Henry Heinz and Brand Creation in the Late Nineteenth Century
H.J. Heinz founder Henry Heinz developed sophisticated brand-building strategies without the advantages of modern economic analytic technique, data and theory. HBS Professor Nancy F. Koehn shows how in this excerpt from her Business History Review article "Henry Heinz and Brand Creation in the Late Nineteenth Century."
Today we might point to Heinz and Noble's skill in exploiting economies of scope, in developing additional goods that utilized existing inputs and organizational capabilities. 48 But neither man thought in theoretical terms about what he was doing. Like other entrepreneurs at other times, they were working to expand a fledgling business operating in a new, as yet largely undefined, market. Heinz and Noble believed that they had no time to lose. To make the most of the opportunity they saw before them, they would have to use their limited financial resources and more ample creativity as efficiently as possible. Increasing the company's product line was a potentially quick, inexpensive way to shape a nascent market for processed food.
It was also a means, Heinz reasoned, of building the brand. In the 1870s, branding was a new commercial concept. 49 Before that time, as business historian Richard Tedlow has written, "most manufacturers were unknown to the people who bought their products." 50 Heinz would not have used the words "brand creation" to describe his initiatives. This term is a product of the mid-twentieth century. But the entrepreneur understood the strategic rationale of branding and its importance to competing effectively on the demand side of the economy. In a young market, he realized, consumers had to be able to identify a particular product's source, functional attributes, and perceived quality relative to rival goods. Customers also needed to be made to appreciate the intangible aspects of a good—the associations and expectations that they attached to it.
Heinz knew from selling bottled horseradish that men and women would not buy a completely new product, especially a good they could make themselves, unless its quality was assured. Through careful packaging, unadulterated ingredients, and savvy salesmanship, Heinz and later Heinz & Noble had provided such assurance. Grocers, wholesalers, and their customers—Heinz's end users—now associated the anchor symbol with superior horseradish, manufactured outside the home. "The brand of the Anchor Pickle and Vinegar Works," a business writer noted at the time, "is known to consumers throughout the country as a guarantee of a first-class quality of goods." 51
Heinz hoped to extend this brand association to other related goods. He suspected that the potential demand for pure, savory condiments and sauces was enormous. In thinking through the possible appeal of his offerings, Heinz had no quantitative information on contemporary purchasing power. He did not know in the 1870s that real per capita incomes would grow by an annual average of more than 2 percent for the next two decades; these statistics are the products of modern economic analysis. 52
But the young entrepreneur had done business in a number of cities on the eastern seaboard and in the Midwest. He had seen firsthand how swiftly places such as Chicago, Cincinnati, and Pittsburgh, were growing. In these and other cities, he could observe the effects of accelerating industrialization: the emergence of new enterprises and occupations, the coincidence of great wealth with urban poverty, and the appearance of novel consumer goods—ready-made shirts, watches, Japanned fans, celluloid baby rattles, Swiss buttermilk soap, and much more. Heinz could also sense that the pace of urban life was quickening, spurred on by transportation and communications improvements. 53
These changes augured well for Heinz's products and brand. Standardized, branded condiments, the entrepreneur realized, would be affordable to large numbers of urban Americans. These goods would also be appealing. As cities expanded, fewer households had access to their own food supplies: the family cow or garden. Many consumers in the city, Heinz believed, might turn to mass-produced foods, such as canned soups, packaged meat, and condiments. Not only would Heinz's products save women time and energy, they would also enhance the flavors of other foods. Horseradish, pickles, and celery sauce were already popular with German and English-origin peoples. Pickles were also important in Jewish cuisine. 54
The young businessman hoped to develop a larger market for his products. In the early 1870s, he saw an important opportunity to do this. Most existing canneries and condiment manufacturers were small enterprises that sold their products locally. From Heinz's perspective, these companies had not yet begun to tap the possibilities of a broad national market. By concentrating initially on growing cities, he intended to expand his young business westward across the country.
Commercial traffic in prepared foods was not new to the late nineteenth century. Rural consumers had long bartered butter, eggs, horseradish, and other foodstuffs with storekeepers in exchange for sugar, coffee, and other items that could not be made at home. 55 Retailers used these in-kind payments as capital, reselling them to other store customers or trading them to urban wholesalers and jobbers for needed supplies. Bartering reduced storekeepers' dependence on currency. It also created informal distribution networks for locally produced goods. For instance, Philadelphia consumers could often find butter at their local grocers. These and other such products were made by farm households in Devon, Berwyn, and other surrounding areas. Although these foodstuffs bore no name or other information, urban retailers could generally vouch for their quality.
