Kraft Heinz: is a new CMO really what the business needs to turn around its fortunes?
Whoever takes charge of marketing Kraft Heinz will need a dogged belief in innovation and the conviction to kill or cure ailing brands. But more than anything, they’ll require a heavy dose of tact and diplomacy to argue marketing’s case to its notoriously frugal board.
It’s likely that Eduardo Luz has single-handedly pulled the tenure period of the average CMO back down after finding himself out at Kraft Heinz just eight months after taking the top marketing job. The Brazilian had already committed six years to the food conglomerate as president of the grocery business, but when it came to announcing his resignation as chief brand officer and US chief marketing officer, the end came quickly.
With just a week left at head office, it’s unclear whether Luz jumped or was pushed. The official line was he had “decided to leave the company” at the end of May (and he told The Drum he had nothing more to add on the matter) but the move appears largely unanticipated given the string of presentations he enthusiastically gave at a number of industry events earlier this year.
At conferences he smiled broadly throughout his well-rehearsed presentation over Kraft Heinz’s problems; he spoke of sprint approaches, tech investment and the “Kraft Heinz Company Way”, all while investors leveled accusations of underinvestment at his bosses and their investors, namely 3G Capital.
He was optimistic that the company’s stock tumble of 27% in February was nothing more than a blip, and that the $15bn written off the value of Kraft and Oscar Mayer was recoverable.
Most importantly, he categorically denied these problems were the result of critical underinvestment in the company’s brands.
“It’s a misconception,” he told The Drum back in March, arguing that the increases in raw materials, transportation and other logistical costs played bigger roles in Kraft Heinz’s Wall Street hullaballoo.
Kraft Heinz has not yet filled Luz’s role, so it’s currently unclear whether his predecessor will continue down the CPG veteran’s path or map out their own marketing route. But there’s also a chance that the company could relinquish the role altogether.
A disposable role?
For one, Luz was the first person to take on the US chief marketing officer job, which – to all intents and purposes – was more than an international role, given that the US accounts for roughly 80% of the Kraft Heinz business. He was handed the job, he explained, because his bosses were impressed he had managed to keep the grocery category growing in the six years that he led it.
“We created a culture of accountability to the teams and we were very specific on the playbook for brands,” he said at the time. “What we want to do now is have this growth applied everywhere in the US and globally.”
Clearly, this growth did not come fast enough, or – more likely – the Kraft Heinz board were not patient enough for Luz’s five-pronged masterplan to pay dividends.
Secondly, Kraft Heinz has already appointed a chief marketing officer – of sorts. The company’s new chief executive, Miguel Patricio, is an experienced marketer who previously held the CMO role at AB InBev and comes armed with a knowledge garnered at the likes of Johnson & Johnson and Lego. He will take over from the incumbent chief, Bernard Hees, on 1 July and has already pledged to “focus on the consumer” when he begins his turnaround of the mega-merger’s fortunes.
Finally, it’s arguable that the chief marketing officer role has fallen out of fashion lately, particularly at big corporations such as Kraft Heinz. Marc Pritchard continues to steer P&G in the guise of chief brand officer, and reports suggest Unilever will retire the job as Keith Weed bows out of the business.
In Kraft Heinz’ case, a chief brand officer or chief innovation officer may be more relevant and fitting, given that its recent problems appear to be less about marketing per se, and more about product.
"Kraft Heinz needs to make innovation a priority,” said a former brand executive who recently left the business. “It needs to invest in innovation and brand-building to ensure their products and brands are relevant for today's consumers."
'An extremely honest assessment'
Because while Luz’s plan made room for innovation at the company (going as far as developing a team named White Spaces, where marketers were encouraged to “put on their consumer hats” and dream up eyebrow-raising products such as Heinz Mayochup), his central thesis focused on accountability: “200 CMOs for 200 brands” was his catchphrase.
But in hiring a chief marketing officer onto every brand, Luz likely found himself with 200 very senior marketers hellbent on defending their brand in order to protect their own skin. In forcing accountability into each property through leadership, the CMO would have found himself with less power to play strategically with the brand portfolio – something his predecessor must do with conviction.
“Kraft Heinz has a storied line-up of brands and a strong brand heritage, but as some of those brands are evolving and adapting, others are not,” said Chris Ross, vice-president analyst at Gartner. “Among other things, a new CMO would need to do an extremely honest assessment of the current landscape, [and look at] which brands are positioned well, which are not, where the opportunities exist, where strategies may need to shift or where more significant brand investments may need to be made.”
Elizabeth Finn, managing director at one of Heinz’s agencies, Cowan, said the new marketing chief will also need to face up to what Kraft Heinz represents to consumers on a macro level.
“As consumers increasingly look for food that is natural and unprocessed, Heinz’s tinned business is under continued threat,” she explained. “And with our increasing intolerance of plastic and with Tetra Pak s largely going unrecycled, questions will be asked of the brands, as well as own label in chilled categories, so there is a real opportunity to position tins as the environmentally friendly format in food.”
Ultimately, the CMO will have to niftily navigate the waters of Kraft Heinz’s infamous zero-based budgeting – if indeed it continues under Patricio – to establish a sense of brand purpose, whether that be through a lens of healthy living, environmentally friendly packaging, or something else.
At the very least, this is necessary just to keep up with the competition. Unilever has successfully invigorated heritage brands such as Ben & Jerry’s and Knorr with a paint job of purpose; meanwhile, over at Kraft Heinz, it’s difficult for consumers to see what substantive role an uncured wiener hotdog or a jar of melted cheese should play in their lives now without such a purpose-led marketing strategy.
“I don't think [Kraft Heinz] are nearly as active on the purpose-driven track [as they should be] – they seem more focused on cutting costs rather than using technology to get closer to the consumer,” said Michael Cammarata, chief executive of Unilever acquisition, Schmidt's Naturals. “I think that cost them big.
“Barriers between the consumer and the corporate structure have to be [dismantled] because this is the first time consumer staples are being disrupted from several different angles ... and there are big entities that have been successful in pushing that disruption forward. If you're trying to pinch every penny, you're going to miss the boat.”
A direct understanding of the consumer’s tastes and needs, a fearlessness when it comes to assessing the brand portfolio and a burning desire to innovate – the future Kraft Heinz CMO will need to come armed with a whole lot of chutzpah. But, more crucially, they’ll also require a degree in the art of persuasion – or a knack for creativity accountancy – in order to secure the cash required for a renovation of the Kraft Heinz brands.
“For a company with multiple brands, with differing levels of maturity and financial success, the CMO will likely need support from the board to make changes that may create short-term pain but ultimately offer a new way forward,” said Ross. “Refreshing a portfolio of products at a company like Kraft Heinz will require a holistic, long-term approach that will cause some disruption along the way.”
The new CMO might be able to find the necessary support in fellow marketer Patricio, and they might be able to find it in the head of the company’s largest investor, Warren Buffett, famed for his long-term commitments to stock. But convincing notoriously thrifty investor 3G to back a future proofing marketing plan lacking in a short-term payoff? That’s another story.