Image: courtesy of Mike Mozart via Flickr .


What do you do when you are one of the world’s largest packaged food companies and you have seen sales growth evaporate over the last two years? If you are Kraft Heinz, you turn to the star power of Oprah Winfrey to help spark a turnaround with a new line of chilled comfort foods.

Oprah Winfrey's success in transforming Weight Watchers has growth-starved Kraft Heinz salivating at the prospect of an encore performance. Two years ago, Oprah took a $43m stake in (at that time) a struggling Weight Watchers as part of a turnaround plan. After tweeting about her weight loss results while on the Weight Watchers diet, Oprah helped memberships skyrocket. The value of her Weight Watchers stake subsequently grew more than six-fold, to nearly $300m.

Oprah has had the Midas Touch in other ventures. Her book club helped elevate 59 of the 70 books it recommended onto The New York Times best seller list.

Kraft Heinz hopes that Oprah’s magic can put the food behemoth back on a growth footing. Since the 2015 merger of Kraft Foods and H.J. Heinz, Kraft Heinz has not recorded a single quarter of sales growth. The company has cut nearly $1.5bn in costs over this same time period to improve profit margins, but topline growth is missing-in-action.

On 3 August, the company reported another disappointing quarter, with revenue down 1.7% and US sales off 1.2%. Consumers are abandoning the legacy, center-store brands Kraft Heinz is known for, instead embracing foods perceived as fresher and more natural. More often than not, those brands are sold from the perimeter of the supermarket where Kraft Heinz is weak.

By teaming up with Oprah Winfrey for the September 2017 launch of “O, That’s Good!” refrigerated side dishes and soups, Kraft Heinz will address a number of issues that are clouding its future, from 'clean label' concerns and promising growth opportunities in chilled foods (versus shelf-stable fare) to urban food deserts and the fight against hunger.

Regarding the latter initiative, 10% of the profits of the new joint venture Mealtime Stories formed by Kraft Heinz and Oprah Winfrey have to market “O, That’s Good!” will go to food charities Rise Against Hunger and Feeding America. In the absence of profits over the short-term, Kraft Heinz has pledged to make annual donations to the causes. This all dovetails nicely with Oprah’s reputation for generosity (people still remember Oprah’s 'everyone gets a car' giveaway in 2004), an image developed over years of hosting The Oprah Winfrey Show.

What sets “O, That’s Good!” apart is the line’s focus on 'clean label’ comfort foods fortified with 'nutritious twists'. Dishes such as Original Mashed Potatoes and Three Cheese Pasta are made without artificial flavors or dyes, and include helpings of vegetables to increase vegetable eating. Sometimes referred to as the 'hidden vegetable' trend, and this approach has recently gained traction, with food makers adding vegetables to staples such as pasta. Many of those products were aimed at picky children who purposely try to avoid vegetables. Kraft Heinz’s launch represents the highest profile effort to date to use this type of marketing approach.

The two mashed potato variants have added mashed cauliflower, while the three cheese pasta flavours boast added butternut squash and the creamy parmesan pasta contains white beans. Celery, carrots, sweet potatoes, cauliflower, and butternut squash are the additions for the three soup flavors.

These 'nutritious twists' may have been instrumental in persuading Oprah to seal the deal. When Kraft Heinz first approached Oprah to enlist her help, the company pitched the new product concept as a way to make 'better-for-you' food available to communities that may not have that option. Whether they can afford it is another issue. The 20oz soups will retail for $4.99 each, which is nearly double the retail price of a similar sized can of Campbell’s Chunky soup.

"These 'nutritious twists' may have been instrumental in persuading Oprah to seal the deal."

Kraft Heinz’s reference to availability alludes to food deserts, a real issue in many of America’s urban areas. Junk food often dominates what limited shelf-space exists in corner grocery stores there, crowding out healthier options such as vegetables.

Food deserts, essentially areas with limited access to grocery stores, are also much more likely to affect black consumers than white customers. According to the Teaching Tolerance project of the Southern Poverty Law Center, 8% of African-American consumers lived in a census tract with a supermarket, versus 31% of white people, as of 2009.

But underwhelming vegetable consumption is not necessarily so simple. According to the Produce for Better Health Foundation, per capita consumption of vegetables in America declined by 7% between 2009 and 2014.

Survey data indicates that Americans want to eat more vegetables. According to a Q3 2016 GlobalData survey, 48% of Americans say they want to eat as many vegetables as possible, while another 34% say they want to eat a moderate amount. Yet intentions lag actual behavior. What is driving the vegetable consumption declines? Signs point to meal simplification as the biggest factor depressing consumption of vegetables.

To speed up meal preparation (and shrink eating time) consumers have cut back on side dishes. More meals today are ready-to-eat, one dish meals such as pizza, or sandwiches. Speed matters, especially to younger consumers.

GlobalData’s Q4 2016 survey found that 25% of American 18-24 year-olds ate dinner in less than 15 minutes, versus just 16% of consumers overall. The Produce for Better Health Foundation says Americans are consuming one fewer serving of vegetables a week per capita versus just five years ago.

Kraft Heinz probably did not set out with the intention to reverse these declines as its vegetable ingredients are there for more of a 'halo' effect. The product packaging for “O, That’s Good!” plays down the specific amount of vegetables in each offering. That is likely by design so as not to scare off potential consumers.

Oprah herself alludes to the love / hate appeal of vegetables, remarking that the 'twist of vegetables' concept came from her own personal experience eating cauliflower as a substitute for mashed potatoes. This 'healthy swap' fell short for her, leading to a cauliflower and potato blend rather than an outright cauliflower-for-potatoes swap.

Oprah’s gut instinct may pay off. Consumers are thinking more about alternatives to high-carbohydrate foods. When GlobalData surveyed American consumers in Q1 of 2017, they found that vegetables topped all other choices (including pulses such as lentils or beans and alternative grains) as an alternative to traditional carbohydrates.

While we may be more than a decade removed from the peak of the low-carbohydrate food fad, the issue still matters to lots of consumers. One-third of Americans say they are actively trying to reduce consumption of carbohydrates, according to GlobalData’s Q4 2016 consumer survey.

The 'healthy twists' approach may edge Kraft Heinz closer to growth. But it is probably wishful thinking to expect a huge bottom line impact near term. Chilled soup is still a niche in the US, though one growing at twice the rate of shelf-stable (ambient) soup. This market is more than 15 times larger, according to GlobalData’s Global Market Data database. It may be a long time before chilled soup moves the sales needle in any significant way.

At a minimum, the fresh side dish and soup line offers something to counter threats inside and outside of the supermarket. The competitive set for packaged food makers now includes myriad takeout competitors, fast-growing meal delivery services, 'grocerants' (restaurants located in grocery stores), and whatever Amazon has brewing for the future.

The bigger question is what kind of competitive response Kraft Heinz can expect. Three of the eight initial “O, That’s Good!” offerings are soups. Campbell Soup and General Mills (Progresso) are unlikely to let Kraft Heinz waltz in and establish a beachhead in soup without a fight. It is more likely that “O, That’s Good!” will force one or both of these companies to up-the-ante in the refrigerator case.

The side dish market may offer smoother sailing, but the ultimate legacy of Oprah Winfrey may be weaning Kraft Heinz off of its reliance on the centre store to focus on the greener pastures of fresh, perishable foods.