Supermarket own-brand ketchup is voted just as good as Heinz - and it’s over half the price too

A Which? blind taste test of 72 consumers found Asda Classic Tomato Ketchup and Heinz tied for top taste at 77%, with Asda’s 550g bottle priced at £1.07 versus Heinz’s 460g at £2.98 (the supermarket alternative works out ~72% cheaper); Asda’s winner was noted for balanced tang and lower salt/sugar. Waitrose Essential (75%) and Aldi Bramwells (73%) followed while M&S scored 61%. The findings highlight private-label quality parity that could sustain pricing pressure on branded ketchup makers and influence grocery category pricing and margin dynamics.

Analysis

Market structure: This Which? result is a data point confirming accelerating private-label substitution in grocery staples where price elasticity is high — Asda’s bottle is ~72% cheaper than Heinz on a per‑gram basis, implying branded ketchup faces persistent volume and pricing pressure. Supermarkets (Tesco TSCO.L, Sainsbury’s SBRY.L) capture higher gross margin on own‑brand goods and can reprice across categories; expect a 1–5% share shift from brands to private label in the next 12–24 months if retailers scale promotion and shelf‑placement.

Risk assessment: Tail risks include a sharp commodity shock (tomato concentrate/sugar) or logistic disruption that raises input costs >20% over 3 months, which would favor vertically integrated branded manufacturers and hurt thin‑margin private labels. Near term (days–weeks) event risk is low; medium term (months) monitor quarterly retail volumes and promotional intensity; long term (years) brand equity erosion could permanently lower branded P/E multiples by 5–15% vs. consensus.

Trade implications: Favor long exposure to listed grocers with meaningful own‑label penetration (TSCO.L, SBRY.L) for 6–12 months while shorting branded packaged food vulnerability (Kraft Heinz KHC, selective Unilever ULVR.L exposure) via options or small shorts. Cross‑asset: limited sovereign/bond impact, but consumer staples credit spreads could widen 10–30bp if branded earnings miss; commodity producers of tomato paste could see volatility — hedge if concentrated exposure >3%.

Contrarian angles: The market may underprice branded defensive levers — targeted promotions, co‑pack deals, and SKU premiumization can stem share loss quickly; historical parallels (post‑2008 private‑label gains) show partial reversion once inflation moderates. Watch for a reversion trigger: branded firms cutting list prices by >10% or launching cheaper SKUs within 90 days, which would compress the thesis for shorting brands.

Key Decisions for Investors

• Establish a 2–3% portfolio long position in Tesco (TSCO.L) and a 1–2% long in Sainsbury’s (SBRY.L) for a 6–12 month horizon to capture margin upside from own‑label scaling; set tactical stop losses at 10% and target 15–25% upside if private‑label mix increases 2–4pp.
• Initiate a 0.5–1% portfolio risk position short Kraft Heinz (KHC) via buying 3–6 month puts ~20–30% OTM (size so max premium = 0.5–1% portfolio) to protect vs. margin erosion and share loss; unwind if KHC announces net price cuts >5% or commodity costs rise >20% in 90 days.
• Execute a pair trade: long SBRY.L (2% exposure) and short KHC (1% exposure) for 6–12 months to capture retail own‑label tailwinds; rebalance if SBRY’s own‑label penetration moves <1pp in two consecutive quarters or if SBRY issues earnings guidance that misses consensus by >3%.
• Hedge portfolio tails by monitoring tomato concentrate/sugar input indices and UK grocery CPI monthly releases: if input price index rises >20% over 3 months, rotate 50% of supermarket longs to branded food producers (KHC, ULVR.L) within 30 days to capitalize on branded scale advantages.