Founded in 1869 by Joseph Campbell, Campbell Soup Company has grown to become a global marketer and manufacturer of high quality soups, beverages, biscuits, sauces, sweets, and prepared food products, with a diversified portfolio of more than 20 businesses organized in four principal segments:
North America Soup and Away from Home; North America Sauces and Beverages; Biscuits and Confectionery; and International Soup and Sauces.
Besides its internationally renowned Campbell’s canned soups, the company markets a diverse range of brand name food products including Erasco soups in Germany, Pepperidge Farm cookies and crackers in the US, Liebig soups in France, V8 vegetable juices, Pace Mexican sauces, Prego Italian sauces, Franco-American canned pastas and gravies, Swanson broths, Homepride sauces in the United Kingdom, Arnott’s biscuits in Australia, and Godiva chocolates worldwide. The company has also recently expanded its dry soup and sauce businesses by purchasing several well-respected brands in Europe.
The present section will provide a condensed overview of the principal strategic actions and policy choices taken by the last three chief executive officers to head Campbell Soup Company.
As head of Campbell Soup Company, Gordon McGovern spearheaded various initiatives to improve the strategic position of the company’s different business units, such as:
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Developing new products to meet changing consumer demand. |
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Improving operating efficiency and reducing costs |
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Updating marketing for both established and up-and-coming brands |
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Maintaining the company’s unrelenting commitment to high-quality products |
It is important to note that McGovern’s business unit strategies have been embraced by subsequent heads of the company and continue to play a significant role in Campbell’s current strategic posture.
Under McGovern, Campbell Soup Company was divided into six principal segments. As illustrated in Figure 1, the company was considered a dominant-business firm in which one business unit, Campbell US, accounted for half of all corporate revenues, with the other five units constituting the remainder.
Figure 1 Campbell’s Portfolio Composition (1980-1989)
McGovern’s approach to managing the company’s business portfolio was to split the firm into 50 independent units, each of which was authorized to develop and market new product ideas even if they overlapped another unit’s products. To promote this strategy, McGovern earmarked $30-$40 million annually in financial resources to new product launches. In addition, McGovern pursued an aggressive growth strategy of acquiring promising new businesses every two years that could generate at least $200 million in annual sales by targeting a particular niche of the food industry. The net effect of this approach was that a staggering number of new products (922) were introduced during his tenure.
McGovern’s commitment to rapid expansion through new product development had the negative effect of slighting the company’s core business, US soup. Indeed, net earnings in the Campbell US division actually fell from $205 million in 1980 to $175 in 1989. On the positive side, earnings growth in the Pepperidge Farm, Vlasic, and International divisions was substantial. Nevertheless, McGovern’s aggressive marketing and new product development campaigns made it difficult for the company to achieve its low-cost production targets while maintaining high quality, a problem that continues to perplex the company to the present day. Table 1 summarizes some of the positive and negative aspects of Gordon’s McGovern’s tenure as head of Campbell Soup Company.
Table 1 Gordon McGovern’s Tenure in Retrospective
When David Johnson assumed the helm of Campbell Soup Company in 1990, he viewed his mandate as one of reversing the negative trends that had diminished the company’s competitive advantage during the past decade. Consequently, he crafted an ambitious turnaround strategy centered on four strategic principles:
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Build shareholder wealth through dividend growth and capital gains. |
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Fully exploit the company’s powerful, legendary brands |
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Strengthen human resources and organizational excellence |
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Preserve the company’s independence from outside takeovers |
As part of his turnaround strategy, Johnson applied strategic fit and resource fit tests to each of the company’s business units to determine which contributed to the company’s core competencies and which did not. Based on his analysis, Johnson then formulated the following strategy to build competitive advantage:
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Divest underperforming lines of business, engage in strategic acquisitions, and reorganize the company’s divisional structure |
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Eliminate weak products that did not contribute to the company’s core competencies |
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Exploit Campbell’s brand name equity and core competencies while achieving financial targets |
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Improve global marketing of core competencies and capabilities |
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Eliminate or transfer low-performing and cost-ineffective facilities to other locations |
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Maximize shareholder wealth and return on assets |
Under Johnson, Campbell Soup Company was reorganized into three principal segments, as shown in Figure 2.
