Consumer tastes are changing big time and that’s led to hard times for processed food giant Kraft Heinz lately. Meanwhile, out on the wild west frontier of franchising, Restaurant Brands International (RBI) is at war with its franchisees again over scathing new allegations of corporate wrongdoing…
Will we be saying ‘goodbye’ to iconic Kraft Dinner and other
famous Kraft processed food brands as consumers change
their buying and eating habits for the 21st Century?
Kraft Heinz takes major write-down over loss of brand value
Although the financial papers aren’t saying which specific KH brands showed the big losses over the past couple of quarters, they are howling in despair at the move, by the conglomerate, to down-value some of its ‘core’ brands by a total of (US)$15.4 billion, claiming that changing consumer tastes have destroyed their value. In plain English, that means consumers aren’t buying those products like they used to. Divisions involved in the write-downs were identified as Oscar Meyer (Cold Cuts and Processed Meats), and the Kraft name, itself, associated with Condiments, Cheeses, and processed foods such as the iconic Kraft Dinner.
KH stock lost (US)$10.34 a share on the write-down, dropping 28 percent to (US)$38.90 by the close of trading yesterday in New York. KH also stated a (US)$25 million increase in the cost of producing products sold for the most recent quarter. In all, KH shares have lost about half their former value over the past year.
KH says folks just aren’t buying its Processed Foods including Cured Meats, which have been taking a licking over the past few years from dietary experts and food researchers as unhealthy. Seems the younger set and young families are, indeed, demanding healthier, fresh food alternatives. Maybe KH should have bought into the Meal Kit business.
At the supermarket, we may start to see some KH brands disappear…
Horton’s / RBI back at war with franchisees
Except, this time, it’s US franchise owners who are making the fuss; one in particular which controls franchise development for the entire state of Minnesota.
Timm-Minn Inc. is suing its parent company Tim Horton’s USA (owned and controlled, in turn, by RBI of Miami) over 10 separate counts and is asking for a trial by jury, seeking monetary damages, legal fees and any other relief the court wants to grant in this matter.
The franchise development company signed a huge deal to build 280 Tim’s store across its state and has already spent tens of millions of dollars to open 10, according to its court filing. The problem is, the head office has recently increased the cost of certain core food items that franchisees must buy from it under their deal by unmanageable amounts.
For example, the suit charges, Horton’s USA makes Tim-Minn pay Tim Minn (US)$104.08 more per case of Applewood Bacon and (US)$23.85 more for fountain packs of Diet and Regular Coke than Wendy’s franchisees pay. And Wendy’s is a Sister Fast Food chain under RBI. You’d think they sould all pay the same price, right? Not in the RBI universe.
Tim-Minn says it can’t make a profit with such high mandatory costs. And it’s claiming the Head Office made false and misleading statements and promises when negotiating its development deal.
We’ll have to see what happens on this one. It’s a slightly different situation than the recent Canadian Tim’s franchisee revolt, but the issues are the same. In that kettle of fish, Horton’s Canada came to a deal with its angry franchisees over the past couple of months and things have cooled down considerably in the ‘home’ market. But animosity and distrust are still simmering just under the surface.
At ground level, expect no change in prices or service in Canadian Stores for the foreseeable future, but look for price increases for signature chain-wide Tim’s menu items in the U.S. And don’t be surprised if some Tim’s outlets there close as a result of recent supply price increases.
~ Maggie J.