Product Position Study Proposal for more sustainable packaging for Annie’s Organic Ketchup Mark Chamberlain Packaging Sustainability MCAD | Fall 2016 Adobe Stock Image #101666203 (licensed 2016) CONTENTS Product Position Study INTRODUCTION . 3 Proposal for new sustainable packaging for COMPETITIVE ANALYSIS . 6 Annie’s Organic Ketchup MARKET ANALYSIS . 13 STRUCTURE ANALYSIS . 18 SUPPLY CHAIN ANALYSIS . 28 REPOSITIONING PROPOSAL . 37 NEXT STEPS . 44 CITATIONS . 45 APPENDIX . 48 Mark Chamberlain Packaging Sustainability MCAD | Fall 2016 Adobe Stock Image #101666203 (licensed 2016) Introduction This analysis will propose options for Annie’s Homegrown to reposition its organic ketchup through a new and more sustainable packaging system and to take advantage of the companies ethos — “organic for everybunny ”. This analysis will discuss the competitive environment, market, packaging structure options, supply chain issues, and a final summary of the repositioning proposal. Introduction The secret sauce Organic and “natural” products are the keys to growth in not only ConAgra Foods has left the door open on creating an organic the ketchup industry but in many food sectors globally. Retail sales of version of Hunt’s Ketchup to this date. organics have gone from $3.6 billion in 1997 to $21.1 billion in 2008.1 Industry leading brands and producers have seen this growth and Kraft Heinz Company and ConAgra are not alone in looking for ways have positioned themselves to capitalize on this continued shift in the to capture the organic and natural foods market. Minneapolis-based market. General Mills has been making strategic acquisitions in this area for many years. In 2000, General Mills bought Small Planet Foods, which U.S. KETCHUP MARKET SHARE BREAKDOWN included organic and natural food brands such as Cascadia Farms (Households who say they buy brand, 2014-15) 2 and Muir Glen.5 The latter makes organic ketchup and is part of this 58.71% - Heinz (Kraft Heinz Company) analysis. 30.3% - Hunt’s (ConAgra Foods) 11.47% - Store brands In 2014, General Mills acquired Annie’s Homegrown for $820 million. 7.59% - Del Monte Annie’s has gone from a small player in the food industry to having 3.51% - Other brands sales of more than $204 million on 145 products across 35,000 retail locations. Its growth has echoed the consumer demand for Heinz, seeing its future growth in organics, naturals, and specialty organic and products free from artificial flavors, synthetic colors, or 6 products, has worked to expand its lead in the ketchup market by preservatives. creating sauces catering to growing niches. In 2015, the company increased its organic offering by providing a 14 oz and 32 oz bottle There is significant opportunity in Annie’s Homegrown not just of Heinz Organic. The Simply Heinz recipe that offers a high fructose because they sell natural and organic products that people like, but corn syrup free product has expanded as well and now offers 20 oz because of a genuine kind of ethos and brand story that attracts and 34 oz bottles. These two Heinz products join a line of specialty customers across the product line. recipes that include Reduced Sugar (13oz), No Salt (14oz) and a variety of flavored ketchup products, all of which are available nationwide.3 ConAgra Foods, the producer of Hunt’s Ketchup, also has seen the shift in the market and has followed Heinz by removing high fructose corn syrup from its entire retail line. ConAgra cited a 2009 HealthFocus Trend Report that indicated consumer concern over high fructose corn syrup, saying that it has gone from 27% of shoppers being “extremely” or “very concerned” about it in 2004 to 45% of buyers in 2008.4 Introduction Annie’s Organic Ketchup COMPANY BACKGROUND Annie’s Homegrown is a Berkeley, California-based food producer focusing on natural and organic pastas, meals, and snacks. Known for its bright packaging and bunny insignia, the company had $204 million in sales in “Bernie” 2014.6 Annie Withey co-founded Annie’s Homegrown, Inc. with Andrew Martin in 1989 with the goal of giving families healthy and delicious macaroni and cheese and to show by example that a successful business also can be socially responsible.7 ANNIE’S MISSION “Our mission is to cultivate a healthier and happier world by spreading goodness through nourishing foods, honest words, and conduct that is considerate and forever kind to the planet.”7 ORGANIC KETCHUP PRODUCT DESCRIPTION “Combining ripe organic tomatoes and a blend of spices, Annie’s ketchup is sure to please ketchup lovers everywhere with hints of clove spice and a full-bodied flavor. Rich and robust and miles ahead of conventional ketchup in taste and texture!” 