"Ketchup will still be around in 50 years' time," says Dan Propper, one of the veterans of Israel's food industry and chairperson of Osem Investments Ltd. (controlled by Nestl? SA (SWX:NESN)) (TASE: OSEM), talking to "Globes" in the wake of the slump in the share price of US food giant Kraft Heinz Company.
Nevertheless, he adds, "The great lesson for the entire food industry must be that you cannot rest on your laurels and things don't last forever. One of Heinz's most serious problems is the dramatic decline in the value of their brands. It has happened because of failure to update the brands and to adapt them to the times."
As the person who for many years has headed Osem-Nestlé, which dominates the ketchup market in Israel, Propper is convinced that Heinz did not adapt as necessary, and as would be expected in an international food company.
He says that the two trends that Heinz missed were innovation and the healthy eating trend. "This has to be a signal for the entire food industry," he says. "At Osem, we are working with more than 100 food engineers on raising the nutritional value of our products, such as by reducing the fat and salt content and adding protein."
Propper believes that one of the main factors to blame for the plight of Kraft Heinz is pressure from shareholders to raise the company's market cap at the expense of investment for the future, which he describes as 'crossing a red line.'"
"3G Capital set the tone for cutting expenditure and raising profitability, leading to a significant cutback in long-term investment, which meant crossing a line that it's very dangerous to cross. We must not reach a situation in which we are prepared to cut development and marketing in order to save costs today; these are things that put the brand and the company at risk. Our responsibility is to look ahead, at what the public will want in the future, and to aim at that now in our development efforts."
Even assuming that ketchup will still be with us, "It will change more and more to become healthier, as will other products," Propper says. "In Israel, Osem ketchup dominates the market despite the fact that Heinz is sold here (Osem has about 70% of the market, S.M.). We are making the necessary adaptations: sharper, more spiced, with 50% less sugar."
On consumers current preference for fresh food, Propper says, "I know of plenty of processed foods with nutritional values no lower than those of food from the field, which is likely to have pesticide residues."
Published by Globes, Israel business news - en.globes.co.il - on February 25, 2019
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