Organic and On-the-Go, Recipes for Soup’s Recovery?

With the launch of an organic soup range under the Campbell’s brand in the US in February, Campbell Soup Co is seeking to focus on premium soup, moving away from its core ranges of canned/preserved soup, and attempting to appeal to a younger audience. Almost concurrently, under its Plum Organics brand, the group also introduced an organic soup range, adopting a similar strategy to other baby food manufacturers in extending its reach beyond baby food and into children’s food to widen its target audience.

As the two organic ranges, already announced in August and October 2014, respectively, were introduced almost simultaneously in February 2015, they may struggle to each succeed in establishing their presence in their adjacent niches. The Plum Organics brand may also suffer from too much diversification, which could result in further dilution of its image, until recently rooted in baby food.

Targeting two distinct organic soup segments

An increasing proportion of US consumers are paying close scrutiny to the provenance of their food, which has bolstered organic food sales. Campbell also cited an internal survey showing that 53% of US adults aged between 18 and 29 actively are trying to purchase more organic food. As organic soup has gained a significant and growing share of soup sales in the US, Campbell sees organic soup ranges as key to attracting younger customers to the soup category, which is struggling due to an ageing customer base.

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The Campbell’s Organic range, targeting adults, is available in carton format, making it mostly suited for take-home consumption. Available at large grocery retailers with a low-to-mid-price positioning, including Kroger and Wal-Mart, it should gain a wide exposure, giving it a key role in granting the Campbell’s brand a more premium image.

The packaging of the Plum Organics range is suited to on-the-go consumption thanks to a flexible pouch, and the products specifically target children, as the pouch carries the brand’s “Kids will love it!” tagline. It is available in only three variants, none of which are vegetarian, which will reduce the brand’s appeal, as a significant proportion of consumers buying organic soup may be vegetarian. By contrast, the Campbell’s range is offered in six flavours, of which four are vegetarian.

Few large retailers are likely to offer the Plum Organic brand, with the range only sold at Meijer, Safeway and selected Target stores as well as online through Amazon. Therefore Plum Organics is likely to retain its niche status, a strategy that should enable it not to overlap too closely with the Campbell’s range and to complement it effectively.

Is Campbell at risk of overstretching the Plum Organics brand?

As Campbell issued a profit and sales warning in February 2015 for its financial year ending August 2015, citing unfavourable currency exchange rates, this illustrates the company’s growing need for diversification, for which it will rely on several brands in its strategy to target different consumer groups and retailers.

However, its ambitious plans for new product launches, with 200 planned in the current financial year, may put its margins under pressure and result in a lack of resources to fully support all these launches. In the first half of early 2014, despite launching eight new soup variants, the company failed to reverse the stagnation of its soup sales in the US.

The move for the Campbell’s brand to offer organic soup is strongly justified by the need to focus on more premium variants in a mature category offering modest growth prospects, and its launch was overdue. It should also help the company retain its share in soup against private label, following the ambitious launch of Wal-Mart’s organic food range Wild Oats range in 2014.

By contrast, for Plum Organics, the benefits are less obvious. The venture into soup is the latest among recent forays outside of baby food for Plum Organics, with the most recent previous addition to the brand in October 2014, when the Plum Organic Vida range of canned/preserved fruit was launched at Target stores.

Although serving to widen the brand’s reach to more consumers, moving into soup exposes the brand to a category offering fewer growth prospects than its core category, baby food, and the brand could have been better served by a less precipitate move into other categories or by choosing ones offering stronger growth potential within children’s snacks.