Campbell Soup Company

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Campbell Soup Company

founded: 1869

Contact Information:

headquarters: campbell pl. camden, nj 08103-1799 phone: (609)342-4800 fax: (609)342-3878 url: http://www.campbellsoups.com

OVERVIEW

Campbell is the world's largest producer and marketer of soups, vegetable juices, and sauces. Its soups account for about 80 percent of all canned soup sold in the United States. Other products include Godiva Chocolates, Great Starts breakfasts, Pepperidge Farm cookies and crackers, and Swanson frozen foods.

COMPANY FINANCES

In fiscal 1997 (ending August 3, 1997), Campbell Soup Company achieved record net sales of $7.96 billion, up 4 percent from 1996 sales of $7.68 billion. In company reports, growth was attributed to a 3 percent increase from new products, 2 percent from higher selling prices, and 2 percent from acquisitions, while it was offset by a 3 percent decline attributed to divestitures. Overall, net sales from ongoing businesses increased 7 percent in 1997 and 1996. By division, soups and sauces accounted for $4.1 billion in sales; biscuits and confectionary products accounted for $1.5 billion; foodservice revenues were $459 million; and other miscellaneous products and services accounted for remaining revenues. The company's Pepperidge Farm and Godiva brands were solid contributors to company performance, both experiencing double-digit growth in 1997.

Net earnings for 1997 were $713 million, down 11 percent from 1996 earnings of $802 million. The company's earnings per share declined 6 percent, from $1.61 in 1996 to $1.51 in 1997. The company attributed the drop to "special charges" the company recorded in the first quarter of 1997—before the charge, net earnings increased 9 percent and earnings per share increased 15 percent.

The company's stock price as of mid-1998 was around $54 per share. Its 52-week high was $62.88, and its 52-week low was $46 per share.

ANALYSTS' OPINIONS

In early 1997, several market analysts were enthusiastic about Campbell Soup Company's financial performance and its management. A February 1997 report by Deutsche Morgan Grenfell noted that Chairman David Johnson's goal was to make Campbell Soup a world-class consumer goods company. "The company has proven that it can successfully rejuvenate and leverage its core brand strengths, innovate with new product introductions, drive volumes through new marketing campaigns, and discover significant cost-saving opportunities by divesting underperforming assets," the report said. Deutsche Morgan Grenfell recommended that its clients buy Campbell stock, saying that "Campbell's strategy seems like a textbook case for good management."

Another report produced in February 1997 by Credit Suisse First Boston was equally enthusiastic about Campbell and its management. "Campbell is a company on a roll," the report said. "The focus on returns on invested capital and improving the leading businesses has never been higher, and the company is enjoying the benefits of significant (higher) pricing in its flagship soup business."

Fortune also reported the health of the "comfort-food" industry as a whole in early 1998. As stated by Jeanne Lee, "After all, what could be more reassuring now than the stable cash flow, predictable double-digit growth, and minimal emerging-market exposure offered by the edibles you grew up with, like Campbell Soup and Sara Lee? We mean it. Packaged-food stocks make an exciting opportunity today precisely because they aren't too exciting." Investment analysts expected the industry to continue showing annual growth rates between 12 and 14 percent for the next several years.

HISTORY

Campbell Soup Company was founded in Camden, New Jersey, in 1869 as a partnership between Abram Anderson (an icebox manufacturer) and Joseph Campbell (a fruit merchant) to produce canned tomatoes and vegetables, jellies, soups, condiments, and minced meats. In 1876, Anderson left the partnership and Arthur Dorrance and Joseph Campbell formed a new partnership, beginning a long-term association between the Dorrance family and the company.

In 1891, the name of the company became The Joseph Campbell Preserve Company. Campbell retired in 1894 and was succeeded by Dorrance. In 1897, Dorrance's 24-year-old nephew, Dr. John T. Dorrance, joined the company. Trained as a chemist, he developed the process for producing condensed soup. The elimination of water resulted in lower packaging, shipping, and storage costs for the company. As soup sales accelerated, the Campbell Soup Company grew rapidly. In 1904, the company developed its "Campbell Kids" campaign as a marketing device to sell soup and, in the same year, 16 million cans of Campbell soup were sold. Campbell bought Franco-American in 1915. In 1922, the company changed its name to the Campbell Soup Company.

