Campbell Soup’s Growth Prospects for its ‘Transitional’ Fiscal 2012
In the first quarter of its 2012 fiscal year, ending 30 October 2011, Campbell Soup began its previously announced transition towards a new strategic framework. This will focus on extended brand and product platforms through more consistent innovation in three core categories – simple meals, baked snacks and healthy beverages.
In line with the expected negative impact of the restructuring, with the exception of the smallest reporting division, North America Foodservice, and the Global Baking and Snacking division, sales declined across all divisions, resulting in negative sales and net earnings growth for the quarter.
Campbell Soup’s Financial Results
Like its fellow packaged food players, Campbell Soup has defined its focus categories and has started to invest in an intensive product innovation strategy in order to align its portfolio with key growth trends.
In its US soup division, it has started with the announcement that it will launch 35 new products this autumn, seven times the number of new items it brought to market last year. Following this boost to its Campbell’s soup line, it has also added two new products to its Swanson stock and broth portfolio.
The volume and direction of these innovations showcase Campbell’s strong focus on reigniting growth in its US soup business. Campbell generates some 61% of its global soup sales in the US, accounting for US$2.1 billion in retail value sales. However, some 98% of its overall soup sales stem from the canned/preserved format.
While this is by far the largest soup category, it is forecast to achieve a CAGR of just 0.5% over 2011-2016. As part of its current wave of innovation in the US soup category, Campbell Soup would do well to increase its focus on the two most dynamic soup categories – chilled soup and UHT soup.
Both are expected to post a CAGR of 7% over 2011-2016. These categories will account for 31% and 26%, respectively, of the overall US soup category’s absolute retail value growth over the forecast period. Campbell Soup is already the second largest player in the UHT category, courtesy of its V8 brand. It also leads chilled soup through its Stockpot range.
Therefore, the company is well positioned to benefit from the strong forecast growth rates for both categories. Further investment in product innovations that leverage key wellness and convenience trends could well drive and satisfy consumer demand in these dynamic categories still further.
Growth opportunities in international markets
Although Campbell’s US soup sales consist almost entirely of canned/preserved soup, its sales are more diversified across other soup categories in the rest of the world. Its largest non-canned/preserved soup activities are in France, where its UHT soup offerings accounted for 8% (or US$260 million) of its global soup sales in 2010.
Its Pur Soup is the number one brand in the category. Although UHT soup is only modest in size in a global context, worth some US$1.3 billion in 2011, it is a dynamically growing category in markets where Campbell has the scale and knowledge to further exploit opportunities. These include the US, the Netherlands, France and Belgium.
These four markets combined will account for more than 80% of global absolute retail value gains for UHT soup to 2016. Focusing on innovation and driving growth in UHT soup in these markets would serve a double purpose – it would reduce reliance on the mature and slow growing canned/preserved soup category and would widen the company’s reach in international markets.
In terms of international expansion, China is currently Campbell’s focus market. This follows upon its July 2011 exit from the highly publicised emerging prepared soup market that is Russia. Although growth rates in Chinese soup are high, with a 10% CAGR expected over 2011-2016, in absolute retail value terms the market remains modest in size. Sales are only approaching a mere US$70 million in 2011 compared to US$4.3 billion in Campbell Soup’s domestic US market.
This means that as well as expanding into new international markets, Campbell must continue to invest in a range of innovative and expansion-minded opportunities in its core mature markets to ensure steady long-term growth. For further insight, please contact Ildiko Szalai, Senior Food Analyst at Euromonitor International, at Ildiko.firstname.lastname@example.org