Heinz to Battle Private Labels for Market Share

H.J. Heinz Co. (HNZ) is determined to win back the fans it has lost to private labels. Last week the company reported a 16 percent drop in second-quarter profits, but CEO Bill Johnson said Heinz would dramatically raise the amount spent on promotions and advertising.

The recession has led many shoppers to switch to cheaper store brands. But private labels are also going up in quality, and many have predicted that this new store-brand loyalty will stick around even after the economy has righted itself.

Some brands have easily weathered this switch to generics -- one survey showed that Coca-Cola, Kraft and Tide were three of the brands least likely to be abandoned in favor of cheaper products. Heinz is hoping a 15 to 30 percent increase in advertising and promotions spending will get it on that list.

Previously, Heinz had been "more reticent to lower its prices in the tough economy than some of its competitors," as the Associated Press put it, which cost the company some of its bargain-seeking customers.

Heinz will also be pushing for increased sales in Mexico, where ketchup is extremely popular and Heinz controls only 1 percent of the market.

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