Campbell tries to catch up with consumers
CAMDEN, N.J. When John Dorrance began working for the future Campbell Soup Co. in this thriving manufacturing town 100-plus years ago, he quickly figured out how to distinguish the canned preserve company from its rivals.
NAME: Campbell Soup Co. HEADQUARTERS: Camden, N.J. FOUNDED: 1869, by icebox maker Abram Anderson and fruit merchant Joseph Campbell PRODUCTS: Campbell's soups, Swanson broths, Franco-American canned pasta, Pace Mexican salsas, Prego pasta sauces, V8 juices, Pepperidge Farm baked goods, Godiva chocolates EMPLOYEES: 22,000 REVENUE: $6.3 billion STRATEGY: Increase marketing and innovation to expand ready-to-serve soups while stabilizing slowing sales of condensed soup QUOTE: From CEO Douglas Conant: "There's not much out there that's easier to prepare than soup. People are migrating to lighter meals, not full sit-down meals, and soup can be one of those meals very easily."
Campbell du jour
NAME: Campbell Soup Co.
HEADQUARTERS: Camden, N.J.
FOUNDED: 1869, by icebox maker Abram Anderson and fruit merchant Joseph Campbell
PRODUCTS: Campbell's soups, Swanson broths, Franco-American canned pasta, Pace Mexican salsas, Prego pasta sauces, V8 juices, Pepperidge Farm baked goods, Godiva chocolates
REVENUE: $6.3 billion
STRATEGY: Increase marketing and innovation to expand ready-to-serve soups while stabilizing slowing sales of condensed soup
QUOTE: From CEO Douglas Conant: "There's not much out there that's easier to prepare than soup. People are migrating to lighter meals, not full sit-down meals, and soup can be one of those meals very easily."
In 1897, Dorrance invented the formula and marketed it as a quick yet tasty alternative to homemade. Campbell's soups quickly became best sellers.
But now the world's largest soupmaker finds itself a step behind. Earnings have slipped as consumers on the run went elsewhere for seemingly easier-to-prepare items. Competitors such as Progresso and private-label brands have reduced its market dominance.
"Their biggest challenge is to make their product more contemporary, to allow them to grow in a different world," said John McMillin, analyst with Prudential Securities Inc.
"They are the Maxwell House of soup in a world that wants the convenience and taste of Starbucks."
Campbell recently announced a multimillion-dollar investment for new product launches, advertising and technology partly aimed at making soup more convenient to eat.
"We have been somewhat victims of our own success," acknowledged Campbell chief executive Douglas Conant, who took the helm in January. "We didn't get to the ready-to-serve segment as aggressively as we could, and we regret that."
The company plans to phase in easy-open lids on its condensed soup line. It's also putting "Pop N' Pour" lids on its Swanson broths and test-marketing a microwavable soup in a sippable, single-serving container.
It's also investing more in its noncondensed Chunky Soup brand, a $436 million business growing at a 20 percent rate this year.
And the soupmaker wants to devote more money to its snack brands Pepperidge Farm and Godiva and its Prego and Pace ready-made sauces, which Conant believes feed well into America's workaholic ways.
The target audience is people such as New York attorney Albert Kim, who was a fan of Campbell's chicken noodle soup as a kid but rarely touches the stuff now.
"When you're busy and looking for a meal, it's not worth the effort to open a can, put in a pan, pour in water, and wait for it to simmer," Kim, 28, said as he rushed off to the office recently, a banana in hand. His preferred fare: soups and sandwiches from a local deli.
"It's instant gratification," he said.
Campbell still controls 72 percent of the nation's $3.1 billion soup industry, but unit sales have steadily declined last year, 2.6 percent. During the same period, the uncondensed Progresso brand, owned by the Pillsbury Co., saw an 18 percent jump in sales, according to Information Resources Inc.
The company's stock slid from a high of $60 per share in 1998 to a low of $23.75 last September. It is currently trading around $26.
For the first nine months of fiscal 2001, earnings were down 9 percent to $597 million, or $1.42 per share, on revenue of nearly $5.2 billion. Campbell releases fourth-quarter earnings Sept. 6.
Analysts blame the stumbles on the company's 1990s tactic of boosting profits by raising prices without addressing a burgeoning new market for people on the go: pop-top containers, yogurt in a tube, peanut butter slices.
"Some have said the primary criteria for determining success at a company is whether the product can be eaten with one hand," said William Leach, analyst for Banc of America Securities. "I think it's fair to say Campbell has been pretty old-fashioned."
At company headquarters in Camden, a city struggling to revitalize itself, Conant rejected any notion that Campbell's soup may be part of a bygone era.
"Condensed soup is not that inconvenient," said Conant, a former CEO of Nabisco Foods Co. credited with reviving the Planters Nuts brand and launching the fat-free SnackWells line.
Campbell still aims to market its soup as a childhood classic. Last year it resurrected its classic "M'm! M'm! Good!" jingle to boost its "icon" soups: chicken noodle, tomato and cream of mushroom.
Analysts say they are encouraged by Conant's new management team and initiatives.
"He's doing all the right things," said Mitchell Pinheiro, who watches the company for Janney Montgomery Scott Inc. in Philadelphia. "Clearly, growth will be in the ready-to-serve market, but by no means is condensed going away."
Jennifer Zayas, 18, of Cramer Hill, N.J., agreed as she examined some Campbell's soup selections on sale at a store in Camden recently. Her favorite: chicken noodle.
"I kind of grew up on the stuff," she said, "so I'm not going to give up on it now."