Commentary: What Campbell's New Chief Needs to Do Now

On July 27, Campbell Soup Co. (CPB ) CEO Douglas R. Conant plans to address an audience of analysts and unveil his plan for kick-starting growth. What he almost certainly won't say is that his predecessor's plan--a combination of new products, packaging, and a massive marketing campaign--didn't work. But the results are irrefutable: While sales increased modestly, Campbell's lost market share and profits eroded. And the pressure is about to rise. Once General Mills Inc. completes its purchase of Pillsbury Co. (DEO ), it will rev up its vaunted marketing machine on behalf of Campbell's chief rival, Progresso.

Conant, in the job since January, is trying to avoid falling into the same trap as ex-CEO Dale F. Morrison, who resigned after failing to make good on his promise of 8% to 10% sales growth. Conant has impressed analysts with his candor, acknowledging the need for a "transformation" at Campbell and vowing to "do whatever it takes" to win in the U.S. soup market.

But past attempts to do that have amounted to just so much tinkering. Conant needs to begin the long, hard task of fundamentally remaking the company. Slow-growing for years, Campbell has resisted change and missed opportunities. Its slavish devotion to condensed soup left faster-growing products lacking for research-and-development funds and marketing support. Without a major makeover, the core product appears destined for irrelevance. Says Prudential Securities analyst John M. McMillin: "You really have to ask yourself: `Is this the next buggy whip?"'

Not if Conant learns the lessons of past mistakes, which should be studied by any manager hoping to avoid the pitfalls of stagnation:

-- Love your product, but not blindly. With its focus on its cash cow, condensed soup, Campbell for years failed to appreciate the growing demand for healthier and more convenient foods. Sure, Campbell's ready-to-serve soups now feature premium ingredients and low-fat, low-sodium varieties. But those account for less than 40% of Campbell's total U.S. soup sales. And it has yet to work the same innovations into its condensed-soup business, which has fallen 21% since 1998, according to Merrill Lynch & Co.

With Campbell's economies of scale, there's nothing stopping it from upgrading ingredients. Pop-top lids, introduced on 70 varieties last year, were a good first step on the packaging front, but innovations could go further. The company should be doing everything possible to get soup into fast-food outlets, college dining halls, and other eateries. And for a company that has watched sales plummet every summer, two words: cold soup.

-- Beggar not your innovations. Campbell also desperately needs to start believing in the nonsoup winners right under its nose. Among them: V8 juices, Godiva chocolates, and Pace salsa, which have all had double-digit compound annual growth rates from 1995 to 2000. But at key junctures, some of those lines have been starved for attention. Fruit-and-veggie combo V8 Splash, launched in 1997 after years of development, came out of the gate strong but lost ground to rivals last year as marketing support slipped.

Campbell's history is one of opportunities found, then squandered. Three years ago, it considered using less heat to improve its soups' taste and texture, but backed off because retooling cost $100 million. Progresso beat it to the punch. Says a former exec: "It's definitely a risk-averse, control-oriented culture. It's all about two things: financial control and how much they can squeeze out of a tomato."

-- Change is inevitable--embrace it. Exacerbating these problems is a culture overcome by inertia. Another ex-manager says, only half-jokingly, that she carried a mirror to "make sure everyone was breathing." Partly, it's the curse of size--any product change entails a massive capital investment that makes even modest improvements seem like giant risks. Thus, few good ideas are carried through to execution.

Campbell needs to reward risk-taking, remove organizational roadblocks, and summon up the courage to move bold initiatives from proposal to execution quickly and regularly. If the past has proved anything, it's that a few new products and packaging changes aren't enough. On July 27, we'll see if Conant is the mild-mannered executive he appears to be--or the revolutionary he needs to be.

By Louis Lavelle

With Gerry Khermouch in New York

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