February 21, 2017

If there were any questions surrounding Kraft Heinz’s need for growth, they faded in the wake of the food-product company’s blockbuster $143 billion bid for Unilever in recent days. While that potential pairing failed, in recent weeks Kraft Heinz was able to ink a partnership with daytime talk-show host turned health and nutrition champion, Oprah Winfrey. The move is no-doubt strategic, given the recent sales slump Kraft Heinz has suffered, particularly in the United States, but there is no guarantee the pendulum will shift in the food maker’s favor, even with Oprah’s touch.

Last month Kraft Heinz unveiled the new partnership with Oprah that seems to attach a narrative to the consumer experience. The venture, dubbed Mealtime Stories, LLC, surfaces as healthy meals across a number of categories that the company said “will make real, nutritious products more accessible to everyone.” Mealtime Stories will be ready-to-eat refrigerated products, initially available in the United States, which Kraft Heinz will manufacture and sell.

Allen Adamson, BrandSimple Consulting founder and a Kraft and Unilever alum, told GAI News that Kraft Heinz, like many packaged-goods firms, is simply not growing fast enough, pointing to a shrinking number of supermarkets and changing eating habits among consumers.

“A lot of their brands were developed and designed in the 60s and 70s and are potentially less relevant now than when they were created. Times have changed, and a lot of Kraft’s products were designed for a different time and place. Everything from Jell-O to cream cheese,” said Adamson.

In order to grow, Kraft Heinz needs to launch new brands, which is harder than ever to do. Compounding the challenge, time is not on Kraft Heinz’s side, as it can take years to launch a new brand. “Kraft Heinz needs growth now. They can’t wait five years,” said Adamson.

Kraft Heinz is likely banking on the tide turning with its Oprah deal, similar to how Weight Watchers was able to bolster its business and its stock price when Winfrey took a 10 percent stake in the weight-loss brand two years ago.

“Oprah is a huge influencer of many consumers. She says ‘go left,’ and lots of people go left. What she does influences lots of people, particularly in the area of food,” said Adamson.

One generation that Kraft Heinz appears to be targeting, said Adamson, is Millennials, evidenced by the company’s commitment to contribute 10 percent of profits from the Mealtime Stories partnership to charities dedicating to eradicating hunger.

“Millennials are very concerned not only about what a company does in terms of what they make and how it tastes, but what they stand for and do. And so clearly donating a portion of profits to charity is a tip of the hat to Millennials,” he said.

While Oprah brings the marketing muscle, Kraft Heinz brings its manufacturing prowess to the partnership.

“Usually celebrities are very good at marketing, image, and coming up with ideas, but they often fall flat on manufacturing and logistics,” said Adamson. “Kraft is good at manufacturing, efficiency, and scale, but it’s not that good at marketing anymore. Oprah has a vision for a product and she is putting her celebrity image behind it, and Kraft Heinz can figure out how to get it to the corner store on Tuesday.”

For Kraft Heinz, however, a brand that is mired in tradition and history at a time when e-commerce and food-delivery concepts are trending, success is not a sure thing.

“I think it’s going to be a challenge. Consumers are spending less time in grocery stores and also Oprah, while she is still very popular, she’s not growing in popularity. It has an interesting shot. But whether or not this brand hits – you could do all of the research and planning in the world. Sometimes they work and sometimes they don’t. It’s never a sure bet,” said Adamson.

Both Kraft Heinz and OWN & Harpo declined requests for comment on this story.

-Gerelyn Terzo

Gerelyn is a regular contributor to GAI News. She has been writing about institutional investing and asset management for the majority of her career, and has developed a focus on agriculture given the global scale of the industry’s relevance and importance.