Heinz Looking to Break French’s Hold on Mustard Business

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Condiment Wars: Heinz Takes on French's With Expansion

H.J. Heinz Co. wants to make sure it has your hot dog covered.

Heinz, the world’s top ketchup seller, is bringing its yellow mustard to stores across the U.S. in a bid to dominate traditional barbecue condiments. On Thursday, the company is rolling out national advertisements that play on the idea that Heinz ketchup is breaking up with French’s, the market leader, in favor of a new relationship with Heinz mustard.

“Consumers will be well-served if they choose Heinz mustard and Heinz ketchup for the pairing for their barbecue,” Eduardo Luz, president of Heinz North America, said in an interview. “It’s a new companionship. We’re going to pair them as much as possible.”

Heinz mustard has primarily been sold through the company’s food-service business, with the product available in bulk packages and at stadiums and restaurants. To date, the company hasn’t had much of a presence at U.S. grocery stores. In making a retail push, Heinz is taking on French’s, which is owned by Slough, England-based Reckitt Benckiser Group Plc.

French’s is the world’s leading mustard brand and had a 60 percent share of the U.S. market in the yellow category in the last 52 weeks, according to Elliott Penner, president of French’s. Pittsburgh-based Heinz was at less than 1 percent during the same period, he said.

“They’ve had mustard for years, and it hasn’t done well,” Penner said. “The ads are humorous. I think sometimes when you don’t have new news, you use humor.”

Condiment Battle

Heinz’s move on mustard expands a battle over U.S. condiments that started about three years ago when French’s started selling ketchup as part of its food-service business. French’s is now expanding its retail ketchup business and brought the product to stores in Canada in December. The company is rolling it out across the U.S. this month, along with a national ad campaign, as Memorial Day and the start of the peak grilling season approach, Penner said.

Heinz tipped its hand on its mustard plans last month, when 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. announced a deal to buy Kraft Foods Group Inc. and combine it with Heinz. Heinz listed yellow mustard as one of its top three “Big Bold Bets” in product innovation for 2015 in a presentation released in conjunction with the news of the Kraft merger.

The new company will be the third-largest food and beverage producer in North America, with sales of about $28 billion, according to Heinz. Buffett and 3G, the Brazilian private-equity firm known for cutting costs, teamed up to buy Heinz in 2013.

New Formula

Heinz tweaked its mustard formula for the retail expansion and put it in the upside-down squeeze bottles that have proven popular with ketchup, Luz said. Heinz also said it would start selling two new styles of spicy ketchup: jalapeno and sriracha. French’s, meanwhile, is rolling out new spicy and sweet versions of its classic yellow mustard, Penner said.

Sales of yellow mustard have slipped each of the last three years and are down 1.9 percent since hitting $276 million in 2011, according to Nielsen data. But the declines are slowing. In 2014, sales dropped just 0.1 percent to $271 million. About 67 percent of adults in the U.S. say they use yellow mustard, according to a survey by market researcher Mintel Group.

While condiments tend to suffer from the perception that they’re overly processed, mustard’s simple recipe gives it a better health profile, said Beth Bloom, a Mintel food-and-drink analyst.

“It’s not high in sugar like ketchup, and it doesn’t have to be high in fat like mayonnaise,” she said.

‘Growth Profile’

On a call with investors to discuss the Kraft deal, Alex Behring, Heinz’s chairman and a 3G co-founder, said the company had “accomplished a lot on the cost side” and was preparing to “return Heinz to its long-term historical growth profile.” That means more marketing and product innovation, Behring said.

Kraft owns the Grey Poupon brand and was the second-biggest seller of mustard in the U.S. last year, according to Euromonitor International. The Heinz mustard announcement may be a preview of how the company will try to boost sales once it absorbs Kraft, said Jared Koerten, a senior analyst at Euromonitor in Chicago.

“They really don’t have a presence of any significance with mustard at the retail level right now,” he said. “They already have a strong presence in the sauce aisle, and with Kraft, they’re going to dominate that space.”

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