'We must be bold': How Campbell Soup is adapting to food's rapidly changing future
In interviews with Food Dive, top executives said the firm is evolving its product mix and trying to seize opportunities in e-commerce.
Campbell Soup executives have a pointed response for critics concerned that recent developments in the food space foreshadow the end of its business: Don't count us out just yet.
"I have seen the pundits predict the demise of our industry several times before in the past, when different channels started to emerge," Mark Alexander, who oversees the division that includes the company's U.S. retail operation, told Food Dive. "If we have great products, super relevant brands and very strong consumer connections, we'll do just fine. If someone is writing us off, they're writing us off very prematurely."
For decades, the storied food and beverage industry loaded grocery store shelves with cans, boxes and bags of mostly processed items. But the industry now finds itself scrambling to overhaul its product mix in response to growing consumer demands for items with clean, simple labels that are chock-full of fresh and healthy ingredients.
Along with the food itself, how consumers get it is changing, too. The once obligatory trip to the grocery store is no longer the only way for shoppers to stock their cupboards and pantries — the public can now turn to direct-to-consumer purchases, online grocers like Instacart, discounters such as Lidl and Aldi, or even one of the many meal kit delivery companies.
"If we have great products, super relevant brands and very strong consumer connections, we'll do just fine. If someone is writing us off, they're writing us off very prematurely."
President of Campbell Soup's Americas simple meals and beverages unit
The shifting landscape has prompted some Wall Street analysts to call into question what role food companies such as Campbell, General Mills and Kraft Heinz will have in this new paradigm. During a pair of interviews, Alexander and Campbell's CEO Denise Morrison said the company has gone to great lengths to position itself as a viable player in an increasingly online future and overhaul its product mix with items that will resonate with a new generation of shoppers more concerned about their health and well-being.
Campbell's has burnished its credentials by reformulating its existing product line and spending hundreds of millions of dollars to acquire companies to help position it as a go-to marketplace for consumers interested in knowing more about their food and where it comes from.
Bolthouse Farms, a maker of carrots, smoothies, juices and dressings, was acquired for $1.55 billion in 2012. A year later, it was followed by children’s food and snack company Plum Organics. Then in 2015, Garden Fresh Gourmet was purchased for $231 million, bringing its refrigerated salsa, hummus and dips into Campbell Soup’s portfolio. The soup icon extended that push when it announced this month it would spend $700 million to purchase of natural and organic brand Pacific Foods of Oregon
Morrison said she has already seen disruption in the marketplace, such as when new retail formats like club stores made popular by Sam's Club and Costco came into existence. "The [food] industry is going to have to evolve to where the consumer is going," she admitted.
'Bold moves ... at a rapid pace'
As part of its effort to reposition itself, Campbell has been aggressively bulking up its online business that represents about 1.2% of its total U.S. sales.
Just last week, Campbell hired Shakeel Farooque to oversee digital and e-commerce in a newly created role. The former Kohl’s, eBay and Amazon executive will be responsible for growing Campbell's e-commerce business to $300 million within the next five years.
Earlier this year, the soup maker invested $10 million in e-commerce meal kit company Chef'd — a move that not only gave Campbell's another way to sell its products, but also gave it access to valuable insight into customer shopping patterns and purchasing decisions.
"It's the early days for grocery e-commerce ... but we must be bold in our strategy and choices and we must move fast."
Chief executive of Campbell Soup
"The goal here is to make bold moves and do so at a rapid pace," Morrison told investors at Campbell's investor day at its Camden, New Jersey headquarters last week. "It's the early days for grocery e-commerce but we see a larger opportunity to generate more top line growth for Campbell by accelerating our digital marketing and e-commerce efforts, but we must be bold in our strategy and choices and we must move fast."
E-commerce today comprises just 2% of grocery sales, according to Kantar Retail, meaning there is plenty of room for growth. The firm estimates the share of online food and alcohol sales is set to triple during the next five years to $55 billion by 2021.
For many food manufacturers, that urgency ratcheted up a notch after the $13.7 billion takeover of Whole Foods by web giant Amazon — fueling concerns the combined company could use its online prowess, brick-and-mortar muscle, aggressive pricing practices, private label brands and other expected, though largely unproven, advantages to put further pressure on these companies.
In a note issued shortly after the deal was made, analysts at UBS said Campbell Soup and Conagra — already facing a consumer shift away from packaged foods — could experience the biggest impact from the deal.
“If Amazon steers Whole Foods away from its ‘whole-paycheck’ image, and successfully sells Whole Foods’ products online, then ‘Big Food’ faces the threat of losing even more market share,” Rabobank food analyst Nicholas Fereday told The Wall Street Journal.
Major food manufacturers like Campbell disagree. While they acknowledge the merger will bring change to the industry, it doesn't mean they won't — or aren't already — working to adapt.
"We see two things that are clear from this deal. One is that retail consolidation in our space is going to continue," Alexander said in the interview. "The second is that it is an accelerator for e-commerce. As the retail environment consolidates, branded players need to make sure they are super relevant, that they are in category-leading positions, that they are innovating at a great rate. That is the way you strive and survive in a consolidating envrionment."
"Is shopping and food procurement going to move away from traditional methods into new methods of acquiring food? No question."
President of Campbell Soup's Americas simple meals and beverages unit
Alexander said one challenge facing Campbell is that it's hard to predict exactly what food trends sweeping the industry now are going to last over time. Campbell has not only entrenched itself into meal kits and dramatically altered its product line, but is working on a new supply chain to make it easier to deliver products to a consumer or warehouse. The company also has launched more than a dozen Amazon Dash buttons for its products including its namesake soup, V8 juice, Plum baby food, Milano cookies and Goldfish snacks.
"Is shopping and food procurement going to move away from traditional methods into new methods of acquiring food? No question. What's less certain is exactly which services, which types of ways of buying food that people are going to prefer," Alexander said. "We want to have experiments happening. We want to be building capabilities so that we can get after those growth pockets as they arise."
Follow Christopher Doering on Twitter