Why Is McDonald’s Parting Ways With Heinz Ketchup?

McDonald's

It appears as though the 40-year relationship between McDonald’s Corp. (NYSE:MCD) and ketchup-maker H.J. Heinz Co. is set to end as the world’s largest fast-food chain announced Friday that it would find a new ketchup-supplier amid recent management changes at Heinz. This follows the condiment company’s acquisition by Warren Buffett’s Berkshire Hathaway (NYSE:BRK) and an investment fund affiliated with 3G Capital.

McDonald’s said in statement, “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time.” The changes McDonald’s eluded to revolve around Heinz’s decision to place Bernardo Hees — the former chief executive of Burger King Worldwide Inc. (NYSE:BKW) — at the head of the company.

Heinz was acquired by Berkshire Hathaway and an investment fund affiliate of 3G Capital for $28 billion in June, naming Hees as CEO shortly after. ”We have spoken to Heinz and plan to work together to ensure a smooth and orderly transition,” McDonald’s said. Heinz declined to comment on the matter, with company spokesman Michael Mullen explaining, ”As a matter of policy, Heinz does not comment on relationships with customers.”

As Reuters points out, the change isn’t likely to have much of an impact domestically, where McDonalds only serves Heinz ketchup in Pittsburg and Minneapolis — most McDonald’s restaurants are labeled with the generic “fancy ketchup” label. However, the impact of the change could be far more dramatic overseas. Though the change is likely to negatively impact Heinz and Berkshire Hathaway’s bottom line, it opens up a huge opportunity for Heinz rival Hunt’s, which is owned by ConAgra Foods Inc. (NYSE:CAG), and Del Monte.

Burger King, which returned to the NYSE stock exchange in 2012 less than two years after being taken private by 3G Capital Management LLC, has been a Heinz customer for decades, and spokesman Miguel Piedra told Reuters that the fast-food chain uses its products in about 80 percent of its markets around the world.

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