What can manufacturers learn from Campbell's stumble in fresh foods?
- Two major brands in Campbell’s Fresh division are struggling, according to CNBC. The company’s Bolthouse Farms brand has faced crop shortages due to inclement weather, including the prolonged California drought. Garden Fresh Gourmet has struggled to generate consumer interest beyond its core audience in the Midwest.
- Analysts warn of a cautionary tale in Campbell’s push to acquire fresh-positioned brands. "The one-size-fits-all model that works in packaged food is harder to apply to newer, artisanal products, especially in the fresh aisles of the store," wrote JPMorgan analyst Ken Goldman in a research note.
- Campbell said it plans to work on its distribution and agricultural infrastructure to address both brands’ shortcomings.
Campbell has high hopes for its Fresh division, with a goal of generating $2 billion in sales by 2020. Its struggles with the Bolthouse and Garden Fresh Gourmet brands signal the company may need to step back and reassess its strategy.
Campbell’s Bolthouse woes stretch back to 2012, when it bought the produce, beverage and dressing manufacturer for $1.55 billion. Bad weather, coupled with execution problems such as harvesting vegetables too early, led to the brand performing below expectations — a problem that continues more than four years after the acquisition.
Shortly before it bought Garden Fresh Gourmet in 2015, Campbell restructured into three divisions and set cost-cutting objectives aimed at saving $200 million in its annual budget. Campbell’s CEO Denise Morrison told investors its Fresh Division would drive growth. So far, the company has struggled to realize this goal. In February, the company said sales in its fresh division fell 8% year-over-year to $260 million.
With more than three-quarters of consumers looking to eat more fresh versus processed foods, Campbell’s strategy is understandable. But fresh foods require nimbleness, innovation and levels of execution that can be difficult for large CPG companies to manage. It’s why many companies that acquire natural and organic brands prefer to let these companies keep control of the business.
One analyst interviewed by CNBC said Campbell’s acquisitions offer a “cautionary tale” for manufacturers investing in fresh. Thankfully for Campbell, it still has the time — and the money — to regroup, learn from its missteps, and perhaps become a success story.
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