Campbell's Food Industry Competition
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The rivalry among companies in the food processing industry is high and intense. These food processing companies are competing on price, quality, taste, health factors, product innovation, and product benefits (The Food Processing Industry 2006). Campbell's major rivals are General Millis Progresso, Heinz and Kraft Foods.
As a multinational food processing company, Campbell's faces an extremely competitive market in internationally, nationally and locally due to the similarities between each soup producer and wider selection of products provided by other food processing company. (Ellison, Sarah 2003)
On the other hand, various types of generic soup brands in the existing market which offer products in lower price have raised the competitive pressure. However, the Campbell's high quality of soup products and the ability to keep low production costs weaken the rivalry of the generic soup brands. For instance, Campbell's price their soup products only 20 to 25% higher than generic brands while maintaining a level high quality. Campbell's would have to continue developing superior healthy food to distinguish itself from Progresso and smaller soup maker companies.
3.1.2 Threat of New Entrants
The threat of entry depends on the presence of entry barriers and the presence of new entrants to a food processing industry typically bring to it new capacity and the want to gain market share. (Wheelen & Hunger J.D 2007)
Campbell's major rival- Kraft foods and General Mills, create high entry barriers in food processing industry through their high levels of advertising and promotion. Besides, the intense competition in the food processing industry makes it hard to access in the market. Smaller food processing companies often have difficulty obtaining supermarket shelf space for their products as large retailers charge for space on their shelves and give priority to the established companies who can pay for the advertising needed to generate high customer demand. According to Ghemawat & Collis (2001), the economy is a major factor as if the company wants to be a part in this food processing industry it must be able to face high costs for strong competition. Moreover, the slow market growth rate for the food processing industry causes acquisition between companies, resulted the barriers to entry are high with so many food processing companies and little to zero capacity remaining for any more companies.
3.1.3-The Threat of Substitutes Products
The rivalry from firms of other industries which offer substitute products is intense as they are producing, supplying and serving the same food products that the food processing companies are. For example, Dunkin' Donuts is in the foodservice industry and Campbell Soup Company is in the food processing industry, yet Dunkin' Donuts serves soup and Campbell Soup sells soup. Consumers can still go to Dunkin' Donuts and acquire the similar soups that Campbell sells. (Wall Street Journal 2003)
3.1.4- Bargaining power of buyers
Consumers affect the food processing industry through their ability to force down prices, bargain for higher products quality and services, and play competitors against each other. The bargaining power of buyers is high as there are huge tendency of new entrance with new and variety of products. Besides, consumers prefer choosing products which offer lower prices. For example, Campbell's soup products price is relatively 20 to 25% higher than generic brands in grocery stores, hence some consumers would choose generic brand products in the market rather than Campbell's. Besides, the profitability obtained by the company is also determined by consumers. Food processing companies would be forced to lower prices if consumers think that the prices are too expensive as consumers tend to stop buying their products or switch to supplements.
3.1.5- Bargaining power of suppliers
Suppliers can affect the food processing industry through their ability to raise prices or reduce the quality of purchased goods and services. In case quality products the suppliers face an important factor. Due to the inflation the overall price of materials has been significantly increased. Campbell has always purchased high quality ingredients produced from local farmers. In 2006, Campbell launched Campbell's Supplier Diversity Program to grow its diverse supplier base and to ensure that the supplier base better reflects the markets served. In 2007 the Campbell's goal to spend with diverse suppliers was $121 million, but the actual spend with diverse suppliers was $129 million. (Campbell's CSR 2008) So for Campbell's, there is a
3.2.0- Swot Analysis
A swot analysis allows the Campbell Soup Company to determine the extent of the strategic fit between its capabilities and the needs of its external environment. According to Henry(2008), the company can seek to match its strengths and weaknesses to the opportunities and treats it faces in current competitive food processing industry. The Campbell's products portfolio includes soups, sauces, biscuits and chocolates and has a strong research function with high capabilities in new products development.
