CASE 19

CAMPBELL: HOW TO KEEP THE SOUP SIMMERING^*

In 2019, Campbell Soup was brimming with problems. In less than a year, the company had gone through three CEOs. The resignation of its long-term CEO Dennis Morrison proved to be a tough blow for Campbell, as its stocks had slumped from 2017. The companys interim CEO Keith R. McLoughlin, said, Looking back at fiscal 2018, there is no question that Campbell had a difficult year.¹ Despite the challenges, the company added Pacific Foods, a leader in organic soups and broths, and Snyders Lancethe second largest salty snack maker in the United Statesto their portfolio.

Although one of their major challenges during 2018 was lackluster financial performance, net sales increased 10 percent from $7.89 billion to $8.685 billion in 2018, primarily due to an 11-point benefit from their acquisitions of Snyders Lance and Pacific Foods. Denise Morrison, former CEO, had taken over the company several years prior. The change at the top of the company received a lukewarm response from investors, who were watching to see what drastic changes Morrison might have in store. By 2017, with Morrison at the helm, the Campbell Soup Company had launched more than 50 new products, including 32 new soups. This number was way up from previous years. One of its most important challenges was to remain attractive to health-conscious consumers. Morrisons vision to modernize Campbell and make it a major player in fresh foods turned out to be quite expensive for Campbell. The company made contrasting decisions to acquire Snyders Lance, a salty snack maker, in 2018 while maintaining its position to venture into fresh foods. Morrison also shocked experts with the $1.55 billion buyout of California juice-and-carrot seller Bolthouse Farms, the largest acquisition in Campbells history.² Despite the revitalization of its product line, however, the company failed to spark a financial turnaround.

Toward the end of 2018, the company announced Mark A. Clouse as the new Chief Executive Officer of Campbell, effective January 22, 2019. With more than 20 years of experience in the food industry, Clouse held senior management positions at popular brands such as Mondelz International, Inc., Kraft Foods Inc., and Pinnacle Foods. Mark Clouse entered Campbell with an optimism duly needed at the companys historic crossroads. I am honored to lead Campbell and its portfolio of iconic brands into the next chapter of the companys storied history, said Clouse. I am committed to delivering Campbells strategic objectives and look forward to partnering with the Board and working alongside the companys many talented employees to deliver sustainable, long-term growth. I am confident that together we can build a prosperous future for Campbell and all of its stakeholders.³ The questions haunting investors today are: What is Clouses revival strategy for Campbell? Will Campbell still try to build on its image as a fresh food company?

Company Background

Known for its red-and-white soup cans, the Campbell Soup Company was founded in 1869 by Abram Anderson and Joseph Campbell as a canning and preserving business. Over 140 years later, Campbell offered a whole lot more than just soup in a can.

In 2016, the company, headquartered in Camden, New Jersey, implemented a new product category structure by reducing from five categories to three: Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh (see Exhibit 1). In 2018, Campbells products were sold in over 100 countries around the world. The company had operations in the United States, Canada, Mexico, Australia, Belgium, China, France, Germany, Indonesia, Malaysia, and Sweden

1. Discuss the implications of the amount of soup that the Chinese consume a year relative to American consumption.

2. Discuss the reason(s) that made investors lukewarm and cautious about the appointment of Denise Morrison as the new CEO.

3. Analyze Campbells acquisition of Pace Foods and identify the underlying strategic motivation for such an acquisition.

4. Explore why Campbells sales in Russia fell below expectations, forcing the company to pull out of Russia after four years. 5. Discuss the advantages that Campbell enjoyed by providing its managers training across the organization.