The consumer goods giant behind the Kraft and Philadelphia cheese brands and Heinz ketchup has shortlisted four agencies for its global media agency review, which is progressing despite coronavirus distancing restrictions.
Publicis Groupe’s Starcom, the main incumbent, is facing off against Dentsu Aegis Network’s Carat, Omnicom Media Group’s PHD and WPP’s MediaCom in the battle for the estimated $600m (£484m) account.
A Kraft Heinz spokesman declined to comment, beyond referring to a previous statement when it launched the pitch in March.
"Our contract with Starcom Worldwide is expiring this year, so Kraft Heinz is exploring opportunities for its global media planning and buying operations to ensure we are positioned for success in 2021 and beyond," the company said.
Neither MediaSense, which is advising Kraft Heinz, nor the agencies would comment.
North America is the biggest prize as the market generates about 75% of Kraft Heinz’s $25bn a year in global revenues. EMEA and the rest of the world represent a little over 10% each.
Kraft Heinz is one of the biggest global account reviews to have continued during the coronavirus pandemic.
Some brands have paused or postponed plans for pitches but "new business activity has remained healthy so far this year despite the Covid-19 crisis", according to a research note from Goldman Sachs on the global agency sector this week.
Pitch activity "slowed" in May "but was still up 40% year on year", the investment bank said.\
Investing more in media
Industry observers are closely watching Kraft Heinz’s marketing strategy after the group took a $15bn writedown last year on the value of its brands.
The company admitted it had cut costs too deeply and vowed to increase its investment in media.
Like other consumer packaged goods companies, Kraft Heinz has performed relatively strongly during the coronavirus crisis and reported a "spike in demand" as customers have stayed at home and bought more household food items.
Miguel Patricio, who has been chief executive of Kraft Heinz since last year, said on an earnings call at the end of April that the company still planned to increase its media spend by about 30% this year.
Patricio, the former chief marketing officer of AB InBev, said Kraft Heinz will find the extra money for media from "within", by reallocating spend from other parts of the marketing budget.
"It’s our intention" to keep up the extra investment because Kraft Heinz has already seen an "increase in penetration of our brands with our consumers", he said.
One agency source involved in the media review said it was waiting to see whether Kraft Heinz would still squeeze costs in the final stage of the pitch.
Kraft Heinz spent $1.1bn on marketing last year, of which $534m was advertising expense and the remainder was spent largely on "shopper marketing, sponsorships, and agency advertisement conception, design, and public relations fees", according to its annual report.
Warren Buffett’s Berkshire Hathaway and private equity giant 3G are the main owners of Kraft Heinz.