Reevaluating its ketchup product line, Heinz worked to analyze what assortment of ketchup sizes to offer, and at what prices.
Determining how to proceed involved two key marketing concepts: One, retail pass-through, which measured the amount of promotional savings that actually reached the consumer, given the retailer’s portion; when Heinz offered a dollar-off promotion, the retailer might keep half. The other key was the consumption-adjusted margin, which reflected that a larger bottle increased consumption, therefore sales. This could be a problem: Larger bottles would be harder for grocery stores to stock, so retailers might be reluctant to take them on.
Shifting their analysis of profitability from the product level to the customer level, Heinz and retailers collaborated to understand how the smaller bottles decreased profitability for both. They phased out the popular 24-ounce bottle in favor of larger bottles that offered more per-customer profitability and category growth.
Read more about how Heinz aligned incentives across the supply chain in Management Consultant Rebecca Goldberg (MBA ’03) and Professor Ronald T. Wilcox’s article “How Heinz Got Retailers and Consumers to Accept a Larger Ketchup Bottle,” in the Darden School of Business/Washington Post “Case in Point” series.