Campbell’s Soup Case Essay Sample

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“The U.S. food processing sector is extensively regulated by state and federal agencies. Federal agencies dominate the regulatory oversight: USDA FSIS for the meat and poultry processing businesses and FDA for all other food processing businesses. State agencies also have an active role in overseeing food processing businesses within their respective states, but their role is in collaboration with the federal agencies”.1 Fortunately, there was no mention of any issues that Campbell’s has encountered regarding their manufacturing operations. However, they have run into some ethical issues regarding the methods used by the companies that they employed to do their marketing research. Campbell’s hired three different marketing research companies. The first was Innerscope Research Inc. who measured bodily responses such as galvanic skin response, heart rate variability, pupil dilation etc. Using these measurements, they looked to see which parts of Campbell’s television commercials were eliciting responses from the consumer.

The second marketing research company they hired was Merchant Mechanics Inc. who conducted studies in the field (rather than a lab) to determine what it was about products that attracted customers. Merchant Mechanics believed that changing the retail environment was the best way to increase sales. Finally, they hired Olson Zaltman Associates who used a metaphor elicitation technique to ascertain thoughts and feelings that might be occurring in the mind of the customers. These methods encountered some ethical objections as there was concern about companies being unethical in their use of neuroscience to sell more of their products. It is mentioned in the case study that a group called Commercial Alert has raised objections regarding this kind of research. “Neuromarketing is a controversial new field of marketing which uses medical technologies such as functional Magnetic Resonance Imaging (fMRI) — not to heal, but to sell products.

We see three big potential problems with neuromarketing: (1) increased incidence of marketing-related diseases; (2) more effective political propaganda; and, (3) more effective promotion of degraded values”.2 Another ethical concern within their industry was regarding the mandatory nutritional labeling of food products by manufacturing companies. “The Food and Drug Administration recognizes the importance of food labeling as a vehicle for dietary messages and, thus, enforces stringent guidelines to maintain the integrity of the food label”.3 Manufacturers were stretching the truth about what was in their products. An example of this is the ‘natural’ label. “The word “natural” is not regulated by the FDA and therefore is very misleading. Sure “natural” brings to mind thoughts of fresh, minimally processed and healthy food, but it means nothing about a food’s nutritional content, ingredients, safety, or health effects”.4 Economic

This case study was done during the time when the world was on the cusp of a global economic recession. “In 2008 the world economy faced its most dangerous crisis since the Great Depression of the 1930s”.5 The upside for Campbell’s was that the food industry is considered ‘recession proof. “Some goods and services are a necessity, meaning people will buy them in about the same quantities regardless of changes to their income or employment circumstances. Food is an obvious essential”.6 Food and beverage companies were still considered safe by investors during 2008 downturn. As well, a favorable currency exchange rate had contributed to growth in markets like Canada and the US.

In addition to the favorable exchange rate and industry that Campbell’s was in, they also had the advantage of focusing their business on the late stages of food manufacturing which is a high margin, high value category that allows for brand building. Socio-cultural

During the time of this case study (2007-2008) there was a new awareness of the importance of eating well. Part of this trend included the at-home consumption of food and beverages, of which soup (Campbell’s single largest focus of their marketing efforts) was a big part of. There was also the increase in the sales of convenience food for time-constrained customers. “Mainstream consumers have become more health conscious in the last decade and if the booming success of retailers such as Whole Foods Market are any indication, the trend is just hitting its stride”.7 In general, people wanted cheaper, healthier food that was quick and easy to make. The preference of consumers to have healthier food options was an opportunity for Campbell’s.

They worked to create healthful soups with low calorie, low sugar, and low fat contents as well as focused on the reduction of sodium as its top strategic priority. Another aspect of Campbell’s culture influence was the iconic status of soup label (created around 1900). It was ranked among the four major packaging designs (the others being Coke, Heinz and Kellogg’s) that had become icons among food brands in United States and abroad. As labeling is major point of visual contact with customers, Campbell’s was looking to enhance that positive emotional connection with their brand by possibly changing their label. Technological

Campbell’s was the innovator of condensed soup (created in 1886) which reduced their costs on production, shipping, packaging and distribution as well as created a convenience items for customers. They also spent much of their marketing research budget on understanding how the end consumers consumed their products at home. “There is a constant stream of new software to collect data. Beyond the traditional methods such as paper surveys, interviews, and focus groups, technology enables researchers to be much more targeted in what they measure and how quickly feedback can be received. For instance, there is a mood-sensing retail device that’s personalizing the shopping experience. It is a powerful tool for any retail business looking to increase market share and learn more about customers”.8 As previously mentioned, Campbell’s had elicited the help of three different firms that were using various technologies such as consumer neuroscience technologies and biometrics to help predict consumer behavior. Demographic