Figure 2 Campbell's Divisional Structure (1990-97)
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USA – comprised of soups, beverages, meal enhancements, and frozen foods for domestic American consumption |
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Bakery and Confectionery – comprised of domestic and international sweets and baked goods products |
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International Grocery – comprised of international soup and specialty food offerings |
Johnson’s approach to managing the company’s business portfolio was to consolidate the company’s 50 independent units under the three main segments mentioned above to maximize strategic fits among different product brands and families. Johnson also took a much more modest approach to new product development, preferring instead to invest more heavily in the company’s well-known core brands. Recognizing the need to increase Campbell’s international marketing and distribution presence, Johnson engaged in strategic acquisitions to bolster the company’s international brand appeal and infrastructure. Finally, Johnson undertook several cost-cutting initiatives to improve the company’s competitive advantage, such as divesting 26 underperforming lines of business, closing or relocating cost-ineffective plants and facilities, and terminating redundant administrative and operational positions.
Like his predecessor, Dale Morrison believed that Campbell’s competitive advantage resided in maintaining a renewed commitment to the company’s legendary premium brands, particularly soups, while vigorously seeking new international markets and keeping costs at a minimum. Aware that the food industry was increasingly becoming a commodity, Morrison infused additional resources into R&D and marketing to differentiate the company’s products and capture market share from competitors. Morrison also continued his predecessor’s policy of divesting lines of business that represented poor strategic or resource fits while making strategic acquisitions to further augment the company’s core competencies. Believing that Campbell was best served by a functional organizational structure, Morrison consolidated the company into three broad divisions:
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Soups and Sauces – comprised of all domestic and international soups, sauces, beverages |
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Biscuit and Confectionery – comprised of domestic and international sweets and baked goods products |
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Away from Home – comprised of food products marketed and distributed to food service providers |
The Away from Home division was revitalized by Morrison to cater to the rapidly growing number of individuals who only had limited time to prepare food at home or preferred to dine out entirely. By facilitating access to the company’s ready-to-serve foods and beverages through vending machines, kiosks, and restaurant outlets, Morrison hoped to make it as easy as possible for consumers to enjoy Campbell products.
Dale Morrison agreed with his predecessor that Campbell Soup Company could not afford to eschew its core brand name foods in favor of new products aimed primarily at niche markets. Consequently, he opted to channel strategic and financial resources to revamping and diversifying the company’s well-known brands to reach new consumers and capture market share. Nevertheless, Morrison was astute enough to realize that Campbell was in a mature industry and needed to extend its horizons and marketing presence both domestically and internationally to generate substantial year-to-year sales growth and volume. To that end, he allocated additional resources to marketing and product design while undertaking several initiatives to maximize the company’s economies of scale and scope.
According to Douglas Conant, Campbell Soup Company’s chief executive officer since Jan. 8, 2001, the firm has laid out an ambitious 3-year transformation plan to achieve the five main strategic objectives shown in Figure 3.
Figure 3 Campbell’s Corporate Strategy (2001 to Present)
Campbell’s highest strategic priority is to reinvigorate the US soup business. Accordingly, Conant has initiated an ambitious program to:
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Improve product quality and variety |
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Commit additional marketing resources |
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Develop innovative new products |
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Improve sales in its core business |
With US soup sales accounting for more than half of the company’s consolidated earnings, it makes sense for Campbell to strengthen and energize its largest and most strategically important business.
Despite its name, Campbell Soup Company markets and distributes many products besides soup. In fact, the company has a growing portfolio of sauces, beverages, and other food products that are delivering solid earnings. In particular, V8 vegetable juice, Pace Mexican sauces, and Prego Italian sauces are three of the company’s most successful non-soup brands. Despite the negative economic impact of the September 11 tragedy, the Biscuit and Confectionery division, which includes
premium Godiva chocolates, has also experienced significant growth.
