McDonald's Ends 40-Year Relationship With Heinz

By Sam Lewis

Will Heinz be welcoming deals from other fast-food chains?

McDonald’s restaurants will soon be seeing a big change, at least in some locations. Executives at the home of Ronald McDonald have decided to part ways with 40-year partner, Heinz ketchup.

The decision from McDonald’s was announced on Oct. 25 after Heinz — which was recently bought by Warren Buffet’s Berkshire Hathaway and 3G Capital — appointed the former head of Burger King, Bernardo Hees, as its new CEO.  The McDonald’s’ statement reads, “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time.” During Hees’ three years at Burger King, he gave the struggling fast food chain the lift it needed to recreate itself as the worthy rival of McDonald’s. Hees remains vice chairman at Burger King, which is also controlled by 3G Capital.

However, McDonald’s only uses Heinz products in two major markets — Heinz’s hometown, Pittsburgh, and Minneapolis — within the U.S. The majority of the U.S. receives the restaurant’s house brand of the tomato-based condiment called “fancy ketchup.” For McDonald’s, the move most likely won’t hurt its bottom line much, if at all. Globally, Heinz represents a small percentage of McDonald’s’ condiment and sauce business,” says Becca Hary, McDonald’s’ director or global media relations. Even if the percentage is small, a significant portion of Heinz’s business comes from emerging markets. Receiving the kibosh from McDonald’s has to have Heinz wondering, “How will losing McDonald’s affect the company internationally?”

This isn’t the first time Heinz and McDonald’s have run into problems. In 1973, a tomato shortage hit Heinz hard, and the company decided its glass bottle business would take priority over bulk accounts. Needless to say, McDonald’s’ executives weren’t happy with this and abruptly ended the exclusive agreement. The partnership eventually dwindled down to international markets and two domestic markets. Heinz’s investors have pushed for the company to sell more to McDonald’s until the Berkshire Hathaway purchase ended the relationship completely.

McDonald’s will not be making the switch from Heinz to other ketchup suppliers immediately. Instead, other suppliers will be brought in once plans, depending on how much share of the condiment supply Heinz holds in every market, are finalized.