Campbell has always applied the spirit of innovation in every aspect of its business. At Campbell's manufacturing plants in Napoleon, Ohio, and Paris, Texas, an innovative method called overland flow is used to treat wastewater. In terms of products introduction, the company has been consistently quick to come up with new products in the market. For example, the first portable soup product, Soup at Hand, the new microwaveable products such as Chunky and Select. Besides, Campbell frequent updates the products' appearance with more contemporary design and new photography. Its popular gravity fed shelving system have been installed at 24,000 retailers nationally and credited for rejuvenating the soup aisle, expanding the category and vastly improving the shopping experience. Campbell is innovative to gauge consumer satisfaction and expectation. (Campbell's Corporate Social Responsibility Report 2008)
Declining Market Share
The Campbell's market share in soup drop from 60% in 2007 to 49% as of October 2009. This is due to more and more private labels continue to enter the market by providing quality products in lower price. Some consumers have switched to try private labels and resulted private labels have gained 11%of the market share. On the other hand, Campbell has also faced stiff competition from brands such as General Mills' Progresso and Nestle. (Campbell Soup Co Form 10-Q Quartery Report 2010)
Demand for Wellness Products
In recent years, the trend towards being more health-conscious has arisen from two main consumer groups. The younger generations currently focus more on low calorie content and "on the go" meals. For the more mature age group, their diets require health-consciousness in terms of limiting their sodium intake due to increased risk of ailments. Campbell's Soup's core product categories, notably soup and bakery products, are widely perceived as healthy and are compatible with the further development of health-oriented products, such as the existing and expanding line of Select Harvest and Healthy Request soups. In conjunction with the product improvement, Campbell has announced to expand its industry-leading sodium reduction program and to reduce the sodium content in 23 of its condensed soups by up to 45 percent in fiscal 2011.(Campbell Growth Plans for U.S 2010)
Campbell's main profitable core soup category has been facing intense competition and also been losing market share to its strong competitors, particularly General Mills' Progresso and private label brands produced by companies such as Wal-Mart. Moreover, Campbell's other segments have not produced consistent profits. According to Wolpert (2002), shifting consumer habits and preferences indicate the need to constantly innovate their products and minimize costs, in order to retain loyal consumers and keep up with the fast-changing consumer environment
The company is governed by a multitude of local and international laws and regulations with regards to food safety and environmental standards. For instance, in accordance with the Federal Food, Drug and Cosmetic Act, Campbell's food products must be inspected before they can be marketed. The company faces the risk of fines, injunctions, recalls or asset seizures, and criminal sanctions if it violates these laws and regulations. ( Campbell's CSR 2008)
Campbell understands the importance of using benchmarking to evaluate performance. Hence, the company analyzed few top companies which mainly involved in food and beverage processing manufacturing company in a few aspects such as sustainability, supply chain, consumers, community and workplace. Moreover, Campbell have also highlighted the primary ways that companies are implementing their goals as well as select initiatives and key past achievements.
In terms of community, Campbell's have chosen to focus on nutritional and environmental programs by partnering with nonprofit organizations, universities and Think Tanks to conduct R&D for new products. Besides, it also partnered with environmental experts to develop innovative solutions to protect the environment. For instance, Nestle has been launching malnutrition and obesity programs targeting children and adolescents of lower-income families while General Mills has been contributing 5% of pretax profits to charitable causes. The Campbell's benchmarked the best practices by promoting nutritional and hunger elimination programs. Besides, Campbell's also promote micronutrient products to attend lower income families and develop environmental initiatives. (Campbell's Annual Report 2009)
In terms of workplace related programs, Nestle, Coca Cola, Pepsi.co, General Mills, have done excellent job. For instance, Pepsi CO has been providing job opportunities for people with disabilities while General Mills, the company has reduced lost-time injury rate by 25% over five years. Hence, Campbell benchmarked and developed workplace programs by focusing four key areas:
- Ensuring diversity of the workforce thereby bringing a broad range of talents and perspectives to the business - Helping employees achieve both personal and professional development - Ensuring the health and safety of employees both at home and at work - Ensuring that employees have a fair work environment
Campbell's strived for an injury-free workplace through a strong health and safety program supported by high employee engagement. They train their employees to conduct their activities in a safe and environmentally responsible manner. (Campbells CSR 2008)
4.0 Strategy Formulation
For Campbell's to achieve sustainable competitive advantage in food processing industry, strategy formulation which derived from the objective and mission is undertaken. Porter (1980) argues that competitive strategy is about developing a defendable position in an industry which enables a firm to deal with the five competitive forces and thus generate a superior return on investment for the film.