In May of 2001, Campbell acquired several European soup and sauce brands to increase its presence in countries such as England, Ireland, France, Belgium, Holland, Germany, Sweden, Finland, and Denmark. In addition, the company is continuing to expand throughout Asia, particularly Japan, China, Hong Kong, Taiwan, Singapore, Malaysia, and Korea, and has launched several soups and beverages specially designed to cater to Asian culinary
tastes. Campbell has also entered into strategic alliances with local companies to spur growth in its Asian operations.
Conant’s strategic transformation plan also aims to improve product quality by increasing R&D and instituting a comprehensive quality control program. To improve productivity, Conant has initiated several cost-cutting drives to trim unnecessary costs and close inefficient plants and facilities. Indeed, the company was able to reduce costs by more than $100 million in fiscal year 2002.
Finally, Conant’s transformation plan acknowledges that much of a company’s competitive strength resides in its people. Consequently, Campbell is undertaking efforts to improve the company’s functional capabilities, make its business units more productive, and improve the well-being and morale of its employees. In this regard, the company has implemented a workplace satisfaction and improvement program to make Campbell the most attractive work environment in the industry.
Analysis of the company’s past and current corporate strategy indicates that Campbell will be more likely to build a sustainable long-term competitive advantage if it adopts the recommendations outlined below.
Campbell Soup Company has learned from its past strategic mistakes and successes that it cannot afford to ignore its core business, domestic US soups, even as it rolls out new products and expands internationally. Indeed, soups continue to generate the bulk of the firm’s consolidated earnings. Some actions that Campbell can take to improve the performance of its core soup business include:
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Differentiate its soup offerings on the basis of taste, nutrition, convenience, and quality |
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Bolster marketing investment to attract new consumers and increase repeat purchases |
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Increase the number and availability of quick-serve distribution channels such as kiosks and vending machines in schools, airports, and business offices |
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Channel additional resources to R&D to develop new flavors that appeal both to gourmets as well as health-conscious individuals |
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Promote its soups as the ideal food for any occasion |
Because the US food industry has reached the mature stage of the product life cycle, there are fewer opportunities for Campbell to generate substantial sales revenue and volume domestically. Consequently, it is imperative that the company continue to penetrate foreign markets and provide international consumers with a wide variety of nutritious and delicious soups, foods, and beverages that cater to local tastes. For instance, the company has many untapped markets in South America that it could enter
through strategic partnerships, alliances, or joint ventures. Fortunately, many of the strategic initiatives that Campbell is undertaking in its core soup business are also relevant to the company’s international efforts.
Campbell must continue to improve quality, reduce costs, and increase productivity. Given the slim margins in the increasingly mature domestic foods industry, it behooves Campbell to become as lean and productive as possible. The company must also leverage its international presence to improve its global supply chain and seek international resource and strategic fits. By adopting a best-cost product approach through renewed cost-cutting and quality improvement initiatives, the company can also ensure that it will have sufficient resources to continue to attract and retain the best and most talented people in the industry.
Because the soup business has reached the mature stage of the product life cycle, Campbell must continue to strengthen and diversify its broader non-soup portfolio to retain present customers and attract new ones. Some steps that Campbell can take to accomplish this goal include:
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Increase R&D and marketing expenditures to increase quality and sales volume of biscuits, confectionery, beverages, and sauces |
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Initiate a public awareness campaign to inform the general public that Campbell is more than just a soup company |
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Critically examine the entire length of the value chain to eliminate redundant or inefficient activities |
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Continue benchmarking and adopting best practices from industry leaders such as Kraft and Heinz |
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Engage in acquisitions only if they add value and enhance the company’s non-soup portfolio |
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Divest product lines that do not represent good resource or strategic fits |
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Reward management on its ability to increase non-soup market share without compromising core soup business |