By Annie Gasparro
For its biggest product launch under its private-equity owners,
H.J. Heinz Co. isn't venturing far beyond the ketchup bottle.
The company on Thursday said it would start selling Heinz
mustard through retailers, bidding to take a bigger bite out of a
more-than $400 million-a-year U.S. market that is now dominated by
French's Food Co., which itself has begun marketing a new ketchup
to compete with Heinz.
Heinz has been selling ketchup for nearly 140 years, but until
now, its efforts to target the companion space in the hot-dog bun
have been limited to its food-service business, which sells mustard
mainly to institutions like ballparks and restaurants as well as to
some bulk retailers. The new retail version has a different recipe
that Heinz says uses all-natural ingredients and stone-ground
mustard seeds.
Heinz said the mustard launch is its biggest in terms of
marketing spending since Brazilian private-equity firm 3G Capital
Partners LP teamed up with Warren Buffett's Berkshire Hathaway Inc.
to acquire the Pittsburgh-based ketchup maker in 2013 for $23
billion. The new product comes on the heels of Heinz's deal
announced last month to acquire Kraft Foods Group Inc., creating a
giant with combined revenue of $28 billion and iconic American
brands from Heinz 57 to Oscar Mayer.
Eduardo Luz, Heinz's North America chief, said the strength of
the Heinz brand will carry its new condiment. "It was a no brainer
to extend the Heinz umbrella to mustard," he said in an
interview.
Still, it is unclear how big an opportunity there will be in a
product category that is not been hot of late. U.S. mustard sales
fell to $429.6 million last year from $445 million in 2010,
according to market research firm IRI. That doesn't include
food-service sales or sales of ketchup-and-mustard combo packs.
French's, owned by British firm Reckitt Benckiser Group PLC,
says it sells 125 million bottles of mustard each year and is the
No. 1 seller in North America, with about 30% market share.
French's also is taking the fight to Heinz, promoting on its
website a new retail-ketchup that it says is free from
preservatives and artificial flavors targeting fast-growing demand
for foods with simpler ingredients. A spokeswoman for French's said
the product is shipping to stores now and will be formally launched
soon.
Mr. Luz, who took his role in January 2014, played down the new
competition. And he said that Heinz can grow mustard sales as it
has with ketchup. U.S. Ketchup sales ticked up half-a-percent to
$749 million last year, after two years of declines, according to
IRI. Heinz has more than 60% market share. Mr. Luz said yellow
mustard is Heinz's current focus but it could add flavored
varieties down the road, which are trendier among younger people
looking for exotic tastes.
Write to Annie Gasparro at annie.gasparro@wsj.com
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