H.J. Heinz Co. (NYSE:HNZ) is introducing smaller sized Heinz pouches that will cost 99 cents for a 10-ounce pack to lower the entry price for price-sensitive consumers in times of tough economic conditions. Heinz will also discontinue its T.G.I. Friday’s single and multi-serve frozen meals and will instead focus on the frozen snacks business.  Heinz competes with major food and consumer companies like Kraft Foods (NYSE:KFT), Tyson Foods (NYSE:TSN), ConAgra Foods (NYSE:CAG) and Campbell Soup Company (NYSE:CPB). We have a $54.50 Trefis price estimate for H.J. Heinz Company, which is about 5% above the market price.
Tighter Purse Strings
The move is in line with the company’s policy of adjusting to the tough economic conditions as more customers are keeping closer tabs on their spending habits. The lower entry price will help the ketchup brand appeal to a wider range of customers. At the same time, the bigger packs, which have a lower price per ounce, will remain unchanged. Heinz aims to cater to the category of consumers who seek greater value in lower price per ounce as well as to the category of consumers who seek value in a lower entry point.
Heinz Ketchup continues to perform impressively with sales witnessing a 10.7% growth in Q3. The company’s market share in the global ketchup, condiments and sauces market continues to rise with performance in Asia/Pacific leading the pack.
Focus on Frozen Snacks Over Meals
The frozen snacks is a $200 million business in the U.S. The T.G.I. Friday’s frozen snacks business includes potato skins and buffalo wings. Heinz had been struggling in the frozen meals category but has performed rather well in the frozen snacks segment. Although Heinz’s market share in the global meals and snacks market has decreased over the last few years, it has stabilized in the last couple of years. We see this is a solid growth segment that should help results going forward.Notes:
- Heinz launching new smaller Ketchup in March; ending T.G.I. Friday’s frozen entrees, bizjournals.org, February 22, 2012 [↩]