4.1 Business Level Strategy-Differentiation
To achieve superior value that is recognized by the consumer, Campbell's needs to provide unique and superior value to the customers in terms of its products quality and value added up services.
It is appropriate to relate differentiation strategy to the Campbell's Soup Company as the company's goal is very straight forward, which is "Together we will build the world's most extraordinary food company by nourishing people's lives everywhere, every day." Campbell has always focused on providing superior, healthy and nutrition food by expanding their icon brands in simple meals (especially soup). The Campbell's latest plans are to enhance more than 60 percent of its condensed line with product improvements, further sodium reduction, more contemporary packaging, improved shelving systems and new marketing aimed at the simple meals category. ( Campbell Growth Plan 2010)
Nowadays there are increasing numbers of consumers who are very concerned with nutritional values of foods they eat. The Campbell's Soup Company which is having superior research abilities has been taking advantage of this avenue and further develops this product line. According to Douglas R. Conant, Campbell's President and CEO, Campbell is going to fire up the important condensed soup business and step up the competitive posture of their ready-to-serve products. (Campbell's 2009 annual report) The improvements and innovations of Campbell's has made over the past several years has made Campbell outwit most of its rivals in the condensed soup category.
Low-sodium products are pivotal to Campbell's long term success as the majority of Campbell's consumer base isbaby boomers. The majority of baby boomers' diets are comprised of low sodium. A recent study shown that high cholesterol, attributed to high levels of sodium intake, is the number one diagnosed health condition for the baby boomer generation.The condensed soups have one of the highest sodium contents of all processed foods in existing market. Therefore Campbell's low-sodium products have differentiated themselves with many rivals. Besides sodium, Campbell's also has to focus on other aspects such as MSG and low calories of its soups by hoping that these healthier offerings will help gain market share among younger, more health conscious consumers. (Campbell CSR Report 2008)
Besides, Campbell understands that creating a quality product begins with quality ingredients. Campbell purchases most of the ingredients from domestic farmers in countries where they manufacture products and also obtain certain ingredients from carefully selected suppliers around the world. Any ingredient that does not meet the quality requirements will not be used in a Campbell product to ensure superior product quality.
On the other hand, providing value-added services help Campbell's to outwit its existing rivals. Campbell continually experiments with new programs to provide consumers with useful information on meal ideas, health and wellness, and other tips. For example, each day their Campbell Meal-mail program delivers nearly 500,000 recipes electronically to busy Americans who are hungry for convenient, great-tasting meal ideas that will please their families. Consumers can access the Campbell's Kitchen website at any time to download recipe ideas that have been tested and approved by Campbell's nutritionists. Consumers also have the opportunity to share their ideas and comments on recipes with one another on the Campbell's Kitchen website. ( Campbellsoupcompany.com)
It is suggested that the Campbell Soup Company to improve the flavour of its soup products to attract more demand. Besides, Campbell can try to create more contemporary design for its existing soup products instead of the familiar red and white colour design in order to stand out from various types of products in the market.
