Lighting A Fire Under Campbell
There are high fives all around at the Tweeter Center, a concert venue in Camden, N.J., where 1,400 employees from Campbell Soup Co. (CPB ) are celebrating at the company's annual awards event in late October. Some of the accomplishments read more like those of a fast-growing technology startup than a staid food company. Earnings were up more than 100% in Pepperidge Farm Goldfish last year, thanks to new ads and innovations like the 100-calorie packs. And new products and stores helped propel Godiva Japan (CPB ) to double-digit sales growth.
Amid the revelry, Chief Executive Douglas R. Conant beams like a proud but geeky dad as he sings and dances to the Goldfish jingle. He has plenty of reasons to smile. In just under six years since he came on board, Conant, 55, has transformed Campbell from a beleaguered old brand rumored to be on the auction block to one of the food industry's best performers. The stock is up 100% since March, 2003, more than double other comparable food companies. In the fiscal year ending July, 2006, net income rose 8%, to $766 million, on sales of $7.3 billion. In the latest quarter, although earnings fell on a tax settlement, they still beat expectations. The turnaround has been catalyzed by cost-cutting, smart innovations, and a concerted effort to reinvigorate the workforce. "We're hitting our stride a little bit more [than our peers]," says Conant, in his usual understated style.
Conant's strategy isn't complicated: He just wants to keep up the good work, which will mean coaxing more great ideas from his workers. That is a tall order. Among big branded food companies, Campbell has been something of an outlier in its ability to jump-start sales. Elsewhere, revenue growth has been sluggish. Large, established companies have run into trouble demanding higher prices from consumers, who have more high-quality generic and private-label choices than ever. Plus, three of Campbell's largest competitors, including industry heavyweight Kraft Foods Inc. (KFT ), have appointed new CEOs in the past year, all of whom are itching to put their mark on their businesses.
Conant hasn't shaken up a complacent 137-year-old company by being in-your-face. He happily gives others credit and deflects praise. He's not brash like his mentor Jim Kilts, the former Gillette (PG ) chief who was Conant's boss at Nabisco. In fact, many co-workers have told Conant he wasn't tough enough to hack it in the business world. In his time at Campbell, he has sent out more than 16,000 handwritten thank-you notes to staffers, from the chief investment officer to the receptionist at headquarters--notes often found hanging in people's offices or above their desks. "[In business] we're trained to find things that are wrong, but I try to celebrate what's right," says Conant.
A self-described introvert, the father of three grown children is more likely to retreat to the corner of a crowded ballroom than engage a group of strangers. He says he needs regular "alone time," which he gets on his daily commute, four hours back and forth to the northern New Jersey empty nest he shares with his wife, Leigh. Once a year, he retreats to places like the Utah mountains for personal reflection.
Unlike many of his peers, Conant knows he doesn't have all the answers, admitting mistakes with a simple but meaningful "I can do better." Says Harvey Golub, Campbell's chairman and the former head of American Express Co. (AXP ): "He's an extraordinary leader who behaves with the utmost integrity. People follow him and believe in him. He's an Eagle Scout."
A devout reader of leadership tomes, Conant has scores of books in his office on shelves and piled up in corners. He keeps extra copies on hand to share with colleagues, and he started an executive book club for top brass. The cerebral Conant devours the words of everyone from President Abraham Lincoln to World War II General George S. Patton to management guru Stephen Covey. He regularly hands out the parenting book Whole Child, Whole Parent. And he drops Leo Tolstoy quotes into conversations. "I'm obsessed with getting new insights," he says. "I recently read a book about Patton, and he was an obsessive reader. It's really the only way to learn."
He may come off as bookish, even Clark Kent-like in his demeanor, but Conant hasn't shied away from making gutsy calls. Over some 30 years, mostly in the food business, he's gotten his hands dirty. After graduating from Northwestern's Kellogg School of Management and spending 10 years at General Mills Inc. (GIS ), Conant worked his way up the ranks at Kraft and Nabisco. Under Kilts at Nabisco, Conant was charged with fixing up the margarine unit for a sale, a job that ultimately included laying off staff. Later, he helped revive lifeless but iconic brands such as Planters nuts and Life Savers candy, not only with cost-cutting but also with a revamped marketing plan and new product launches. At Planters he gave longtime pitchman Mr. Peanut a bigger platform, and at Life Savers he oversaw the rollout of Creme Savers. Those moves helped drive double-digit sales growth in each business. Both stints proved useful training grounds for his current fix-it job at Campbell.
In one of his first moves at Campbell, he lowered earnings expectations and slashed the dividend by 30%. The stock dropped precipitously in his first 18 months on the job. The founding Dorrance family, which owns around 50% of the company's shares, took the hit directly in the pocketbook. Yet the board of directors, which includes several Dorrance family members, was behind Conant, since the cuts gave him money to invest in the future of the business. "He's the guy with an iron fist in a velvet glove," says Kilts.
Conant knows that Campbell must keep restocking its cupboard with new products and ideas to maintain its momentum. So he has focused on innovation, the lifeblood of any consumer packaged-goods company. He has homed in on three key areas: healthy, convenient, and premium goods.
Take soup, for example. It's still Campbell's mainstay, accounting for half of sales. Simple innovations such as pop-top cans helped lift sales of condensed soup 8% in 2005 and 5% in 2006 after more than a decade of declines. In August, the company launched a lower-sodium line that uses natural sea salt. Unlike previous generations of lower-sodium soups, this one has the full flavor of the regular stuff--a sort of holy grail for soupmakers. It's a technology cooked up in Campbell's research labs. Campbell is also testing a new line of refrigerated soups with gourmet flavors, such as crab and sweet corn chowder. The premium flavors come with premium price tags--about $5.50 for 24 oz., compared with about $2.50 for a 19 oz. can of Campbell's Chunky soup.
In supermarkets, Campbell has installed new shelving systems that automatically slide the next red-and-white soup can to the front when shoppers pluck one for their carts. It also sorts different types of soup by typical use; Cream of Mushroom sits in a cooking section, while Chicken & Stars rests next to Chicken Alphabet in the kids' section. Supermarkets are happy, because their shoppers are buying more soup, and the new shelving system makes restocking far easier. "Doug has helped reinvigorate a category that didn't have a lot of innovation," says Jeffrey Noddle, CEO of giant supermarket chain Supervalu Inc., which owns Jewel-Osco and Albertsons stores, among others.
Campbell's Godiva brand fits more closely into Conant's premium products category than the healthy one. The famous purveyor of gold-boxed chocolates is remodeling its stores to encourage shoppers to stop by regularly, rather than just for special occasions when they need gifts. At in-store "chocolate bars," Godiva sells individual strawberries (chocolate-covered, of course) and Chocolixer, a drink you can get hot or cold.
Conant is also eyeing major markets like Russia and China. In both countries, people eat billions of bowls of soup a year, but nearly all of them are made at home. "The story he's bringing to the table is probably one of the most interesting [in the food business], because he's thinking long-term," says Sanford C. Bernstein & Co. analyst Alexia Howard, who figures Campbell's can grow earnings per share by 8% a year through 2010. "Campbell's has very effectively found consumer insights and turned them into sustainable growth opportunities."
Conant certainly hopes so. As he sees it: "The corporate life is Darwinian, so you either grow or you die."
By Adrienne Carter