The US represented the largest market for consumer food and beverage in 2008 and was also the single largest geographical focus globally for food and beverage companies. However, trends are showing that there is a decline in soup consumption overall. “Morgan Stanley found that the demographics of the company’s soup-eaters were skewing older — all those Millennials aren’t hip to glop in cans — and disproportionately non-Hispanic, which doesn’t speak well for the dish down the road”.9 “Soup consumer demographics currently somewhat mirror the US population (i.e., for both, ~40% of people are under 45 and 60% are over 45).

However, since 2001, MRI data indicates that the volume share of soup usage across younger demographic groups (i.e., under 45) is declining faster than the population share of those groups. Soup consumption by those under 25 is declining twice as fast as the under 25 demographic is declining relative to the total population. Between 2001 and 2010 the US population under the age of 25 declined as a percentage of the overall population by 60 bps while the percentage of soup consumers under the age of 24 (defined as anyone who consumed canned soup in the past 6 months) declined by 130 bps, or over double the decline relative to the overall population”.10 Global

In 2008 Campbell’s products were available in 120 countries. They were also taking advantage of a large and rapidly growing consumer market in Brazil, India, China and Russia.

Porter’s Five Forces

Rivalry among competing firms
Several big competitors for Campbell’s (CPB) include General Mills Inc. (GIS), H.J. Heinz, Kraft Food Inc. and Mondelez International, Inc. (MDLZ).

In response to this fierce competition, Campbell’s has been acquiring smaller companies that will strengthen and broaden their company’s offerings. An example of this is Bolthouse Farms. “Campbell Soup is buying carrot-to-beverage firm Bolthouse Farms for $1.55 billion is the latest in a slew of deals by food companies looking for growth. The world’s #1 soup maker is looking to Bolthouse’s line of premium beverages, which includes carrot juice and fruit smoothies, to bolster its V8 juice line. (Beverages are Campbell’s fastest growing business, ahead of lukewarm soup sales)”.11

Threat of new entrants
A further source of competition for Campbell’s is the private label brands that retailers are producing that offer the same sort of healthier choices with reduced fat, sodium and sugar for good prices. “Retail chains of all sizes develop and market store brands in various ways. They may create a whole line of products around a particular feature — such as Safeway’s O Organics and Eating Right offerings, or Kroger’s Private Selection and Albertsons Wild Harvest organic lines. In other cases, a majority of the store brand items in a chain may carry the same name — such as Costco’s Kirkland, Wal-Mart’s Great Value or Whole Foods’ 365 Everyday Value products”.12 Threat of substitute products

Campbell’s largest business segment is their soups, sauces and beverages with their largest market being the USA. Their soup market has three major categories: canned soup (oldest and largest category), dehydrated soup and broth/bouillon (fastest growing category). Taking into account the emphasis on healthy eating in today’s society, one substitute product could simply be actual homemade versions of these soups or sauces. While it may lack the convenience factor, it is relatively cheap and easy to do. Additionally, there are many alternatives for the soup products that Campbell’s makes from the other major competitors in their industry. Bargaining power of suppliers

“The dramatic rise in global agricultural commodity prices over the past two years has led to significant increases in the costs of major ingredients in food and beverage manufacturing. These cost pressures have led to a variety of responses by major transnational food and beverage companies, including consumer price increases, cost-cutting, supply chain mergers & acquisitions, and strategic alliances with suppliers, while powerful retailers exert pressure to keep prices down”.13 Bargaining power of buyers

Companies in the industry were under constant pressure from retailers to reduce their prices and improve quality. The biggest retailers such as Wal-Mart now had economies of scale to strengthen their negotiating position with brand manufacturers. “Buyer power enables supermarkets to control their suppliers to an extent which would not be possible if there were a reasonable balance of bargaining power between them. The imbalance of bargaining power is especially acute in agricultural products as the fragmentation on the supply side reinforces the bargaining power of supermarkets. Supermarkets have buyer power because they also have retailer power. In most developed national markets, supermarkets now dominate the supply of food products to consumers”.14 Summary