8 DISTRIBUTION Annie’s products enjoy a wide distribution network at quality grocery outlets. Annie’s partners include: CVS Pharmacy, Walgreens, Lunds & Byerly’s, Hy-Vee, Cub Foods, Target, Whole Foods Market, and Sam’s Club. The next step is to look closer at how Annie’s compares to other ketchups on the shelf. Adobe Stock Image #86623347 (licensed 2016) Competitive Environment Analysis The following section brings together information to gain a better understanding of the competition facing Annie’s Homegrown ketchup . Competitive Environment Analysis Annie’s Full Circle Heinz Organic 365 Everyday Organic 20 + 24 oz plastic bottle 14 + 32 oz plastic bottle Value 20 & 24 oz plastic bottle Avg. cost: $2.79 / $3.09 Avg. cost: $2.84 / $5.07 24 oz plastic bottle Avg. cost: $3.19 / $4.02 Topco Associates LLC Kraft Heinz Company Average cost: $2.39 fullcirclefoods.com heinzketchup.com Annie’s Homegrown Whole Foods Market (GENERAL MILLS) INGREDIENTS: INGREDIENTS: wholefoodsmarket.com annies.com Organic tomato Organic tomato concentrate (water and concentrate from red ripe INGREDIENTS: INGREDIENTS: organic tomato paste), organic tomatoes, organic Organic tomato puree, Organic tomato paste, organic sugar, organic distilled vinegar, organic organic evaporated organic distilled white vinegar, salt, organic sugar, salt, organic onion cane juice, organic white vinegar, water, organic onion powder, organic powder, organic spice, vinegar, salt, organic cane sugar, sea salt, spice. natural flavoring. onion powder, organic organic onion, organic spices allspice, orgnic clove. • Gluten free • No High Fructose Corn • No GMOs • Vegan • Vegan Syrup • No High Fructose Corn • No GMOs • Gluten free Syrup • No High Fructose Corn • Non-GMO Project Syrup Verified • No High Fructose Corn Syrup Competitive Environment Analysis Simply OrganicVille Wild Harvest Muir Glen Balanced 24 oz plastic bottle 20 oz plastic bottle 24 oz plastic bottle 20 oz plastic bottle Average cost: $5.29 Average cost: $1.99 Average cost: $3.39 Average cost: $2.29 Sky Valley Foods Inc. SuperValu Inc. Muir Glen Organic organicvillefoods.com wildharvestorganic.com (General Mills) Target Corp. muirglen.com corporate.target.com INGREDIENTS: INGREDIENTS: Organic tomato puree, Organic tomato INGREDIENTS: INGREDIENTS: organic agave nectar, concentrate (water, Tomato puree (organic), Organic tomato organic white vinegar, organic tomato paste), (tomato paste (organic), concentrate (water, salt, organic onion organic sugar, organic water), naturally milled organic tomato paste), powder and organic distilled vinegar, salt, sugar (organic), vinegar organic sugar, organic spices. organic onion powder, (organic), sea salt, onion distilled vinegar, salt, less organic spice powder (organic), garlic than 2% of: organic onion • Gluten free powder (organic), cayenne powder, organic spices • Dairy free • No GMOs pepper (organic), oils of • Vegan • No High Fructose Corn cove, cassia and celery. • No High Fructose Corn • No GMOs Syrup Syrup • No High Fructose Corn • No GMOs Syrup • No High Fructose Corn Syrup • Non-GMO Project Verified Competitive Environment Analysis No high fructose corn syrup ketchups Sir Kensington’s Hunt’s Natural Simply Heinz 365 Everyday 14 oz glass bottle 20 oz plastic bottle 20 + 30 oz plastic bottle Value (larger sizes available) Average cost: $5.49 Avg. cost: $3.25 / $3.78 32 oz plastic bottle Average cost: $1.78 Average cost: $2.69 Kensington and Sons Kraft Heinz Company sirkensingtons.com ConAgra Foods heinzketchup.com Whole Foods Market hunts.com wholefoodsmarket.com INGREDIENTS: INGREDIENTS: Tomatoes, tomato paste, INGREDIENTS: Tomato concentrate organic sugar, onions, Made with the finest from red ripe tomatoes, INGREDIENTS: distilled vinegar, salt, lime vine-ripened tomatoes distilled vsinegar, sugar, Tomato puree, juice concentrate, green and organic seasonings. salt, onion powder, spice, evaporated cane juice, bell peppers, allspice, Sweetened with agave natural flavoring white vinegar, salt, onion citric acid nectar, this richly flavored powder, spices. ketchup has a fresh • No GMOs • No High Fructose Corn hearty taste and texture • No High Fructose Corn • Vegan Syrup Syrup • No GMOs • 50 percent less sugar • No High Fructose Corn • Gluten free • No High Fructose Corn • Gluten free Syrup Syrup • Non-GMO Project Verified Competitive Environment Analysis Shelf and store location descriptions IN-STORE PRODUCT LOCATION AND SHELF SPACE LUNDS & BYERLYS Golden Valley, Minnesota While individual stores prioritize organic and natural (mostly defined as not using high fructose corn syrup) ketchup products, all of the In Byerly’s, the ketchup was located stores visited in the Twin Cities had organic and natural options at the back of the store perimeter by mixed in with other varieties. The in-store locations tended to be the meat section. The product was in the middle of the store. Whole Foods was the only retailer that on the bottom two shelves. Most of exclusively had organic or natural options. Annie’s Homegrown the product at eye level was specialty organic ketchup was available at each food seller; this was matched seasoning products. Organic ketchup only be Heinz Organic. was mixed with natural and traditional options. If possible, options were grouped by brand, such as Heinz. TARGET St. Louis Park, Minnesota CUB FOODS The ketchup was located Minneapolis, Minnesota near the front of the store in In Cub Foods, there was a robust the first main food ilse close section of ketchup near the right- to the meat section.