Heinz hoped to convince households and storekeepers that Anchor products were of better quality and more reliable than competing goods. He knew many people, including retailers, did not trust bottled food. Its taste was not consistent and it frequently spoiled. In 1870, he did not have a laboratory in which to analyze the content of his own or other offerings. The science of nutrition began to develop in the 1890s; the presence of vitamins in food and the relationship between diet and disease are twentieth-century discoveries. But as he and his partner expanded their business in the early 1870s, Heinz made an important strategic bet on potential consumer attitudes toward processed food. He was fairly confident that a "wide market awaited the manufacturer of food products who set purity and quality above everything else in their preparation. 56
49. The word "brand" is a very old one, dating back to the Middle Ages, when it connoted a burning piece of wood or torch. By the fifteenth century, its meaning had widened to include distinctive marks on goods and more generally, farm animals, to designate origin or ownership. Marks on products also came to indicate specific quality standards and genuineness. In the early modern period, for example, trade guilds like the Goldsmith's Company of London stamped all their goods. But prior to the late nineteenth century, the concept of a brand had primarily defensive connotations when it was applied off the farm. Identifying marks on various products were used to protect buyers from fraudulent or defective goods. Only a few eighteenth-century manufacturers, such as Josiah Wedgwood, used their names or reputations as part of a focused marketing strategy to help interest consumers in their products. On the history of trademarks, see Neil Borden, The Economic Effects of Advertising (Chicago, 1944), 21-24. On Josiah Wedgwood's branding strategy, see Nancy F. Koehn, "Josiah Wedgwood and the First Industrial Revoluation," in Creating Modern Capitalism: How Entrepreneurs, Companies, and Countries Triumphed in Three Industrial Revolutions, ed. Thomas K. McCraw (Cambridge, Mass., 1997), 37-42. See also Cummings, The American and His Food, 104-109.
50. Tedlow, New and improved, 14. One of the earliest references to "brand" in its modern business context comes from an 1889 Supreme Court case involving a trademark dispute. The plaintiff accused the defendant of violating its trademark by using the word "Tycoon." The defendant argued that the word "Tycoon" could not have been lawfully adopted and used as a trade-mark, because it had long been a word in common use as a brand name for various kinds of tea imported from Japan. The court found in favor of the defendants (Corbin v. Gould, no. 131 Supreme Court of the United States. Argued 22 Nov. 1889; decided 3 Feb. 1890). By the first decade of the twentieth century, the term "brand" began to gain academic fluency in connection with the "trust problem." See Jeremiah Jenks, The Trust Problem (New York, 1900), 29; Charles Beardsley, "The Tariff and the Trusts,"Quarterly Journal of Economics 15:3 (May 1901), 385; and Gilvert Montague, "The Conservation of Business Opportunity," Journal of Political Economy 20:6 (June 1912), 617.
53. On the pace of activity in late nineteenth-century Pittsburgh, see "Pittsburgh," Atlantic Monthly. On Chicago, see Julian Ralph, Our Great West: A Study of the Present Conditions and Future Possibilities of the New Commonwealths and Capitals of the United States (New York, 1893), 1-29. As Ralph observed in the late nineteenth century, "I have spoken of the roar and bustle and energy of Chicago. This is most noticeable in the business part of town, where the greater number of the men are crowded together. It seems as if the men would run over the horses if the drivers were not careful. Everybody is in such a hurry and going at such a pace that if a stranger asks his way, he is apt to have to trot along with his neighbor to gain the information, for the average Chicagoan cannot stop to talk," 2.
127. Madison Square, a company newsletter noted, "is a beautiful park covering several acres of ground in the center of the great metropolis, and the sign can be seen for quite a distance up Fifth Avenue and Broadway." "Heinz Electric Sign, NewYork," Pickles 5:3 (May 901), 1-2 Heinz Family Office.
Excerpted from the article "Henry Heinz and Brand Creation in the Late Nineteenth Century: Making Markets for Processed Food" in the Business History Review, Autumn 1999.
Nancy F. Koehn an authority on business history, is a Professor of Business Administration at Harvard Business School.
Photographs: Courtesy of the Heinz Family Office, Pittsburgh, Pa.