Identify Factors That Influence the Price Elasticity of Demand of Heinz Tomato Ketchup
The price elasticity of demand is a measure of how responsive the quantity demanded of a good or service is to changes in its price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price. There are several factors that influence the price elasticity of demand, such as availability of substitutes, utility (necessity versus luxury), income, preference/taste etc. In this assignment, we will use the case study of Heinz tomato ketchup to identify the factors that influence its price elasticity of demand and how the product is affected.
Factors That Influence the Price Elasticity of Demand: A case study of Heinz Tomato Ketchup
Key Learning Outcomes
- Critically evaluate economic data as a guide to policy-making within an international, national, and organizational context.
- Apply a number of different economic concepts (supply and demand, price elasticity, cost analysis) with respect to managerial decision-making in organizations.
- Analyse the impact of government policy on markets and its effect on the managerial decisions
Heinz Company is an American food processing company with its headquarters at Pittsburgh, Pennsylvania. It was founded in 1869 by Henry Heinz as has been a leading food products supplier globally. Its principal products such as tomato ketchup ranked first in the US stock market shares with over 50%.
In 2015, Heinz merged with Kraft to form the world's most abundant food and beverage company. It operates in the food processing industry and offers various food products. It is known worldwide to produce ketchup among other food items such as mustard, steak sauce, and Worcestershire sauce. Additionally, it makes baked beans, delimex taquitos, tamales, lea, and Perrins, processed cheese Jell-O, Kool-Aid, Ore-Ida, Capri Sun and Cracker Barrel. Its Maxwell house branch deals in coffee, Folgers, Keurig, Starbucks, Dunkin' Donuts and other popular coffee brands for market share. The Oscar Meyer deals with meat and cold-cut products including hot dogs, bacon, and lunch meats. The company has also expanded to Lunchables.
Just as any other company, Kraft Heinz operates in a typical business environment with both internal and external environmental factors affecting its operations. It operates under the competitive market forces of demand, supply, and their elasticities to create a market share for its products.
"The major product is Heinz Tomato Ketchup, a product that controls over 80% and 60% of the market in Europe and the United States, respectively" (Baule and Blonski, 2018). The product was first introduced in the market as catsup in 1876 and has been modified over time to be among the best-selling brands of ketchup.
We have chosen Heinz tomato ketchup as it is one of the primary products of the company. Also, it is one of the significant revenues generating products for the company, with all consumers using it as a reference while inferring to Heinz company. The popularity of the product grew due to its unique ingredients such as tomato concentrate from ripe red tomatoes, vinegar, corn syrup, and natural flavouring spices. Heinz tomato ketchup is also a significant product for the fifth-largest food company in the world, making it a key area of interest for management economists in the analysis of market forces and its stability.
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