Why McDonald’s Dropped Heinz, and Why Heinz May Not Care

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Last week, McDonald’s decided Heinz would no longer supply ketchup to any of its 34,000 locations.

This isn’t a huge deal if you live in the U.S., CBS News says, because McDonald’s already uses its own brand of “fancy ketchup” virtually everywhere. (Heinz was still available in Pittsburgh and Minneapolis. Sad news for ketchup connoisseurs there.) But Heinz was a McDonald’s supplier overseas.

Why did it happen?

As McDonald’s coyly put it, “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time.”

CBS News was more specific. “Heinz appointed the former head of Burger King, Bernardo Hees, as its new chief executive officer,” it said. “In three years, Hees oversaw major changes at the struggling burger chain, remaking Burger King into a viable competitor to the mighty Big Mac.” And now he might harness the power of a popular ketchup brand to overthrow McDonald’s once and for all, right?

Actually, Heinz is bigger than you might think. The move by McDonald’s will certainly have some impact — losing the overseas business of McDonald’s “could hinder” Heinz because the majority of its sales are in international markets, The Washington Post says — but it will hardly destroy the company. It sells 569 million pounds of ketchup per year, not including bulk sales to fast-food restaurants, the Post says. To compare, McDonald’s in 2006 used 250 million pounds of ketchup just in the U.S. and most of that didn’t come from Heinz.

And while Heinz is best-known for its ketchup, the company has expanded a lot since first working with McDonald’s 40 years ago, the Post says. “The company now has licensing agreements with restaurants like T.G.I. Friday’s, owns lines of food like Ore-Ida potatoes, and makes diet foods like Smart Ones,” it says.

Do you think hiring a rival’s former CEO was a good reason to drop Heinz, or does it seem a little petty? Keep in mind that Heinz is now owned by a partnership of Warren Buffett’s Berkshire Hathaway and 3G Enterprises, which owns Burger King. Comment below or on our Facebook page.

This article was originally published on MoneyTalksNews.com as 'Why McDonald’s Dropped Heinz, and Why Heinz May Not Care'.

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