Kraft vs. Hormel: Battle of the Brands
Author: Dave Van Everen
With Thanksgiving fast approaching and the weather turning chilly (even in Silicon Valley), our minds are turning to food. In this latest installment of Veryfi Insights, we chow down on shopper receipt data for two titans of the packaged food industry and see how they’re battling it out: Kraft Heinz vs. Hormel Foods.
If you missed our spooky Halloween article full of candy sales insights comparing Target and Walmart shoppers, check it out!
For this U.S. supermarket receipt data analysis, we reviewed the details in two ways. First, we looked at the frequency of line items in all receipts containing at least one item in a long list of Kraft Heinz and Hormel products. This approach revealed the relative sales volumes of those items. Second, we looked at the frequency of line items in all receipts containing at least one Kraft-branded item. This approach identified line items with Kraft brand affinity, neutrality, and aversion.
Our first insight came through clearly in the data: Kraft outsold Hormel overall, by a wide margin. Partly due to the higher number of brands included in the analysis, but also due to clear preferences among U.S. shoppers, Kraft Heinz simply dominated the product rankings.
Hormel meats were the most popular line item for Hormel, as expected. However, even Kraft Heinz brand A.1. Sauce outranked any Hormel product. Kraft’s cross-category dominance in packaged foods was clear. Nine of the top 10 items were Kraft Heinz brands, including iconic products like Lunchables, Heinz Ketchup, Velveeta, Cool Whip, and Kraft Mac & Cheese.
Apparently, Kraft Heinz unlocked the elusive secrets of food and beverage brand strategy and product portfolio management. Their ability to maintain leadership positions across categories is extremely impressive. For example, Lunchables, if that can even be considered a meat product, is far more popular than any Hormel product. And, Hormel is a meat company!
The sheer dominance (and category creation) of Lunchables as a complete meal option for kids deserves a closer look. Kraft Heinz actually sold its Nuts business (mainly Planters) to its competitor Hormel Foods, to achieve greater focus in its portfolio and its Real Food Snacking platform. What they were likely seeing is that as nuts became less popular in schools due to allergen concerns, those products (along with peanut butter products) were growing more slowly. So, Kraft Heinz could sell the business off to a competitor without significant fear of losing market share or compromising its strategic growth prospects. Based on this 2021 comparison of key stock trading metrics, Kraft Heinz is outpacing its competitors in creating company value.
Where Kraft Heinz is really showing its mad genius is in selling off the natural cheese and powdered cheese businesses. To an outsider, it appears that natural cheese could be an important component in other products, such as Lunchables. Kraft Heinz could even expand on that product line with additional natural cheese options. Similarly, it seems that powdered cheese is an important ingredient in Kraft Mac & Cheese.
What is Kraft Heinz doing by selling those businesses? Wouldn’t it potentially trade in-house ingredients for more expensive 3rd-party ingredients? Does the rationalization of its product portfolio and strategic focus on the strongest products justify higher production costs? If any Kraft Heinz brand managers are reading this and can provide more insight into these decisions, get in touch 😉
When researching Veryfi Insights articles, we’re usually surprised by some of our findings. One shocking result was learning just how popular Velveeta is. Everybody in the U.S. is familiar with the brand, and has probably eaten it occasionally. However, it’s truly incredible to contemplate that it’s more popular than peanut butter, arguably a classic American food category. Skippy from Hormel Foods was the #1 peanut butter in our line item receipt data, and it didn’t even crack the top 10 products/brands, falling just below Oscar Mayer products from Kraft Heinz.
In another surprising result, we saw that Cool Whip was purchased significantly more often than Miracle Whip. How can a sweet topping overshadow a classic sandwich spread? Not only that, but it was more popular than all Planters products from Hormel, combined. Once again, comparing Kraft vs. Hormel, Kraft knows its portfolio well. Perhaps the Cool Whip sales volumes helped justify the sale of the Planters business.
One surprise from Hormel Foods was how much more popular Herdez was, compared to La Victoria. Herdez outranked La Victoria by a wide margin, and also surpassed Kraft Heinz brands Philadelphia, Ore-Ida, Crystal Light, Country Time, Jell-O, and more. Hormel doesn’t appear to have any products that complement Herdez salsa. Perhaps this is an opportunity for Hormel to expand into other categories like tortilla chips.
Another Hormel surprise was the popularity of Spam. Within the Hormel portfolio, Spam outranked both Applegate and Columbus, by nearly 2x. It was also ranked just below Skippy, another iconic product from Hormel. Some may argue that the 85-year-old Spam was in its heyday decades ago. However, it’s clearly enjoying a renaissance and has a growing cadre of “Spambassadors” around the world.
We also examined how Kraft Heinz and Hormel Foods brands fared when purchased alongside any Kraft-branded product. We saw some clear cases of same-brand affinities. For example, when a Kraft product was purchased, Oscar Mayer outsold all Hormel-branded products, coming in below Lunchables and above Velveeta in the rankings. However, when a Kraft product was purchased, the ranking of A.1. Sauce went way down. Why? Perhaps that’s a topic for deeper analysis in a future Veryfi Insights article….
Based on our view into Kraft Heinz and Hormel Foods sales volumes, we think there’s ample opportunity for Kraft Heinz to use similar cross-basket receipt data insights to drive same-brand affinities throughout their product portfolio. They could also find additional ways to streamline their portfolio, and identify new marketing campaigns to drive customer loyalty and fend off competitors.
When looking at Kraft vs. Hormel brands purchased alongside Kraft products, we saw that Kraft customers prefer Skippy vs Planters, and Justin’s is nearly nonexistent. We also saw that the purchase frequency for Planters dropped when bought alongside Kraft products. Perhaps that’s another reason why Kraft felt it would be safe to sell off the Planters business: Kraft Heinz didn’t see affinity between Planters and its other brands.
Regardless of how much Planters was contributing to Kraft Heinz sales volumes, it’s now one of the strongest products in the Hormel Foods lineup. We found that Planters outranked Kraft Heinz brand Oscar Mayer, and was placed right behind Kraft Mac and Cheese. Clearly, Hormel Foods saw an opportunity to gain a leading position in the processed nuts category, and its $3.35 billion Planters acquisition is likely paying off.
Sometimes it’s fun to play the role of underdog, and entertain thoughts about how a smaller competitor could usurp a larger one. Let’s consider:
Using insights gained from consumer-provided receipt data, Hormel Foods could better understand the answers to those questions and also identify even more opportunities to increase its growth, profitability, and market capitalization.
When we examined Kraft Heinz vs. Hormel Foods sales volumes, we learned that the former is some kind of “mad genius” when it comes to brand and business strategy, and the latter has a handful of strong brands that could be stronger still. Kraft Heinz is clearly an industry titan with classic American products that have shaped U.S. culture and food preferences.
All of this talk about food is making us hungry! After we celebrate Thanksgiving by stuffing ourselves with turkey, we’ll return with our next installment of Veryfi Insights.