To Save the Soup
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The Campbell Soup Company (NYSE: CPB), along with its subsidiaries, manufactures and markets branded food products worldwide. The company operates in the following segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and North America Food Service. It primarily offers products like ready-to-serve soups, stocks, pasta and sauces, different kinds of juices, and beverages in the United States. It also offers cookies, crackers, and bakery products in Australia, Asia Pacific, Canada, China, and many other parts of the world.
Losing the grip
For more than 140 years the company has been offering a staple diet to Americans; however, in the last few years its core soup business has faded to 46% market share from 51% in 2007. It is struggling to maintain its share among a group of 80 million Americans (which constitute 25% of the U.S. population) between the ages of 18 and 34, popularly known as millennials. According to business experts, Campbell will have to increase sales among the millennials or it will be rendered extinct within the next ten years.
The company’s CEO, Denise Morrison, learned that the millenials, who are globally connected and have a diversified culture, are regularly eating Mexican, Indian and Asian cuisines. Therefore, in August, Campbell launched the Go Soups, which was a six-flavor line in plastic pouches, conveying freshness and meeting millenials’ diverse tastes. Go Soups were priced at $2.99 per pouch in comparison to $1.09 per can of soup.
The company is now initiating numerous marketing strategies and is targeting America’s more mobile young population. Denise Morrison, who has been with Campbell for just over a year, is determined to shake things up and has planned the company’s rescue from irrelevance. By August 2013, the company will have introduced 50 new products, which will include 32 new soups- the core product for the company. She also has plans to expand business operations to Indonesia, Malaysia, and Australia, and would also ramp up exports to Europe, Asia, and the Middle East.
A recent achievement was the buyout of $1.55 billion California juice-and-carrot seller Bolthouse Farm, which has been the largest acquisition for the company.
The Leaders or the Rivals?
Campbell is lagging behind its competitors in terms of EPS, which is at $0.66 per share in the current quarter, while the well known H.J.Heinz Company (NYSE: HNZ), which is among the world’s biggest manufacturer of food products like ketchup, sauces, soups and snacks, has recently showed that it is meeting expectations of investors with the average quarterly EPS coming in at $0.90. Also, Heinz has moved its dividend dates forward and will pay its quarterly dividends in December 2012 instead of January 2013.
General Mills (NYSE: GIS), manufacturer and marketer of ready-to-eat food and cereals, frozen vegetables and pizza, dry dinners, refrigerated yogurt, soups, desserts and snacks, has estimated positive gains with respect to sales and EPS in the current quarter. The company has opened a new $35 million manufacturing unit in Malaysia (a joint venture between Nestle and General Mills) and aims to generate 160 jobs at full capacity within the next few years. Meanwhile, Campbell is planning to shut down its Sacramento factory, which will not only leave the employees jobless, but will further reduce the market share for the company.
The Final Words
Denise Morrison is well aware that her company is in trouble. She began implementing her new vision for the company right when she joined it and initiated work to stabilize the business, expand internationally, and strengthen the company’s market position. With the acquisition of Bolthouse and its revised strategies, the company can now reach where it wants to. Denise Morrison, at an R&D meeting in February, was heard saying that the challenge is not to build a new house but to build a strong foundation for the future. She hopes there is a future, and so do we.
anubhutiagarwal has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend H.J. Heinz Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!