries] and beyond that it’s a vast white space opportunity for us to expand. We launched mayonnaise in the UK about six years ago, and started stealing share from the number one player in the country, and we are now the number two player with a share of about 20%. So we do believe we can launch mayonnaise in the northern markets and have the same success story.”

The Nordics is a region where Kraft Heinz is considering extending its Heinz to Home direct-to-consumer service, which was also rolled out in Australia, although outside of de Noronha’s purview. But first, the ketchup maker wants to establish a stronger presence for the Heinz brand in those countries, as it enjoys in the UK and Ireland, before launching D2C.

De Noronha also believes the D2C service in the UK and Ireland will survive beyond the pandemic even though demand could be expected to tail off through the channel as the economy opens up again. She says orders have increased even during the months when infections dropped and consumers weren’t restricted by lockdowns.

“We do not think this is a one-off,” she says in terms of longevity, noting the conversion rate through the Heinz to Home website of 4.5% is superior to the online industry average of 2.2% to 2.5%. And the site is getting around a 30% return rate from consumers as well.

In terms of a recession, de Noronha says Kraft Heinz doesn’t expect it to be as severe as in 2008-09 but a lot will depend on inflation in the next “few months”. And that could lead to higher prices for retailers and consumers and the company will have to find the right balance before passing inflationary costs on.

“We are still in discussions. There needs to be something where we agree with retailers what exactly we want to do. We need to make sure we do what’s right for the retailers and consumers as well. As an industry, we need to come together so we limit those impacts,” she says.

With private-label products presenting a challenge to Kraft Heinz’s branded offering during a recession, the company hopes the demand seen for trusted and established brands during the pandemic will prevail too.

But that remains to be seen given some consumers tend to feel pressure on spending during an economic downturn while, during the Covid-19 crisis, many people were saving money by not eating out or engaging in recreational activities because of the lockdowns.

De Noronha outlined her thoughts: “We compete with private label, which will always be around, but our focus is on the quality of our products and the strength of our brands and the emotional connection that our consumers have with a brand such as Heinz, especially in a country like the UK.

“Consumers do go back to trusted brands and brands where they believe in the quality, and more so in times of troubles. But that has proved an opportunity for us as large brands continue to retain those consumers going forward.”

On face value, the confidence aired by de Noronha is understandable given her loyalty to Kraft Heinz and the brand, and even more so if the inter-related demand dynamics from Covid-19 and a recession play out as planned. But resting your laurels on innovation when consumers are purportedly seeking comfort in familiarity, comes with short-term risks.

But risk is the name of the game right now. At least baked beans will get liberated.