When New Products Fail: How French’s Couldn’t Ketchup

Over the last few days, friends and extended family have been trying to engage me in an impassioned discussion about ketchup. I used to sell household goods to national grocery chains, so it is understandable to think I would want to talk to them about the ketchup issue.

The Ketchup controversy begins in June 2014 when Heinz decided to no longer produce ketchup in Leamington, Ontario and thus eliminated approximately 740 jobs (over 400 jobs remained for other products like vinegar). In response, French’s launched a ketchup brand in the Summer of 2015 using the Leamington tomatoes however, French’s ketchup suffered from low sales and was delisted (removed from shelves) by Loblaw owned stores including: Loblaw’s Great Food, No Frills, Zehrs, and Real Canadian Super Store. Outrage on social media and calls for boycotts over the last week have created enough pressure for Loblaw to announce that it will be returning the products to their shelves.

Loblaws cited low sales as the primary reason for delisting the brand. I have two reasons to believe them:

  1. The French’s brand is owned by the massive New Jersey corporation, Reckitt Benckiser. There are times when a big brand can make a deal that will cut out smaller brands. However, in this case French’s and Heinz are two massive players and the Loblaw category managers (the decision makers at the stores’ corporate offices) likely do not want to start a war with either company by making such one-sided deals.
  1. French’s has three types of ketchup: regular, buffalo, and garlic. Of those three types of ketchup only the regular type was taken off the shelf. The buffalo and garlic varieties were reported to have stronger sales versus expectations so it makes sense they remained on shelf.

If a brand is not selling, then it doesn’t matter whether or not it is on shelf, the consumer is already not supporting that business. When it comes to the shelf, you vote with your dollars every time you enter the store. Individuals cannot complain when the candidate they did not vote for does not win.

Grocery stores are incredibly responsive to customers and the amount of data they track is inordinate. Every meeting is a battle, where armed only with data on shoppers, those who want to be on shelves need to not only protect space but fight for more. Data shapes what kind of products go on the shelf, the quantity of product needed so that the stores do not risk running out of stock, and the ideal feature price to move a desired amount of product. Every decision is based on the shopper data from stores.

Heinz is an established brand; buying it at the store is a habit. When a new product launches there are three clear phases that take place over a two year period.

  1. The first six months are all about capturing early adapters, a small portion of the market that will let you know how the product holds up vs. claims and who will be the key influencers to their peers as your marketing expands in reach.
  1. The second phase is expansion to the general population. You take the lessons from the first phase to enhance the product, refine the message and if you are beating projections, massively increase production.
  2. Finally the third phase is the late adapters. A small group of people who are late to try new products but make up a large enough portion of the population that you need to care about them.

In 2012 when I was at Proctor and Gamble, two innovations were just being launched: Tide Pods and Febreze Car Clips. After a couple months, most of my family and friends were unfamiliar with the products; however the Tide and Febreze teams were already working overtime on the next phase. The phase 1 results were so positive with early adapters that P&G had ordered for additional plants to be built to catch up with demand. About half a year has passed since French’s Ketchup entered the market and at this time they should be engaging the main population. This delist was likely based on low adaption in the first phase, indicating poor prospects in the future (until this public outcry invigorated trial and adaption).

To grow sales in conventional retail through the three phases, there are four keys: display, pricing, shelving, and merchandising (temporary prices reductions/discounts in stores – good deals get you into the flyer). When I worked selling to these stores, the end of every email the header stated that “Display, pricing, shelving, and merchandising were at the sole discretion of the retailer.” That being said, influencing these decisions was my only job. Ineffective marketing and poor fundamentals in store falls squarely on the staff managing the marketing and sales of that brand. It is not the store’s fault when a product does not sell, and it is a rational decision to delist these items.

Even with poor prospects there is another way a dud product can stay on grocery store shelves… Category managers at the grocery stores hate complaints. A category manager’s fascination with data is curtailed by individual comments and anecdotes by customers given to workers in their stores. When I was selling cleaning products, there was a brass polisher that sold less than one unit per year per store at a major Canadian chain. Changing out that product for one of mine could have made hundreds of thousands of dollars per year for that chain. However, the category manager kept it because when they had previously tried to remove it the outpour of complaints from that minority of customers overwhelmed logic.

So congratulations to French’s; you have regained your listings thanks to a social media video that was more effective than your whole marketing campaign. To everyone else, if you want Canadian products to stay in stores, make sure they stay on your shelves.

Stephen Pariser is an Associate with Finley & Associates who formerly worked for Proctor and Gamble on their National Accounts team of the Consumer Business Development Department.