Introduction

On September 15, 2020 Kraft Heinz announced the sales of some of its popular but struggling cheese brands to Lactalis. One of the brands sold was the cheese brand Cracker Barrel. According to the Wall Street Journal article, the move was considered an appropriate response to the high demands driven by Covid-19 (Lombardo, & Gasparro, 2020). The authors also reported that Kraft Heinz wanted to streamline its business and put more focus on other business aspects. Such a strategic move of Kraft Heinz can be classified as a corporate strategy that specifically deals with diversification choice and resource allocation within the company from top management.

Cracker Barrel brand

Commentary

The question “Where to compete?” was first answered by the Kraft Heinz’s management, and the sale of brands would follow suit. Prior to this sale of cheese brands to Lactalis, Kraft Heinz had started to “reorganize its business under six new platforms” that are catering more towards customers’ preferences, which include “convenient meals and snacks instead of 55 different grocery categories” (Lombardo, & Gasparro, 2020). According to Kraft Heinz’s executives, the reorganization of the company’s brands and products will pave the way for more agility and innovations in the future. This strategy of Kraft Heinz can be seen as a transition from variety-based positioning to needs-based positioning (Porter, 1996). Kraft Heinz’s Chief Growth Officer, Nina Barton, said the shift to six platforms allows Kraft Heinz to better focus on customers’ needs (Knox, 2020). By shrinking the variety of its brands and reorganizing the business under six platforms, Kraft Heinz could innovate and improve upon their existing brands. But the strategy also came with a trade-off, and Porter (1996) stated that this kind of trade-off was a result of inflexibilities existing in corporate systems. By having less brand offerings on cheese products, Kraft Heinz might lose some consumers who are loyal to brands such as Cracker Barrel cheese brand.

Conclusion

With this sale finalized, Kraft Heinz just demonstrated a drastic shift in its marketing strategy. This is expected as the company just appointed a new CEO, Miguel Patricio (formerly Chief Marketing Officer of a brewery) to lead the company last year after it witnessed declining sales (Lombardo, & Gasparro, 2020). The success of the new strategy will be reflected over sales, profits and revenues figures of Kraft Heinz. And for those who are interested in how Kraft Heinz would perform financially following this strategic shift, the last quarter of 2020 (Q4)’s SEC report might show early indicators of success or failure of this strategy.

References

Knox, D. (2020, September 14). Why Kraft Heinz Views Platforms, Not Categories, As The Future Of Food. Retrieved from https://www.forbes.com/sites/daveknox/2020/09/15/why-kraftheinz-views-platforms-not-categories-as-the-future-of-food/

Lombardo, C., & Gasparro, A. (2020, September 15). Kraft Heinz to Sell Part of Cheese Business for $3.2 Billion. Retrieved from https://www.wsj.com/articles/kraft-heinz-nears-deal-to-sell-part-of-cheese-business-to-lactalis-11600182175

Porter M.E. (1996). What is Strategy? Harvard Business Review, 74(4), 61-80