4.2 Corporate Level Strategy-Diversification
The corporate level strategy of The Campbell Soup Company deals with three key issues: i) The firm's overall orientation toward growth, stability, and retrenchment. ii) The market in which the company competes through its products and business units iii) The manner in which management coordinate activities and transfer resources and cultivates capabilities among product lines and business units
The Campbell's operates with four products divisions and has expanded its product to microwavable soups to make customers more convenient for preparing soup without container. (Campbell's annual report 2009)
Obviously, the Campbell Soup Company, which is a decentralized company, has been using a related diversification multiproduct strategy. Its strategy is to diversify its business to produce several products, and expanding its market share. Campbell used its engineering support and diversified production to support customers with convenient, good taste and quality food. To support its operating system, department such as Research & Development (R&D), product development, engineering systems, are required to produce high quality and stable operating system to avoid the unexpected shut down.
Campbell has tried to use unrelated diversification strategy under the leadership of McGovern as Campbell's CEO with the aim of rapidly expand product line to increase profits and revenue. Campbell has tried to acquire other firms to quickly gain access to new products and new markets. Instead of acquiring only food products, Campbell began to use the unrelated diversification strategy to acquire firms that it felt were positioned to capitalize on the consumer's trend and also bought firms involved in all types of business. For example, the triangle Manufacturing Company, a fitness products maker, which is clearly unrelated to the firm's core products. (Ireland, Hoskisson& Michael 2006)
A major reason for Campbell's failure to generate financial economies while using the unrelated diversification strategy is that the firm's approach to managing its core products divisions never changed. At the same time, corporate headquarters personnel didn't implement the strong financial controls necessary to efficiently manage an internal capital market. David Johnson who replaced McGovern decided that Campbell should not longer use the diversification strategy but to reduce the level of diversification by using related constrained strategy to create value through operational relatedness. Campbell's related constrained diversification strategy involves transferring core competencies which lead to competitive advantage and start with value chain analysis to identify ability to transfer skills or expertise among similar value chains and on the hand, to exploit ability to transfer activities. Campbell should enhance more than 60 percent of its condensed line and be more committed to accelerate the performance of their existing portfolio, most notably in U.S. soup, and continuing to lay the foundation for superior long-term growth. (Campbell Growth Plan 2010)
4.2.1 External Acquisitions and Partnerships
Through value-creating external development, Campbell's is able to increase its market presence throughout its product lines. For instance, Campbell's Baking and Snacking segment is positioned to grow due to the company's recent acquisition of Ecce Panis, a manufacturer of artisan breads. This acquisition allows Campbell's to enter into the thriving artisan bread market.
With the ever growing foreign population in America, it is suggested that Campbell's should consider products that have more of the ethnic background of these immigrants. The brand could quite possibly extend the depth of the line with consideration to the vast number of different tastes in the society today.
5.0- Strategy Implementation
A clear mission statement helps in providing focus to an organization and is essential for effectively establishing objective and formulating strategies. (Haberberg and Rieple 2001) In order for the Campbell to proceed into a future where competition is highly competitive, they need to define who and what they truly are, their concerns, their philosophies, and what gives them the competitive advantage over their competitors. This must be clear throughout all areas and divisions, at all levels in the company, in order for the implementation of the mission statement to be successful. The Campbell's strategy implementation includes designing the organization's structure, allocating resources, developing information and decision process, and managing human resources, including such areas as the reward system, approaches to leadership, and staffing. According to Wheelen and Hunger (2007), the strategy implementation process includes the various management activities that are necessary to put strategy in motion, institute strategic controls that monitor progress, and ultimately achieve organizational goals.
5.1- Management Issue
In food processing industry one year is relatively indiscernible from the next from a macroeconomic point of view. Campbell's corporate strategy and the company's management structure have undergone several restructuring since 1980.
