The world’s largest fast-food chain, McDonald’s, has announced that it is ending its 40 year relationship with Heinz, in what will be one of the biggest corporate divorces in recent times!
The breakup follows the appointment of Bernardo Hees (the former CEO of McDonald’s main competitor, Burger King) to the role of CEO at Heinz. The condiments giant was recently acquired for £17.3 bn by Warren Buffett’s Berkshire Hathaway and Brazilian investment fund 3G Capital, the latter of which already owns Burger King. Industry experts have long speculated that 3G would cut the supply of Heinz ketchup to McDonald’s in order to boost sales at Burger King, so the turnaround will come as a surprise to many. What exactly led to this epic breakup remains a mystery, but it would not have been a decision taken lightly. For many, the taste of Heinz ketchup is second to none and the decision to stop serving it at McDonalds will inevitably have some impact on its business.
The news serves as a reminder to companies of the dangers of becoming over reliant on third party suppliers. Where this is the case, you should ensure that your underlying supply contract affords you sufficient protection in the event that your key supplier is acquired by your competitor.