Campbell depended on its core soup products for growth in the first half of the twentieth century. In 1948, however, the company expanded through its acquisitions of V8 Vegetable Juice and C.A. Swanson & Sons in 1955. In 1966, Campbell's bought Godiva Chocolatier, Inc., and in 1978, Vlasic pickles. Mrs. Paul's Seafood, Prego, and LeMenu were all added during the early 1980s.

In 1993, the company took a $300-million restructuring charge to reduce staffing and close and consolidate various operations in order to renew the company's solid financial status. Under the leadership of Robert W. Johnson, Campbell sold several of its food lines in 1993 and 1994, and in 1995 it sold the Mrs. Paul's frozen seafood product line to VDK Holdings, maker of Van de Kamp's frozen seafood. In 1995, Campbell purchased Pace Foods in San Antonio, the leading U.S. producer of salsa, for $1.1 billion. The next year, the company went through another restructuring that reduced operating costs and cut employment by 6 percent.

STRATEGY

In the 1990s, Campbell Soup Company's single-minded goal was to dramatically increase total return to its shareholders. Other goals included increasing profits and boosting the company's stock price. As of 1996, the company was succeeding through its use of cost-cutting methods and improved marketing efforts. Overall marketing support for its products increased—advertising spending was expected to be up 30 percent through the late 1990s.

Like other food companies, Campbell Soup's basic strategy is to develop new products while investing in its established "core" brands. Campbell's soups and sauces accounted for $4.1 billion in sales in 1997, most of which came from three varieties—tomato, chicken noodle, and cream of mushroom. The company planned to make an enhancement to one of these top sellers every year during the late 1990s. For example, in 1996 the company added 33 percent more chicken to its chicken noodle soup. In addition to the strong sales of the top-selling soups, Campbell's line of Fat-Free Cream soups saw 48 percent growth from 1996 to 1997.

In 1996, Campbell's Pepperidge Farm unit "re-launched" its Milano cookies and Goldfish crackers with new marketing strategies. Sales of both products increased dramatically. The company's Franco American unit increased marketing support for its core Spagettios brand in 1996, leading to a 15 percent sales increase. In 1998, Campbell's revamped its successful "M'm! M'm! Good!" campaign (first launched in the 1930s) to air during the Winter Olympics. The company's largest campaign in its history, "M'm! M'm! Good For The Body, Good For The Soul" was launched in February 1998 and focused on the "nurturing and nourishing" qualities of Campbell's soup. All the company's soup lines—such as Red and White, Home Cookin', and Healthy Request—were featured in the campaign.

FAST FACTS: About Campbell Soup Company

Ownership: Campbell Soup Company is a publicly owned company traded on the New York Stock Exchange and other stock exchanges around the world.

Ticker symbol: CPB

Officers: Dale F. Morrison, Pres. & CEO, 48; David W. Johnson, Chmn., 65; Basil L. Anderson, Exec. VP & CFO, 52; Robert F. Bernstock, Exec. VP & Pres., Specialty Foods

Employees: 37,041

Principal Subsidiary Companies: Campbell Soup Company has three major divisions: U.S.A. (soups, sauces, condiments, frozen dinners, and juices); Bakery and Confectionery (Pepperidge Farm and Godiva chocolate); and International Grocery.

Chief Competitors: A manufacturer and distributor of food products such as soups, sauces, and convenience foods, Campbell's competitors include: ConAgra; General Mills; Diageo PLC; H.J. Heinz Co.; Hershey Foods; Hormel; Kellogg Company; Nestle; PepsiCo Inc.; The Quaker Oats Co.; Philip Morris Cos. Inc.; RJR Nabisco; Sara Lee Bakery Co.; and TLC Beatrice.

Another part of Campbell's strategy in the 1990s was to sell businesses outside its "core areas." For example, Campbell's sold its interests in tomato processing and poultry processing, and in 1996 the company considered selling its can-making operations. By selling these assets, reducing its employment by 6 percent, and establishing a global purchasing operation, Campbell planned to reduce operating costs by a total of $200 million in 1996 and 1997. In September 1997, the company announced a plan to spin off seven non-core businesses, including Swanson frozen foods, Vlasic pickles, Swift Armour meats, and other international specialty foods businesses. The spin-off would provide significant cost reductions for Campbell and allow the company to focus on businesses with the highest growth potential—soup and sauces, biscuits and confectionery, and foodservice—all of which grew 10 percent in sales and 15 percent in earnings during 1997. The Vlasic spin-off was completed March 30, 1998, creating a new $1.4-billion company called Vlasic Foods International.

