PITTSBURGH -- It looked like salsa had ketchup right where it wanted it. It was pounding away at ketchup sales -- cutting into profits at H.J. Heinz Co. in the process -- and threatening to win the battle of the tabletop sauces in America.
But pounding on a ketchup bottle doesn't guarantee success. Ask anyone who's tried while sitting before a plate of french fries.Since a low period in the mid-1990s, when salsa sales eclipsed ketchup, the old standby has retaken the lead -- and Heinz is back, too, controlling 51 percent of the ketchup market in the United States.
"We decided to get serious about rebuilding the brand," said Casey Keller, vice president of retail marketing for Heinz, recruited about a year ago from Procter & Gamble's food and beverage group.
The company's strategy has been to reverse two decisions that hurt ketchup's sales. Heinz cut prices and resumed advertising its best-known product.
The company lowered the price on a standard 24-ounce bottle from $2.09 to $1.49. Keller said that has sliced Heinz's name-brand premium from a fat 60 to 70 percent to 28 percent, but Heinz's first-quarter profits rose 8 percent, mainly on a 12.7 percent rise in sales from the unit that includes ketchup, condiments and other sauces.
Heinz also is a month into a new worldwide ad campaign aimed at positioning ketchup as the choice of condiments for hip teenagers. The campaign, by the ad agency Leo Burnett, is exactly the strategy Heinz CEO Bill Johnson expects will breathe new life into the 130-year-old company's food brands.
The campaign positions ketchup as the condiment for foods ranging from hot dogs in the United States to pasta in Sweden, omelets in Spain and potato chips in Thailand. The pitches exploit teens' advertising sensibilities and demonstrated taste for the red stuff and goes after teens wherever they hang out.
Following more than a decade off television (remember Carly Simon singing "Anticipation" while Heinz ketchup took forever to pour?), viewers will see Heinz ads on "Dawson Creek," "Party of Five" and MTV.
Heinz also placed ads in magazines such as Sassy and YM and on popular teen Web sites, including MTV's site, Launch.com and Splirt.com. Smart-alecky book covers for school note that ketchup "Plays rough with Tater Tots" and is "Meatloaf's only hope."
Heinz is putting $50 million into the campaign, 20 percent of that in the United States, where households with kids ages 6 to 18 already buy six bottles a year, Keller said.
"If we could get them to buy that seventh bottle, it's about a 15 percent increase in our business."
Heinz's campaign is getting a boost from ketchup's comeback. Three years ago, salsa, which had been gaining ground for years, outsold ketchup by $16 million, according to Information Resources Inc.
Just as bad, Heinz was losing market share to other ketchup brands. A year and a half ago, it controlled just 43 percent of the U.S. market.
Former president Anthony J.F. O'Reilly, who ended most Heinz advertising and raised prices, "allowed salsa to eclipse ketchup as the dollar leader in tabletop sauces," said Burt Flickinger III, managing director of Connecticut-based Reach Marketing.
Since 1998, however, ketchup has retaken the lead, with $498 million in sales compared to $480 million for salsa, according to Information Resources. Heinz also has managed to grab a 51 percent U.S. market share, Keller said.
And Heinz is preparing to deploy a secret weapon. Heinz researchers have found a way to eliminate the watery stuff that floats to the top of ketchup bottles resting on store shelves or in home larders, Keller said.
While a vigorous shaking returns the condiment to a smooth, tomato consistency, the watery ooze is consumers' top complaint about ketchup, Keller said.
"We'll be out in six months with a new product that separates us from any other ketchup," Keller said.