Some key points from the external analysis include:
The legal and ethical ramifications of the types of market research that is being conducted on behalf of Campbell’s must be weighed against the benefits of this type of research Although the food manufacturing industry is considered ‘recession proof’, this shouldn’t allow for complacency within the company. Continued innovation of new products and expansion into new markets should remain Campbell’s focus The iconic status of the Campbell’s soup label is something that can and should be leveraged in promoting the brand The changing demographic of soup consumers’ needs to be monitored (as this is Campbell’s primary focus) and product development needs to be adjusted accordingly to accommodate their changing customer base Continued diversification of their brand through acquisitions and inside innovation will keep Campbell’s competitive against their four major rivals (General Mills, Heinz, Kraft and Mondelez International) The threat of private label products as well as from substitute products such as homemade soups needs to be addressed The bargaining power of suppliers and buyers needs to managed by the frequent assessment and amendments by Campbell’s of their relationships with both their suppliers and retailers

Internal Analysis

“Campbell acquired several European soup and sauce brands to increase its presence in countries such as England, Ireland, France, Belgium, Holland, Germany, Sweden, Finland, and Denmark. In addition, the company is continuing to expand throughout Asia, particularly Japan, China, Hong Kong, Taiwan, Singapore, Malaysia, and Korea, and has launched several soups and beverages specially designed to cater to Asian culinary tastes. Campbell has also entered into strategic alliances with local companies to spur growth in its Asian operations”.15 They also own all but one of their manufacturing facilities. Intangible

Campbell’s is known as one of the best places to work which would allow them to attract and retain quality employees. “Campbell Soup Company (NYSE: CPB) was recently named Campbell as one of the Best Places to Work in New Jersey by NJBIZ. Campbell ranked number three on the list of large companies honoured with the award. Nancy Reardon, Senior Vice President and Chief Human Resources and Communications Officer said “Campbell is focused on creating a first-class work environment for our associates. We believe that our success in the marketplace truly starts with success in the workplace. We are very proud of our accomplishment and what it says about our commitment to creating an engaging environment where employees feel valued and they can make a difference”.16 Capabilities

Aside from owning the majority of their manufacturing facilities, Campbell’s continues to expand their manufacturing capabilities. An example of this is their expansion into Mexico. “Campbell Soup, an American producer of V8 juices, has signed agreements with Grupo Jumex and Conservas La Costeña to expand distribution and manufacturing capabilities for its beverages, soups, broths and sauces in Mexico”.17 They also have a large focus on R&D which allows them to create new products and quickly bring them to market.

Core Competencies

Campbell’s has three main core competencies based on their resources and capabilities. The first is their focus on soup as their main product which allows them to innovate in this category and bring new products to the market quickly. The second is their reputation both as being an outstanding employer which allows them to attract and retain high quality employees but also with their suppliers and retailers as being a good company to deal with. The third is their place in pop culture which lends their company an invaluable marketing tool.

Competitive Advantage
Soups that are:
Economically priced

Iconic status of soup label

Costly to imitate
High quality organizational culture
Excellent relationships with suppliers and retailers

Non substitutable
Place in pop culture


“Campbell is a global manufacturer and marketer of high-quality foods. Its portfolio is focused on simple meals, heavily anchored by Campbell’s soup; baked snacks, with Pepperidge Farm in North America and Arnott’s in Asia-Pacific; and healthy beverages, heavily anchored by the V8 brand”.18 Campbell’s has seven product categories – soup, pasta, juice, cookies, crackers and gravy. Soup is the highest selling category for them and therefore their focus. In addition, they continue to create new products; “the company brought more than 100 new products to market last year across all of its brands, including Pepperidge Farm and V8 beverages, and will launch over 200 new products this year”.19 “Studies and experience show the sweet spot for consumers probably doesn’t relate to the question of price, but to the questions of taste and convenience.

While many consumers (35 percent in the U.S.) are willing to pay more for ecologically responsible products, they are increasingly unwilling to compromise when it comes to the taste and convenience of food products and packaging”.20 Campbell’s is known for the convenience factor of their products and their name has become synonymous with healthier food choices. “Campbell’s offers a line of “Healthy Request” soups that taste similar to their regular soups but are more heart-healthy. For example, one serving of the Healthy Request chicken noodle soup contains less than half the amount of sodium in the regular chicken noodle soup and only 0.5 g of saturated fat”.21 Rare

Campbell’s is in the enviable position of having their soup label as a part of pop culture. “When Warhol first exhibited these Campbell’s Soup Cans in 1962, they were displayed together on shelves, like products in a grocery aisle. At the time, the Campbell’s Soup Company sold 32 soup varieties; each canvas corresponds to a different flavour”.22