On April 28, 2008, the company announced a series of initiatives to improve operational efficiency and long-term profitability, including selling certain salty snack food brands and assets in Australia, closing certain production facilities in Australia and Canada, and streamlining the company's management structure. As a result of these initiatives, in 2008, the company recorded a restructuring charge of $175 millions. The charge consisted of a net loss on the sale of certain Australian salty snack food brands and assets, employee severance and benefit costs, including the estimated impact of curtailment and other pension charges, and property, plant and equipment impairment charges. The cost of restructuring activity is shown at Appendix 2
The Campbell strive to uphold their promise of "Campbell Valuing People, People Valuing Campbell" by providing employees with the resources required to do their jobs well; competitive compensation and benefits; the opportunity to learn; and grow through their work.
At present, the Campbell's Board of Directors consists of 14 independent members and one company executive, the CEO, Doug Conant. Board operations are managed by an independent, non-executive Chairman. The Board believes that diversity in the backgrounds and perspectives of their directors contributes to sound corporate governance. Currently, three of their directors are women, one director is from India and one director is African-American. The Campbell's Board of Directors is shown at Appendix 3.
The CEO believes that workforce diversity is essential to be a mainstay within the company overall strategic objectives. Hence, Campbell's is committed to attract a diverse group of talented employees and providing all their associates with development opportunities and a culture in which they can flourish and provide their employees with career development and quality-of life enhancements that make Campbell a special place to work.
The directors receive annual fees equal to the median directors' compensation paid by peer food and consumer products companies. Approximately 50 percent of each director's fee is paid in cash and 50 percent is paid in common stock. Director stock ownership requirements have existed at Campbell since 1993. Currently, the directors beneficially own more than 44 percent of the company's common stock. (Carlin, M & Harris R 2008)
Though the Campbell's has successfully implemented workforce diversification strategy, it is recommended that the company offers stock options to their rank-and-file employees too. By offering employee stock options, workers are given the chance to buy shares in their company at a specified price. The grant or strike price, should be pegged to the value of the stock when it is offered to employees. Employees have the option of buying the stock at a set price then selling it after a period of time.
The Campbell believes that employees will feel most valued when they are fully informed, understand the company's business goals and plans and are invited to offer their feedback on a regular basis. In 2007 and 2008, Campbell was recognized by Gallup as one of the 'Best Places to Work' in America. The company believes that its work environment has contributed to their relatively stable retention rate and their improved marketplace performance. (www.euroinvestor.co.uk)
Campbell conducts annual employee survey to develop work group action plans, empower individual employees to improve the workplace and to strengthen the company's business practices.
5.2 Marketing Issues
The Campbell's understands that successful marketing implementation is affected by marketing variables.
5.2.1 Market Segment
The company's 2009 financial reports segment their business into four key categories: US Soup, Sauces and Beverages, Baking and Snacking, International Soup, Sauces and Beverages, and North American Foodservice.
With sales approximating $3.8 million, US Soup, Sauces and Beverages accounted for approximately half of the sales in FY 2009 and drove the bulk of profits for the company. Core brands like Campbell's, V8, Swanson and Prego delivered a combined 4% growth through a combination of innovation, consumer trade downs, and improved distribution channels.( Appendix 2)
5.2.2 Marketing Strategies
The Campbell's positioning is providing healthy and nourishing products within the product line.
The effectiveness of themarketingstrategiesemployed by Campbell's has made them recognized as the premium brand within their product lines. In comparison to the competition, Campbell's focuses a great deal on interacting with the public with such efforts as sweepstakes and giveaways and also education. Their public relation efforts have ranked them as one of the most society conscious brands in the business.
A strategic analysis is most applicable to strategic management at the business unit level of large multinational firm such as Campbell Soup Company. At the strategic analysis stage, internal and external environmental scanning by using Porter's 5 forces model and Swot analysis are conducted. Besides, benchmarking is used to evaluate performances. Strategy formulation which derived from the Campbell's objective and mission is undertaken to outline the business level and corporate level strategies. Strategy at business level deals with which market the company chooses to compete while strategy at the corporate level is more concerned with managing the portfolio of business. The final strategy implementation stage includes the management issues, staffing and marketing variables which can influence the profit margin of the company.
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