Is Heinz a bitter taste for McDonald’s?

They’ve been together since the Second World War but going forward Heinz tomato ketchup will no longer be on the McDonald’s menu.

tomato sauceSo, what has caused McDonald’s to drop Heinz Ketchup?

It’s down to the intense competition that exists between McDonald’s and Burger King.

Earlier this year, Heinz was taken over by Warren Buffett’s Berkshire Hathaway and the Brazilian investment fund 3G in a $28 billion deal. The new owners of Heinz put Bernardo Hees, former chief executive of Burger King in charge of Heinz.

Earlier this week McDonald’s announced that “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time”.

It’s interesting though as if you look deeper into the relationships you’ll find that as well as having a stake in Heinz, investment fund 3G also controls Burger King.

It arguably makes sense therefore for McDonald’s to drop Heinz as otherwise there would be the risk that by having Heinz as a supplier, McDonald’s would be increasing the profits of Heinz who in turn could remit those profits to 3G who could then use the funds to strengthen Burger King to win market share from McDonalds.

So there you go and the next time you’re munching on your Big Mac and realise it’s no longer Heinz Ketchup with it you’ll know why.

The ExP Group