In the late 1990s, Campbell Soup was also trying to increase sales by eliminating hundreds of lower-profit products (including many soups) and directing investment dollars to top-selling, higher-profit products, such as Pepperidge Farm Goldfish crackers, V8 Juice, Prego spaghetti sauce, and chicken noodle soup. The company also expanded into non-soup food areas by acquiring Fresh Start Bakeries, makers of buns and muffins for McDonald's, and by developing a potpie filling and crust for KFC.

INFLUENCES

In the late 1980s, Campbell Soup Company was said to be struggling due to falling profits, weak marketing, and a bitter feud within the Dorrance family, which owned the majority of the company's stock. (As of mid-1998, the family still owned about 44 percent of the Campbell Soup Company.) In January 1990, a company outsider, Robert W. Johnson, was named president. He began a turnaround that made the company a solid financial performer and an innovative marketer. From 1990 to 1995, Campbell's profits multiplied at an average annual rate of nearly 18 percent, to $698 million in the fiscal year ending July 31, 1995. According to a report in Fortune magazine, Johnson's success was due to his unusual combination of talents, including strong control of company finances; effective communication with and motivation for employees; and an "obsession" with beating Campbell's competitors in profits.

CURRENT TRENDS

During the mid- to late 1990s, Campbell Soup Company was involved in the development of "functional foods," also called "nutraceuticals." This product category, which was first developed in Europe, involved creating food/pharmaceutical hybrids. Functional foods promise benefits such as lowering blood pressure and boosting the immune system. Before manufacturers of functional foods could make health claims for their products in the United States, however, they needed the permission of the U.S. Food and Drug Administration.

In the mid-1990s, Campbell Soup Company invested five years and more than $20 million to develop a line of functional foods called Intelligent Quisine. Aiming the products at older consumers with health problems treatable through better nutrition, Campbell tested 40 different "healthy" meals, from french toast and sausage to grilled chicken dijon. In clinical trials, people eating three of these meals per day had reduced blood pressure and cholesterol, according to Campbell. In January 1997, Campbell was test marketing Intelligent Quisine in Ohio.

CHRONOLOGY: Key Dates for Campbell Soup Company

1869:: Company founded as a partnership between Abram Anderson and Joseph Campbell to produce canned goods
1876:: Andersen leaves the partnership and Campbell forms new partnership with Arthur Dorrance
1891:: The company officially becomes the Joseph Campbell Preserve Company
1894:: Campbell retires and Dorrance takes over
1899:: Dr. John T. Dorrance develops a method for canning condensed soup
1904:: Introduces the Campbell's Kids
1915:: Purchases Franco-American
1922:: Company name becomes Campbell Soup Company
1948:: Campbell begins expanding beyond soups by acquiring V8 Vegetable Juice
1955:: Acquires C.A. Swanson & Sons
1966:: Acquires Godiva Chocolatier, Inc.
1971:: Sales top $1 billion for the first time
1978:: Purchases Vlassic Foods
1982:: Acquires Mrs. Paul's Kitchens
1993:: Takes a $300 million restructuring charge to reduce staffing and consolidate operations
1995:: Sells Mrs. Paul's Kitchens and purchases Pace Foods

PRODUCTS

The company was still actively introducing new products during the late 1990s. One market analyst credited them with introducing truly new products, not just recycled versions of old ideas with minor changes. Some of these new products included premium soup in glass jars, which had estimated sales of $15 million in 1997; frozen restaurant-style soups; the Healthy Request Creative line of 98 percent fat-free soups, which had estimated fiscal 1997 sales of $75 million; a brand of premium canned pasta; and new fat-free Swanson broth.

In 1996, Campbell and its Swanson Frozen Foods unit launched "Swanson Lunch and More Casseroles." The Lunch and More product line included seven frozen, single-serve casseroles based on famous Campbell Soup recipes, such as Chicken Noodle Casserole and Tuna Noodle Casserole, and six two-compartment meals. In 1997, new products such as V8 Splash and Franco-American Superiore all-family pastas contributed to the company's sales growth. Campbell's goal for the year 2000 was to derive 25 percent of its sales from products introduced in the last five years.

