Kraft Heinz to bring ketchup production back to Canada, but will still use U.S. tomatoes

Employees eat lunch beside a large novelty ketchup bottle in the cafeteria at the Kraft Heinz factory in Montreal on Nov. 17, 2020.

Andrej Ivanov/The Globe and Mail

Six years after pulling its ketchup production out of Leamington, Ont., a decision that would later ignite the “ketchup wars,” Heinz is coming back to Canada.

On Tuesday, the Kraft Heinz Co. Kraft Heinz Company announced that most of its ketchup sold in Canada will be produced at its facility in Montreal starting next summer. The company will be investing US$17.6-million – partly funded by a $2-million forgivable loan under the Quebec government’s ESSOR program – to build two new production lines.

For the first couple of years, however, Heinz ketchup will continue to be made with U.S.-grown tomatoes. That will matter to some Canadian shoppers, who in recent years have begun to view the red stuff they slather on burgers and fries as an unlikely symbol of national pride.

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“Because of growing agreements we already have in place – because of how farmers sell their crops – we won’t be able to do that in the short term. But our goal is to have Canadian tomatoes used in the production in the future,” said Av Maharaj, the chief administrative officer for Kraft Heinz Canada. The tomato paste will initially continue to be made in the U.S., with the ketchup manufactured and bottled in Quebec. “It would probably take a couple of years before we could solidify that.”

The public-relations headache began for Heinz in 2014, when it moved its Canadian ketchup production to the U.S. It withdrew from its Leamington plant, which employed 740 people and supported many tomato farmers in the region. Some of those jobs were saved when Highbury Canco Corp. took over the plant and signed a deal with Heinz to keep processing tomatoes for other products.

In late 2015, seeking to promote its own ketchup against a dominant competitor, French’s began promoting its use of Canadian-grown tomatoes – it purchased tomato paste from the Highbury Canco plant. Even though French’s ketchup was still produced in the U.S. at the time (it opened a Toronto plant in 2017), and neither Heinz nor French’s were owned by Canadian companies, some consumers began to see their ketchup choice as a political decision. The story made the social-media rounds in 2016 as people boasted about switching allegiances.

“To this day, we are its largest customer,” Mr. Maharaj said of the Leamington plant, where Kraft Heinz makes products such as tomato sauce and tomato juice. (Heinz merged with Kraft in 2015.) The company re-signed a five-year contract with the plant in 2019. “I’d like to say we’re still part of Leamington. … We use more tomatoes in our products than the entire tomato ketchup retail market.”

Despite the furor, Kraft Heinz is still by far the No. 1 ketchup brand in Canada, holding a 76-per-cent share of the market this year, according to research firm Euromonitor International Inc. But that’s down from 83.7 per cent in 2015, with new brands such as French’s and Primo launching in Canada, according to Euromonitor. French’s, owned by Baltimore-based McCormick & Co. Ltd., is Heinz’s single largest competitor, with 6.9 per cent of the market, with grocery stores’ private-label brands holding 13.4 per cent.

“The legacy of the ketchup wars is the fact that it has completely changed the competitive landscape. There are a lot more maple leaves on bottles in that aisle of the grocery store compared to a few years ago,” said Sylvain Charlebois, the senior director of Dalhousie University’s Agri-Food Analytics Lab.

He pointed out that under Canadian rules, a food label can make a “made in Canada” claim if it is manufactured here – though it has to include a qualifying statement if it contains ingredients imported from other countries.

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“If others do their small part to help Canadian farmers, that’s fantastic,” Mr. Maharaj said when asked about the effort by French’s to promote its use of Canadian tomatoes. “I know we’re doing our part as well.”

The category is growing; ketchup sales in Canada have risen roughly 14 per cent this year, according to Nielsen data for the period ended Oct. 24. That’s part of a trend Kraft Heinz began to observe even before the pandemic affected grocery-sales patterns. According to Euromonitor, retail sales of packaged ketchup will climb to more than $200-million this year, up from $168.7-million in 2015.

The heightened demand prompted Kraft Heinz to look for supply-chain efficiencies, Mr. Maharaj said, adding that the provincial government’s aid made this the right time to bring production back to Canada. The company is planning to invest a total of US$100-million to modernize its Montreal facility over the next few years. It already produces roughly $2-billion worth of food per year, or 70 per cent of the products Kraft Heinz sells in Canada, he said.

The company estimates the facility will produce more than 100 million pounds of ketchup in its first two years. Production is scheduled to begin in late summer and will add 30 jobs at the plant.

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