“Warhol’s Campbell’s Soup Can paintings are key works of the 1960s Pop Art movement, a time when many artists made work derived from popular culture. Warhol’s soup cans raise the simply popular or every day to the status of art. Campbell’s and its red and white label date from the late nineteenth century, and became more and more familiar in the twentieth, particularly with the increase in mass production and advertising after World War II. Warhol himself said, “Pop art is about liking things,” and claimed that he ate Campbell’s soup every day for 20 years. For him, it was the quintessential American product: he marvelled that the soup always tasted the same, like Coca-Cola, whether consumed by prince or pauper”.23 Costly to imitate

There are two aspects that give Campbell’s the upper hand in this category. The first is their unique and valuable organizational culture. One of Campbell’s mottos is “winning in the workplace” which they saw as a prerequisite for “winning in the marketplace”. The success of this ideal in their company is reflected by the many awards they have won for being one of the best places to work as well as one of the most admired companies in the US. As many of us know, a quality corporate culture draws worthy employees as well as helps to retain them. Many companies just aren’t willing or able to invest in their employees in this manner. The second aspect is their relationships among their suppliers and retailers. They have a practice assessing and adjusting their sales and supply chains at frequent intervals to ensure that their relationships with their retailers stay strong. The constant attention to their business relationships ultimately help to maintain the connections that will support their business now and in the future. Non-substitutable

The non-substitutable part of Campbell’s is essentially summed up in the rare and costly to imitate aspects of their business. They are known for their excellent corporate culture which may be difficult to find elsewhere in the food manufacturing industry. “Campbell knows that creating a work environment that encourages innovation, rewards results and embodies its values is a key strategy for maximizing shareholder value”.24 Their brand in pop culture is another aspect of Campbell’s that few, if any other food brands (that aren’t fast food such as McDonald’s) are unable to touch.

Porter’s Value Chain

To summarize, here are some of the key actions that Campbell’s has taken in various phases of Porter’s Value Chain to improve their business: Operations

In the 90’s, in an attempt to hang onto their high performing EBIT, Campbell’s began to cut operational costs severely. In 2002, under a new CEO they abandoned these tactics and refocused their efforts on strengthening their core business of soup. With this focus, Campbell’s is more willing and able to give depth to this category which will mean new products being offered to their customers. Marketing and Sales

In addition to cutting operational costs in the 90’s, Campbell’s reduced their marketing expenditures which negatively impacted the company’s competitiveness. They have since refocused their marketing efforts by investing in modern marketing research techniques to learn about their customers’ tastes. With this new understanding of their customers as well as market trends, Campbell’s is able to develop products that their consumers want while maintaining convenience and reasonable pricing. Technology Development

In support of their new focus on strengthening their core business of soup, Campbell’s began spending 1.5% of its sales revenue on R&D annually with the goal of launching new products and new variants of existing products regularly. In addition, their continued innovation allows them to reach new customers and offer their standing customers new products. Denise Morrison (CEO of Campbell’s) has given an example of this; “our team decided that we wanted to really understand Millennials and build food and beverages for the next generations.””So, they went out and they lived and they shopped with Millennials and they ate with them and they cooked with them. They went to pop-up bars; I couldn’t get them to come back to work. It was really something. But listening to the consumer and getting inspired by what the consumer needs before they know they want it is a big spur for innovation”.25 They were also the innovator of condensed soup (created in 1886) which reduced their costs on production, shipping, packaging and distribution as well as created a convenience items for customers. Human resource management

Campbell’s has become one of the leaders in their industry for providing a fulfilling corporate culture for their employees. Attracting and keeping good employees reduces costs and benefits the company by having hard working employees who strive for the company’s continued success. It also benefits the consumer as the savings from the reduced costs of low turnover can be passed down to the consumer or used for other things such as R&D. Procurement

Campbell’s regularly assesses its relationships with its suppliers in order to ensure that they can manufacture and ship their products to their retailers in a timely fashion. This ensures strong relationships with their retailers which in turn guarantees product availability and variety to the end user. In addition, reducing manufacturing costs will ideally pass savings along to the end users.

SWOT Analysis
Strong brand recognition
Leading position in core category (soup)
Ownership of their manufacturing facilities
Strong corporate culture
Extensive market research allowing for more product focus
Their narrow focus on the soup aspect of their business as demand declines Majority of business is from US market which is still in recession Engaged in a highly competitive market with several large rival companies Opportunities

Global emerging markets such as China and Russia
Higher demand for healthful and organic products
Product innovation through their continued R&D
Worldwide economic slowdown shifting consumer habits from eating out to eating at home More philanthropic and green initiatives
The trend of retailers to make their own private label products and the customer’s acceptance of these new products Increased costs of distribution such as rising gas prices
Bargaining power of suppliers and increased costs of their raw materials (such as the vegetables for their soups)

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