ENTREPRENEURSHIP

ASSIGNMENT # 2
Operating in the late 19th and early 20th centuries,
businessman H.J. Heinz used his reputation for quality to
make his food manufacturing company a success.

Muhammad Zeeshan Khan

Student ID # 58704

COURSE FACILITATOR ; Sir Jalal Ahmed Khan

HENRY HEINZ
Making Markets for Processed Foods
 HENRY HEINZ
(Making Markets for Processed Foods)

PERSONALITY:

Henry Heinz was eldest son of Anna and John Henry Heinz. They were German immigrants came to
Pennsylvania to earn some money as there was booming economy in Pennsylvania. Since Heinz was
eldest among eight surviving children therefore he had also highest responsibility amongst all siblings.

Henry Heinz was born in 1844 in Pittsburgh which was a fast growing frontier town of that time. From
childhood after getting back from school Henry helped his father in his Brickyard. After that he also
helped her mother in farming vegetables for their own family and selling surplus to nearby grocers. So
he had a harder life to handle multi tasks at a time (Schooling, Helping father at brick yard, helping
mother in gardening and selling of additional veggies to grocers).

He was very persuasive and also very careful about use of money, no unnecessary expenditure
therefore at the age of only 12 years he had his own plot, a horse, cart and growing list of customers.

Henry finished school at age of 14 years and spent more time with his father as his assistant and
continued to expand produce business by hiring some of his siblings to help. This shows his managerial
skills.

At the age of 17 years he had more than three and half acres under cultivation. His revenues for the
year 1861 were totaled $2,400.

At the age of 21 years Henry Heinz had saved enough money from his food business to buy a half of his
father’s bricks business.

He continued working with both businesses at a time which shows his broad vision that many business
men have “Never put all of eggs in one basket”

He also had an innovative pursuance which leads him to continuous research on new seeds in spring
season by different watering techniques, monitoring and evaluating results to improve his produce and
horseradish business.

At the age of 25 years he formed his own company through partnership and chose a partner from a
wealthy family to fulfill financial needs of company.

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Also at the age of 25 years Henry Heinz married Sarah Sloan Young. They had five children together
before her death in 1894 when Heinz was 50 years. At the age of 74 years, Heinz died of pneumonia on
May 14, 1919, at home in Pittsburgh.

He left behind a business with more than 6,500 employees, 25 factories and products that were
distributed in countries around the world.

OPPORTUNITY:

Pittsburgh was a fast growing frontier town, due to industrialization, and urbanization there was high
demand of bricks. Henry efficiently handled the situation by hiring his siblings increasing production of
bricks.

Vegetables were growing almost free of cost for their family and surplus quantity gives extra amount
which was attracted by Henry and he focused to grow more vegetables for extended customers.

There was no national market for processed food. Horseradish was a popular condiment having high
demand in Pittsburgh because it was used as a home remedy for Dyspepsia, indigestion, respiratory
ailment and flavoring.

Horseradish root grew well in the rich soil of western Pennsylvania many 19th century women like
Henry’s mother were making their own horseradish but due to busy schedule many women did not give
precedence to this task. Therefore local trade in the condiments developed more than a score of small
manufacturers and whole seller sold prepared horseradish in green or brown glass bottle to hide its
lower quality ingredients therefore its use was rapidly diminishing.

Henry bottled unadulterated horseradish in clear glass bottle using his mother’s recipe.

Due to remarkable quality difference he began marketing his product to grocers and hotel owners he
also sampled his product to potential customers to check its quality and taste. After getting reviews
from market he continuously improved his products and incorporated customer suggestions to
products and marketing techniques.

Edwin Drake’s discovery of oil in 1859 leads explosive growth and there were five refineries in
Pittsburgh which increased to more than 50 by 1870. In 1860 Henry Heinz extended his sales route to

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include the new oil towns of western Pennsylvania; he called hotel owners, boarding houses managers,
general merchants, and grocers returning to Sharpsburg with a suitcase full of orders.

In 1869 Henry sold half interest of Brickworks and formed partnership with L. Clarence Nobel a member
of wealthy Sharpsburg family to produce bottled horseradish. They choose anchor as logo and marked
it on all labels, trade cards, invoices and advertisements with it.

Henry’s family recently moved from their house in Sharpsburg where both partners opened their first
factory. They started with only three numbers of workers two women and one boy. Heinz and Nobel’s
products were known for their quality.

Fast growing urban market, new train connected different cities opening new markets for Heinz and
Noble’s products.

RISK:

Since horseradish was a perishable item, Heinz and Nobel identified risk of spoilage. They mitigate the
risk using a technique pioneered in France i.e. use of air tight glass bottles and then immersed in boiling
salt water for as long as 30 minutes.

Expansion of business leads them to different litigations.

Introduced celery sauce, prepared brown mustard, sweet and sour pickles there was a challenge for the
anchor brand to maintain its quality and taste.

Market competition as there were also few larger condiments makers that that imposed high quality
standards on their products and had developed good reputation.

BUSINESS MODEL:

Nobel supervised all bottling and manufacturing operations in Sharpsburg as well as dealing with
suppliers.

Henry Heinz commuted his energies to sales by continuously exploring new markets for expansion of
business.

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Expansion of Product line introduced celery sauce, prepared brown mustard, sweet and sour pickles.

Diversification they become their own supplier for vinegar not they produced it for themselves but also
selling it to a growing number of customers.

THE DOWN FALL:

At the age of 31 in 1875, there was national depression from two years. Henry Heinz Company
continued to enjoy significant success. Sales and productive capacity was also growing rapidly in just
four years manufacturing capacity was increased from 60 barrels of pickles to 15,000 barrels.

During the same year growing conditions were ideal and crops yields were huge. Heinz and partners
were came in problem how to handle this situation because material was perishable and need to be
processed as early as possible otherwise they have to face high material loss and at that time company
was avoiding any potential losses. Therefore they hired more staff in order to process the huge harvest.

Despite growing sales Henry Heinz Company was unable to maintain cash flows which lead the business
shortage of operating capital. Overall national financial condition made it hard for the company to meet
its obligations. The business failed in 1875, forcing Heinz to declare bankruptcy.

Henry Heinz lost all of his assets even personal assets and fall in heavy financial crises he could not buy
groceries therefore he sought credit at three local merchants. All turned him down.

RISING UP:

After much financial crises from having a world to have none. He didn’t give up and seek assistance
from his family. His brother John and cousin Frederick Heinz each advanced him $ 1,600 for finance a
new food processing business. Henry raised an additional $ 1,400 from assets that his wife Sallie owned.

He started with new strategies by using $3,000 for buy back some of the equipment and stock he had
liquidated in bankruptcy.

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He got his old business building from owner offering him first rent after several months of operation, he
also contacted former employees by offering them half salary and told them that half he will be using
getting other lost equipment back.

Frederick Heinz oversaw the firms operations on rented land, while John took charge of manufacturing
and Henry Heinz assumed responsibility of Marketing, Finance and overall direction of the business.

At home in Pittsburgh, he worked day and night often helped by Sallie and their children even though
early revenues were not encouraging.

During next five years the company’s revenues expanded rapidly growing at compound annual rate of
45%

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