The Prospects of Expanding the Kraft Heinz Business in Chile as Part of the Companys Agenda of Increasing Its Revenues

2021-08-25 20:31:06
6 pages
1570 words
University/College: 
University of Richmond
Type of paper: 
Research paper
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Executive Summary

It is recommended that the Kraft Heinz Company enter Chile with its beverages, ketchup, sauce, infant nutrition products, drinks, coffee, baked beans, and snacks. This is in the realization of the eating trends of the Chilean people as well as the global trend of people showing an increased preference for healthier food choices. Additionally, comparative studies of the existing firms indicate that there is a huge drawback in the performance of the competing firms concerning the production of healthy products to the consumers. Taking into account these factors, it is evident that the company has a good chance of succeeding in its endeavor of increasing revenue through the establishment of a new market in Chile.

This report was commissioned to assess the means through which Kraft Heinz Company (KHC) can increase its revenues from 8 to 10 percent from the sales of the previous year and make recommendations for the introduction of beverages, ketchup sauce, infant nutrition products, drinks, coffee, baked beans, and snacks in Chile. The recommendations include:

Adopting a marketing strategy suitable for the business in the global market

Efficient use of available resources to minimize cost while ensuring maximum Return on Investment (ROI).

Globally, Kraft Heinz is the fifth-largest company in the food industry. As such, this shows the vast potential that the company has with its products recognized globally placing it as one of the firms with an enormous potential to take advantage of the Chilean market.

The results of the report found that the prospects of the company in its current position are very positive in its attempt to position itself in Chile and consequently increasing its revenue. The major weakness of the existing firms gives room for Kraft Heinz to establish itself and expand the market for its products.

The report also highlights the limitations of the research which has been conducted and some of the figures provided and the current economic conditions of the existing market are not constant and cannot, therefore, be used entirely to predict future trends.

Introduction

The aim of this report is to give an explanation of the prospects of expanding the Kraft Heinz business in Chile as part of the companys agenda of increasing its revenues. To achieve that objective, this paper will look into the financial performance of the firm, personnel performance and the existing market situation as a way of ascertaining the potential of the Chilean market in relation to the Kraft Heinz startup. The methods of analysis used in this research include PESTEL analysis as well as an analysis of the companys financial performance over a period of five years.

Food Industry

According to a study conducted by a Chinese firm ChinaGoAbroad (2018), Chile remains one of the open markets with its food exports reaching US$ 13,775 million in 2012 accounting for 17% of the countrys total exports. Coupled with the favorable political environment, Chile presents an ideal setting for the Kraft Heinz Company to prosper in its expansion program. Considering these desirable aspects as well as the labor force availability, Chile presents a perfect market for the expansion of the business globally. For foreign investors, Chile offers foreign investors some of the very competitive business costs (Business Monitor International 2004). Chile also offers moderately low corporate taxes and labor costs thus making it very attractive for foreign investors to start up their businesses in Chile and gain entrance in the market (Business Monitor International 2004).

Company Overview

This report will analyze Kraft Heinz Company in relation to its resources, capabilities, and resources in its aspiration to introduce its products in the Chilean market. Kraft Heinz is a company ranked among the top food and beverage firms globally. It has its headquarters both in Pittsburgh, Pennsylvania, and Chicago, Illinois. Kraft Heinz is heavily engaged in the manufacturing and marketing of food and beverages. Some of the very common products include sauces, cheese, dairy, meat, meals, refreshment beverages, coffee, as well as grocery products. Kraft Heinz targets the vast populations in the United States, Canada, and Europe and it has therefore established itself in these market segments as one of the leading (Reuters 2018).

Analyzing organization's resources and capabilitiesOrganization profileKraft Heinz was founded by an American entrepreneur John Heinz in 1876 in what started as a small food business with his sibling and cousin. Its first iconic product was the Heinz Tomato ketchup which has gone to become one of the worlds leading products having captured approximately half of the U.S market (Yahoo Finance 2017). The Kraft Heinz Company was incorporated in 1905 and Heinz served as the companys first president. He held this position and saw the establishment of more than 20 processing plants in the U.S. Currently; the establishment has more than 200 household brands under the umbrella of Kraft Heinz thanks to the decades of takeovers in a growth strategy that has continually expanded over the years.

