Heinz and Beech-Nut Case

Topics: Baby food, Barriers to entry, Pricing Pages: 3 (817 words) Published: February 25, 2012
Case Study of Proposed Merger between Heinz and Beech-Nut

Gerber, Heinz and Beech-Nut are the three major companies for baby food industry in the United States. Gerber is the market leader with unparalleled brand recognition. Heinz and Beech-Nut come in second and third. In order to compete with Gerber, Beech Nut and Heinz entered into a merger agreement where Heinz will acquire 100% of Beech-Nut’s voting securities for $185 million On 28 Feb. Both companies were expected to eliminate the competitions between the merging parties at the wholesale level and then increase the ability to compete with Gerber through merging.

US Jarred Baby Food Market Analysis
Before the merger happens, the U.S. baby food market is Price Leadership oligopoly. There are three strong companies: Gerber is the absolute leader in the baby food market, which takes up 65% of market share and occupies 90% of the supermarket distribution. It has unparalleled brand and good customer loyalty. Heinz and Beech-nut come in second and third, with a 17.4% and 15.4% market share respectively. Heinz is the largest producer of baby food worldwide, but lacks of recognition. Thus treats itself as a “Values Brand”. Conversely, Beech-Nut is a “Premium Brand”, which has the same level of price as Gerber’s. Firm| Market Share %| Supermarket Distribution| Sales Distribution| Facts/Issues| Gerber| 65| 90%| All over US| Unparalleled brand recognition and customer loyalty| Heinz| 17.4| 40%| New England, Deep South, Southeast| Lacks Gerber’s brand recognition.Largest producer of baby food worldwide“value brand”| Beech-Nut| 15.4| 45%| NY, NJ, California,Florida| Price Parity with Gerber “premium brand”|

Competitions between Heinz and Beech-Nut before Merging
Heinz and Beech-Nut were competing at the whole-sale level to gain the position as the second brand in the jarred baby food industry. Heinz lacks Gerber's brand recognition and thus markets itself as a "value...
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