GLOBAL PRESENCE

Campbell and market observers agreed that the international grocery business held a great deal of promise for the company in the late 1990s. In 1997, international volume and market share gains were achieved in all countries, with exceptional growth realized in Australia, Canada, and Japan. The company's goal was to increase international revenues to 50 percent of sales. Campbell's products were sold in 120 countries around the world.

As of 1996, Campbell held only 10 percent of the non-U.S. market for soup, which amounted to $5 billion in retail sales. However, when it acquired Erasco, Germany's number one soup company in 1996, Campbell increased its international soup sales by almost 40 percent. Campbell planned to continue its international expansion through acquisitions. Also in 1996, Campbell Soup Company made several other significant changes in its international business. These included setting up joint ventures in Malaysia with Cheong Chan and with Helios Foods (through its Arnotts unit) in Indonesia. Campbell also acquired Homepride Sauces, the leading cooking sauce in the United Kingdom.

Campbell was focusing heavily on Asia in the late 1990s, where disposable income was increasing and soup was a favored food. Targeted markets included Japan, Malaysia, Indonesia, and Hong Kong. Campbell's international strategy in soups was to customize its brands to local tastes. For example, Campbell's cream of pumpkin was Australia's top-selling canned soup in 1996, while Hong Kong's favorite was watercress and duck gizzard soup.

EMPLOYMENT

Campbell's firmly believes that in order for the company to succeed, diversity is an integral part of its corporate culture. Diversity in ideas, background, experience, and personality all contributed to "bringing forth the best from each and every team member, and the best from Campbell's itself." The company dedicated itself to developing employees through the support of training and encouragement, as well as by challenging employees with responsibility, variety, and growth. Campbell's Professional Development Programs were offered to recent college graduates, as were internships, and co-op programs were made available for undergraduates. Specific professional development programs include: Marketing Leadership Program, Financial Leadership Program, MBA, Information Technology Leadership Program, Corporate Audit Leadership Program, and Sales Leadership Program.

WORLDWIDE APPEAL

"M'm! M'm! Good!" is that famous jingle known to Campbell's soup fans far and wide. The Campbell Soup Company, created by Joseph Campbell and Abraham Anderson in 1869, has grown to become the number one wet soup company in the world. Campbell's soups, more popular than cold cereals, coffee, or bath tissue, are found in 93 percent of American households. Three soups, including tomato, introduced in 1897, along with cream of mushroom and chicken noodle, which debuted in 1934, are some of the more popular ones enjoyed by Americans. Combined, there are roughly 2.5 billion bowls of these three soups consumed in the United States each year.

But America isn't the only place people are slurping up great quantities of soup. Known worldwide, Campbell's has introduced soups such as watercress, duck gizzard, Chinese borsch, pork, fig, and date soups to Hong Kong and China. In Mexico, people can purchase cream of chili poblano soup, and in Australia, pumpkin soup is a best-seller.

The company offers a comprehensive benefits package to employees, including health coverage (medical, dental, and vision), various insurance options (such as long-term disability and life insurance), and flexible spending on benefits as defined by the needs of the individual employee.

SOURCES OF INFORMATION

Bibliography

"campbell launches new soup campaign: m'm! m'm! good for the body, good for the soul." campbell soup company press release, 9 february 1998.

"campbell soup co. debuts first ever co-branded product partnering swanson frozen foods with american's favorite soup." frozen food digest, december 1995.

campbell soup company 1996 annual report. camden, nj: campbell soup company, 1997.

campbell soup company 1997 annual report. camden, nj: campbell soup company, 1998.

donlon, j.p. "top spoon stirs it up." chief executive, november 1996.

grant, linda. "stirring it up at campbell." fortune, 13 may 1996.

lee, jeanne. "comfort stocks." fortune investor, 2 march 1998.

mccarthy, michael j. "food companies hunt for a 'next big thing' but few can find one." the wall street journal, 6 may 1997.

ono, yumiko. "campbell outlines broad reorganization; plans include cutting jobs and brands, buying firm and $160 million charge." the wall street journal, 6 september 1996.

"van de kamp's buys mrs. paul's." the wall street journal, 8 may 1996.