Ch. 5: Business-Level Strategies

The Kraft-Heinz Company's business-level strategy is a hybrid, consisting of both cost-cutting and differentiation tactics. Within the food product industry there is a significant amount of competition, however Kraft Heinz Company (KHC) strives to provide customers with the best product and value for their dollar as well as with new and innovative flavors/varieties of products that can already be found on store shelves.

For example, at a major retailer such as Walmart, multiple brands of ketchup can be found. A 32 ounce bottle of Heinz Ketchup would cost a consumer around $2.88 (9 cents per ounce), whereas a bottle of Walmart's generic Great Value brand ketchup would cost a mere $2.92 for 64 ounces (4.6 cents per ounce). It is clear that even at a mass retailer such as Walmart, Kraft Heinz Company's products are not the cheapest option. Aligning with their company goal of providing customers with the best value for their dollar, Heinz ketchup is arguably tastier than its cheaper alternatives and also comes packaged in a bottle that is more user friendly. Complete with the 'upside down lid' to help consumers use every last drop, and a no drip valve to prevent messes, it is evident consumers are willing to pay a little more for convenient ketchup. Although Heinz Ketchup may be a few cents more expensive per ounce, their products are still reasonably priced and the average consumer can afford to purchase them, keeping them in the low-cost category. In addition, KHC offers more variety (differentiation) in their ketchups than their contenders. For example, KHC has recently introduced Heinz Organic, No Salt, and Reduced Sugar ketchups to appeal to health-conscious consumers as well as Jalepeno and Sriracha flavors to appeal to those who may be more adventurous.

A similar story can be told with Kraft Mac & Cheese. Consumers can purchase a 4 pack of Kraft Mac & Cheese personal cups for $3.50 (87.5 cents each), whereas a 6 pack of Great Value's version would cost consumers just $3.24 (54 cents each). Again, KHC is not the cheapest option on the shelves, but the company is able to justify the price increase by having a reliable brand name that is known for quality. To differentiate their product from the competition, KHC has also rolled out a variety of Mac & Cheese options, including Kraft Velveeta Shells & Cheese (KHC also owns the Velveeta brand), Kraft Velveeta Shells & Cheese with Bacon, and the traditional Kraft Mac & Cheese with troll noodles or spiral noodles, just to name a few.

Overall, Kraft Heinz Company's business level strategies are clearly a combination of cost-cutting and differentiation tactics. The merger between Kraft and Heinz generated synergies that allowed the company to produce products at cheaper prices, have more bargaining power with retailers, and also allowed for growth/differentiation in product varieties to appeal to a broader range of consumers. Going forward, KHC is striving for profitable sales growth and to achieve and maintain best-in-class margins. I believe continuing to adhere to a low-cost and differentiation business level strategy will help KHC reach their goals.