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Heinz bringing ketchup production back to Canada with Quebec plant expansion

Kraft Heinz is planning to make ketchup in Canada again.

Kraft Heinz Co. is planning to make ketchup in Canada again, six years after its controversial exit from Ontario’s tomato belt pushed some shoppers to lash out and switch brands.

Av Maharaj, chief administrative officer at Kraft Heinz Canada, on Monday said the company will start producing Heinz ketchup at its facility outside Montreal, pumping out the equivalent of 13 million one-litre bottles each year starting in 2021.

“There has been an unprecedented demand for Heinz ketchup across North America,” he said, adding that the increase was part of a broader uptick in the sauces category that the company has been tracking for several years.

The Quebec government on Tuesday morning announced it will loan $2 million of the total US$17.6-million cost to add a ketchup production line at the Kraft Heinz factory in Mount Royal, Que.

The new line is scheduled to start running next summer and will create 30 new jobs, part of a US$100-million capital investment in Kraft Heinz’s Canadian operations, Maharaj said.

The Mount Royal line will produce 98 per cent of all the ketchup Heinz sells in Canada, save for a few specialty ketchup products that will continue to be made at the company’s facility in Fremont, Ohio, which currently handles ketchup production for the Canadian market.

 

The Mount Royal plant’s supply of tomatoes — roughly 50 million pounds a year — will be imported from the United States, at least in the short term. Maharaj said the company still has contract obligations with its U.S. tomato suppliers, but plans on switching to domestic producers after those contracts expire.

The hope is … all the tomatoes that we use will be produced in Canada, but we’re still at the early stages,” he said.

The provenance of Heinz’s tomatoes was a major factor in the years-long public relations crisis for its ketchup in Canada.

Heinz in 2014 shut down its century-old plant in Leamington, Ont., cut 740 jobs and switched its production to the U.S. At the time, the plant was reportedly processing half of the entire $52-million tomato crop in Ontario.

The closure inadvertently set off what this newspaper described as “ the Condiment Wars ,” with Heinz pitted against mustard giant French’s Food Co. LLC.

The Leamington plant found a life after Heinz ketchup, when Highbury Canco Corp. took it over and kept around a third of the staff. The plant continued to process some products for Heinz, though not ketchup.

But French’s started sourcing its tomato paste from Highbury Canco, boasting that its new ketchup was made from Canadian tomatoes. Boycotting Heinz became something of a sensation in Canada, particularly after one shopper pledged to switch to French’s in a widely shared 2016 Facebook post.

Maharaj said the blowback wasn’t part of Kraft Heinz’s decision to bring ketchup production back to Canada. Instead, he said, the move is based on the growing North American appetite for ketchup, as well as the company’s ability to find efficiencies in the Canadian supply chain and make room for ketchup production.

“We haven’t actually lost significant ground over the last four years,” he said. “While there were some people upset, Canadians still love Heinz ketchup. And so our market share has been relatively stable over this time.”

But Euromonitor International data show French’s, which launched its ketchup in 2015, has gradually gained ground on Heinz.

In 2015, Heinz accounted for 83.7 per cent of ketchup sales in Canada, while French’s sales weren’t even large enough to be included in Euromonitor’s report. This year, Heinz is down to 76.1 per cent and French’s has risen to second place with 6.9 per cent of the market.

French’s said its success is due to an “incredibly loyal” customer base, which likes that the ketchup is entirely made in Canada.

“We continue to see strong growth driven by consumer preferences and plan to maintain the momentum going forward,” spokesperson Laurie Harrsen said in an email. “The way people have advocated for French’s Ketchup over the past years has been amazing.”

The ketchup market has grown by nearly 20 per cent since the start of the Condiment Wars five years ago. In 2015, ketchup sales in Canada totalled $168.1 million, according to Euromonitor, and are expected to hit $201.6 million this year.

Réjean Pommainville, a farmer in Limoges, Ont., and a regional director at the Ontario Federation of Agriculture, welcomed Kraft Heinz’s announcement on Tuesday as a “good sign.”

He said he hopes it will end up being part of a larger expansion in domestic food production and processing, after runs on grocery stores during the pandemic underscored the importance of sturdy food supply chains.

“It’s great news,” Pommainville said. “We need more. But it’s a good sign.”

Heinz currently uses U.S. tomatoes that are processed into tomato paste at a plant in California, then made into ketchup at Kraft Heinz’s Ohio manufacturing facility.

“We will be assessing the feasibility of processing in Canada,” Maharaj added in an email on Tuesday. “The first step is to have ketchup manufacturing and bottling at our Mount Royal plant.”

He  also noted that Kraft Heinz currently uses 176 million pounds of tomatoes annually from the Leamington area through its contracts with Highbury Canco, just not for ketchup.

Last year, Highbury Canco renewed its agreement with Kraft Heinz to produce products such as tomato juice and pasta sauce in its Leamington facility.

Last year, Highbury Canco renewed its agreement with Kraft Heinz to produce products out of the Leamington facility, including tomato juice and pasta sauce.

At the time, Highbury said it had tripled its business since 2013, and expected to hit 650 full-time jobs, up from 250 when it initially took over the plant, the Windsor Star reported

Financial Post




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