Campbell: Now It's M M GlobalJoseph Weber
When acquisition-minded Campbell Soup Chief Executive David W. Johnson set his sights on Australia's Arnotts Ltd. last year, he figured the two companies were a natural fit. The $485 million-a-year cookie maker was a household name throughout Australia, and the Australian-born Johnson knew its wares well. But he believed the company could still benefit from Campbell's marketing savvy. Better yet, Campbell already owned one-third of Arnotts' stock--a purchase dating back to 1985. Arnotts was even run by a Campbell veteran.
Unfortunately for Campbell, Arnotts' management didn't quite share Johnson's enthusiasm for the intended nuptials. What followed was a painful, costly four-month struggle. Along the way, Johnson and Campbell were vilified in the local press, which painted the company as an ugly American. It wasn't until February that Johnson prevailed, boosting Campbell's stake in Arnotts to 58%, at a cost of more than $200 million.
The cherubic Campbell's Kids as bare-knuckled brawlers? The company whose ubiquitous red-and-white cans are an enduring symbol of Americana--a multinational marauder? It may seem like miscasting, but the Camden (N.J.) company sees its future a lot differently these days. Strapped for growth in stagnant domestic markets, Campbell is bent on foreign conquest. And Johnson says he is determined to turn the insular American corporation into a global force in food.
TOUGH SELL. Johnson's agenda is clearly ambitious. By 2000, he wants no less than half of Campbell's revenues, which approached $6.3 billion in fiscal 1992, to come from outside the U.S. That'll take some doing, since foreign sales now account for less than 26% of revenues, virtually the same as four years ago. Still, Johnson is mounting an aggressive push. Already, Campbell soup is being shipped to Asia. In Western Europe, its Pepperidge Farm cookies, renamed Biscuits Maison to appeal to Continental palates, are fast gaining a following. "I tell our people, 'Carpe Futurum! Seize the Future!'" the ebullient marketer says. "The world awaits us, and we have taken the initiative."
Actually, it's far from clear that the world is waiting for Campbell. Prepared food may be the toughest product to sell overseas. It isn't as universal or as easily marketed as, say, soap, cigarettes, or soda, which have allowed such domestic players as Procter & Gamble, Philip Morris, and Coca-Cola to expand abroad. "Food does not necessarily travel as well. There's more regional taste involved," says analyst John McMillin of Prudential Securities Inc.
Nor can Campbell really be said to have taken the initiative. If anything, Campbell is a Johnny-come-lately to the global scene. Big competitors, notably CPC International Inc. and H.J. Heinz Co., have already built healthy market shares abroad. CPC has established brands, such as Knorr powdered soups, in most of the foreign markets Campbell is aiming for: Last year, 60% of CPC's $6.6 billion in sales originated outside North America. In contrast, Campbell never had a truly global plan. One of the company's biggest overseas ventures, the $400 million acquisition of Britain's Freshbake Foods Group PLC in 1988, was disappointing. Freshbake products lacked brand appeal and didn't excite British consumers.
Johnson doesn't have much choice but to try to take Campbell global. Campbell's sales have hit a ceiling in the U.S. Canned soup, the company's mainstay, has been losing ground to fresh and frozen foods, which are more in tune with today's health-conscious marketplace. At the same time, Campbell's other products, such as Swanson frozen foods and Pepperidge Farm cookies, face tough competition. Operating earnings, which rose 15%, to $184 million, in the latest quarter, ended in January, have held up because of cost cutting. But such results can't be sustained without some boost to sales, which rose a scant 2%, to $1.8 billion. Indeed, McMillin expects earnings growth to slow to 8% next year.
Johnson began devising his foreign strategy almost as soon as he took over the top job at Campbell in 1990. Earnings at the food giant had shriveled in fiscal 1989, to $13 million, after stiff restructuring charges, and some members of the founding Dorrance family, which owns 58% of Campbell's stock, wanted to sell. Johnson, now 60, stepped in and slashed operating costs by closing or selling 20 plants. But he saw global growth as Campbell's salvation.
Unlike Campbell's previous CEO, R. Gordon McGovern, Johnson has plenty of overseas experience. His career has included stints as a marketing executive in South Africa for Colgate-Palmolive Co. Later, he ran Warner-Lambert Co.'s Parke-Davis Group unit in Hong Kong.
FIGHTING MOM. Even with such experience, Johnson faces a tough task. In many regions, consumers know nothing about Campbell or its products--a legacy of the company's insular history. And Campbell brands aren't easily transplanted. Italians, unsurprisingly, shudder at canned pasta, so Franco-American SpaghettiOs won't fly there. The average Pole consumes five bowls of soup a week--three times the American average. But 98% of Polish soups are homemade, and Mom is one tough competitor.
And then there's competition of a more corporate sort. In Argentina, for example, CPC's Knorr soup controls 80% of the market. That has left Campbell struggling with Nestl for a distant second place. In Britain, Heinz is the dominant canned-soup maker.
Campbell has managed to overcome competitive and cultural obstacles in some countries. To shake the powdered-soup domination in Argentina, Campbell is pitching its Sopa de Campbell as "the Real Soup," stressing its list of fresh ingredients on the label. So far, the approach has been a winner. Barely a year after launching nine varieties of red-and-white labeled soup in Buenos Aires, the company now claims to own 10% of the country's $50 million soup market, and it's angling for 15% this year. In Poland, Campbell advertises to working Polish mothers looking for convenience. But it acknowledges that learning what works best will take time. Says Lee Andrews, Campbell's new product manager in Warsaw: "We can't shove a can in their faces and replace Mom."
UNWANTED INNOCENCE. But maybe it can cook more like her. In some markets, Campbell is creating new products that appeal to distinctly regional tastes. To help devise new recipes, the company is taste-testing with consumers around the globe. The results: fiery cream of chile poblano soup is blazing a trail in Mexico. In Hong Kong, watercress and duck-gizzard soup is a big hit.
Johnson says Campbell may even step up its pace of acquisitions to fill in its emerging global network. Arnotts was Campbell's first big buy since 1988. And Campbell's chief executive says that he is even willing to go into debt for more such deals.
That would be something of a shock to Campbell's debt-averse culture--but the culture is another thing Johnson has to overhaul to make his international push work. Because of the company's past disappointments, managers tended to dodge foreign assignments, so few Campbell executives have extensive overseas experience.
Campbell will have to shed its innocence abroad as fast as it can: Its global rivals are expanding quickly. Heinz, for example, recently acquired New Zealand's Wattie's Ltd., which makes canned fruits and vegetables. For its part, CPC just bought a Polish soupmaker called Amino. "The people who have the smaller organizations to begin with will just find it that much tougher going, I guess," shrugs CPC's C. Roger Budden, corporate director for consumer-business development.
Even with the strikes against him, no one is counting Johnson out. Campbell has turned around dramatically since he came on board in 1990. The company's profits have risen by a compound annual rate of 19.8%. Members of the Dorrance family today talk glowingly of Campbell's stock. Now, if he can get international consumers to feel the same way about Campbell's stockpot, Johnson's recipe for global growth could really start cooking.