The company envisions to be the best food company and help in growing a better world. I believe that Kraft Heinz should have its mission to be a globally trusted producer of delicious foods. As such, the company will be dedicated to contributing to the development of sustainable health of the people as well as the company. Kraft encourages the core values of ownership and meritocracy as two of its exciting elements in the business culture. In effect, this creates an environment of empowerment which is unique to the business and providing an empowering environment to its high-potential employees and an unlimited growth opportunity for the company.

Strategy and Competitive position of the OrganizationThe Kraft Heinz Company has for a long time focused on the core business practices, including revenue management, management by objectives (MBO), and zero-based budgeting (Key 2015). There are the three systematic tools which the company is working to ensure that these become the core business practices of the establishment. Figure 1. Below shows Kraft Heinz Company's business strategy.

The company is headed by a Chief Executive Officer who acts as the overseer of all company business activities all across its markets. He is also tasked with the role of serving as the figurehead of the company and work hand-in-hand with other managers to come up with attractive products for the consumers (Wojcik, 2015). The CEO also plays the role of strengthening the companys iconic brands and coming up with the best strategies for the business in the food and beverage industry. The CEO is assisted by the president of the company who ensures that all the departmental operations are in tandem with the companys long-term and midterm objectives (Wojcik, 2015). Beneath the president is the Executive vice president also responsible for the companys financial affairs. In that capacity, the executive vice president is responsible for all the financial activities and investor relations area in the company.

Additionally, the company has executive vice presidents responsible for the operation of the business in all of its branches. According to Wojcik (2015), the companys Corporate and Governance Affairs is headed by a manager who is responsible for spearheading the companys internal and external communications, Corporate Social Responsibility and all the government affairs. He is will also oversee the companys foundation, real estates and facilities. The companys operations and business services manager are accountable for the companys supply chain, procurement, and all the other operations in the U.S and globally. The marketing and strategy officer plays the role of assisting in the integration of the Companys products in the market by developing the best entrance strategy as well as a practical marketing plan that will ensure the success of the company.

Market and financial performance

Revenue Growth.

The Kraft Heinz company recorded a Revenue Growth of 0.75% year on year in the third quarter. This was reported as $6,314.00 million (Appendix 1). Demonstrably, this was lower than the companys most recent improvement, growth rate of 31.6 %. Comparing Kraft Heinz performance in the third quarter with other companies, it is noted that 26 other companies have achieved higher growth rates that Kraft Heinz with its growth rate ranked 2629 overall in the third quarter. One of vital elements to consider before entering the Chilean market is the growth of the company. Over a period of 5 years, experts predicted a growth of 10.00% annual rate (Mendoza 2017). Comparing this standard to other firms, it is evident that Kraft Heinz was competitive in the market and therefore had reasonable prospects of succeeding in the new market.Financial Strength.To establish the financial strength of Kraft Heinz, a comparison of its performance and that of Sanderson Farm, which is one of the competing firms in the industry is given. According to Mendoza (2017), the findings suggest that Kraft Heinz is more profitable as compared to Sanderson Farm. In essence, this goes to indicate that KHC is about the global forces in the foods and beverages industry globally. Additionally, Appendix 2 shows the financial strength of the establishment with respect to the performance of the food industry in general.

Profitability and ReturnsFor a new business, growth does not mean a lot if it is achieved at the expense of company profits. According to Mendoza (2017), Kraft Heinz has an EBITDA margin of 29.05%. This means that the business is profitable and with an ROI of 5.30%, the establishment stands a good chance of entering the Chilean market and attaining a considerable market share. Mendoza (2017) further states that Kraft Heinz is currently priced at -13.46 % of its one-year price target of $90.29. This is a significant growth over the years, which is an indication that Kraft Heinz is a better investment over the next years.

 

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