Ketchup wars: Heinz defends its image as tariffs kick in on U.S.-made condiment

Faced with a 10 per cent tariff on its ketchup and other goods, American food company, Kraft Heinz is openinga new front in Canada'sketchup wars.

Heinz took a public relations beating after movingits ketchup production to the U.S. in 2014, enabling Canadian-made French's ketchup to stealthe spotlight. Now the company, which merged with Kraft in 2015,hasbegun its ownPR campaign to highlight its Canadian connections, including the products it still makes in this country.

"We are a good corporate citizen, and truly part of the Canadian fabric," said AvMaharaj, vice presidentof corporate affairs for Kraft Heinz Canada, shortlybefore the tariffs took effect onJuly 1.

"The tariffs are just making things worse for them and that's why they're reacting," says food industry expert Sylvain Charlebois. However, he believes Kraft Heinz will garner little sympathy as Canada gets embroiled ina trade war with its neighbour.

"It's all about politics politics are trumping economics," saidCharlebois,a professor in food distribution and policy at Dalhousie University in Halifax.

Tariff tit for tat

In response to the U.S. imposing tariffs on Canadian steel and aluminum, Ottawa has levied a 10 per cent tariff on many U.S. consumer importsincluding ketchup and other products such as coffee and sauces that Kraft Heinz makes south of the border.

The company argues the tariffs it faces are unwarranted because it produces many other items in Canada, such as cheese and peanut butter, plus it employs more than 2,000 workers in thiscountry

"We don't think the tariffsimposed by Mr. Trump were particularly fair to Canada, and neither do we think that the reciprocal tariffs that were imposed are equally fair,"said Maharaj.

To add insult to injury, on Canada Day, Justin Trudeau isscheduled tovisit a production plant in Leamington, Ont., that Heinz vacated in 2014. At the time,itlaidoff 740 workers and threatenedthe market forlocal tomato growers bymoving its ketchup operations to the U.S.

U.S.-based brandFrench's benefited, sourcing Leamington-grown tomatoes and eventuallysetting up productionat aToronto plant to make homegrown ketchup. The movewon the hearts of many Canadianswhile Heinz was seen as the bad guy who skipped town.

Kraft Heinz is now trying to change that image of abandoning the region."There's some miscommunication out in the media that we leftLeamington. We never really did," saidMaharaj.

He says after Heinz sold the plant toHighburyCanco, it negotiated deals with the company toproduce many of its productsfor the Canadian market, including canned beans and tomato juice.

"We have been a great partner with them."

Declining sales

Food industry expert, Charleboissays it's a littlelate in the game for Kraft Heinz to try to put a positive spin on selling the Leamingtonplant. Hesuspects the company is speaking out now because it has reached a breaking point."It feels like an 'enough is enough' kind of campaign."

He has been tracking Kraft Heinz's PR battle in Canada, and says the company contacted him this week for advice on how to control its image.

"If you're doing that, you've got be concerned."

Heinz has good reason for concern after rival French's ketchup stole the spotlight for sourcing Leamington tomatoes, the lesser-known brandhas seen a big boost in sales.

According to market research company, Euromonitor International, from 2016 to 2017, French's Canadian ketchup salesmore than doubled to $11.1 million whileHeinz'sfell by five per cent to $126.4 million.

Canadian tariffs targeting U.S.-made goods will also affect the bottom line for Kraft Heinz.

"It's going to be millions and millions of dollars in tariffs, and so that's a difficult thing for any organization to absorb," said Maharaj.

Regardless, chances are it won't be enoughto convince the Canadian government to remove items such as ketchup from its hit list.

Kraft Heinz's messaging may also fail to resonate with Canadians now boycotting U.S.-made products as part of a brewing buy-Canadian campaign to protest U.S.-imposed tariffs.

Beth Mouratidis refuses to buy Heinz ketchup, among other U.S. goods, but the Barrie, Ont., resident says it's nothing personal against the company.

Instead, she says she's taking a standto send amessage to the U.S.to drop tariffs on Canadian products.

"If enough people jumpon the bandwagon, American businesses will suffer somewhat," she said.

"That's the only way they will put pressure ontheirgovernmentto say, 'Hey, we're hurting, you need to stop this.'"

Last week at a Senate hearing, Republican Sen. Patrick Toomey of Pennsylvania, where Kraft Heinz ispartly based, expressed concern over how the ketchup tariffs will hurt the company.He also offered a suggestion how it could fix its woes.

"The solution for them to be able to continue to sell their product in Canada would be to shut down their U.S. factory and move to Canada," he said.