BOCA RATON, FLA. – Plans to restore growth at Campbell Soup Co. will include a different approach to product innovation in the years ahead, said Denise Morrison, executive vice-president and chief operating officer. Ms. Morrison, who will succeed Douglas Conant as Campbell chief executive officer later this year, spoke about the company Feb. 23 at the Consumer Analyst Group of New York annual meeting, which was held at the Boca Raton Resort & Club.
Ms. Morrison spoke following a presentation by Mr. Conant, who acknowledged the company has struggled recently and expressed confidence in Ms. Morrison’s plans to “course correct.”
Looking back over the last several years, Mr. Conant expressed pride in Campbell’s long-term results, noting the company’s cumulative total shareholder returns have been greater than either the company’s food industry peers or the overall S.&P. 500. He noted soup sales have grown $400 million annually over the past decade, reminding the group that “several analysts said we wouldn’t be able to grow soup sales.”
Other metrics highlighted by Mr. Conant were adjusted EBIT margins of 17.7% in 2010 and adjusted return on invested capital of 27.4% in 2010, both of which put Campbell in the upper quartile of performance, he said.
Mr. Conant also pointed to an improvement in scores for Campbell employee engagement over the past decade, as tracked by the Gallup organization.
Ms. Morrison said she was determined to better leverage that engagement for the benefit of the company, its consumers and shareholders. She added it was critical for Campbell to respond to “change that has come over our industry with dramatic impact.”
While most of her presentation was devoted to the North American market, Ms. Morrison noted the seismic impact of globalization in the food industry. She said 1 billion new consumers will be added worldwide in the next decade, principally in India and China.
In the United States, Campbell has not addressed several market segments adequately, she said.
“Hispanics are the fastest growing group in the United States,” she said. “This is an ethnic group with distinct preferences and tastes in food. Historically we have not taken advantage of the opportunities created by this segment.”
Another group to be tapped more effectively is the so-called “millennials,” a group numbering 80 million. She said millennials demand convenience, have strong interest in nutrition and enjoy intense flavors. Baby boomers are similar in numbers, she said.
“Boomers are strongly focused on the connection between diet and well being, and they plan to live forever,” she said.
Across all segments, Ms. Morrison said attitudes toward value are different than a few years ago.
“This widely publicized view of the transformation in consumer behavior is real, and I don’t think it will change back,” she said.
Much of Ms. Morrison’s presentation was devoted to discussing soup. She said recent performance underscores the need for stabilizing and profitably returning to growth net sales.
Earlier steps to revitalize the category focused principally on sodium reduction and other health-oriented innovations, Ms. Morrison said. While these efforts were a success, a new approach to innovation is needed, “compelling innovation carefully calibrated with consumer needs,” she said.
Stepped up brand building in the place of price promotion that has been unusually ineffective will be the chosen approach to marketing in the period ahead, Ms. Morrison said. The tack Campbell will pursue is based on the 85% household penetration Campbell Soup enjoys.
“We need to leverage that penetration for higher usage,” she said. “We will shift spending from price promotion to brand building. Effective advertising is the best way to drive soup from the pantry to the table.”
A campaign under way is aimed at making consumers feel better about eating soup and carries a tag line of “It’s amazing what soup can do.”
While innovation strategies will move from sodium reduction, Ms. Morrison said the health and wellness priorities of recent years were executed decisively and improved the health profile of the product line while maintaining good taste.
“The actions eliminated a key barrier and allowed a better conversation with consumers,” she said. “The leadership in sodium reduction puts us ahead of our competitors. We will maintain our leadership in this arena.”
Several additional reduced sodium soup varieties will be introduced in the months ahead, she said.
An example of a new product in the pipeline includes the Slow Kettle soup brand, which the company is touting as “made with patience, not preservatives.” Targeted toward young consumers, Ms. Morrison described the soup as a premium product that will be offered in new, clear packaging.
A new variety of the company’s heritage tomato soup, Harvest Orange Tomato, did well in test markets and is poised for a rollout, she said.
Beverage innovation detailed by Ms. Morrison included an energy shot made from vegetables together with highly concentrated green tea.