Yet more than a few years into her governance, analysts still had a lukewarm response about Morrison taking over. They s
Posted: Tue Jul 05, 2022 11:27 am
Yet more than a few years into her governance, analysts stillhad a lukewarm response about Morrison taking over. They stillexpressed their doubt about whether Morrison was the right choice,rather than some new blood as a CEO replacement.
Industry Overview
The U.S. packaged-food industry had recorded fastercurrent-value growth in recent years mainly due to a rise incommodity prices. In retail volume, however, many categories sawslower growth rates because Americans began to eat out more oftenagain. This dynamic changed for a couple of years when cooking athome became a more popular alternative in response to the recessionand the sharp rise in commodity prices in 2008.
After years of expansions and acquisitions, U.S. packaged-foodcompanies were beginning to downsize. In August 2011, Kraft Foodsannounced that it would split into two companies: a globallyfocused biscuits and confectionery enterprise and a domesticallyfocused cheese, chilled processed-meats, and ready-meals firm.After purchasing Post cereals from Kraft in 2008, Ralcorp Holdingsspun off its Post cereals business (Post Holdings Inc.) in February2012.
Though supermarkets were the main retail channel for buyingpackaged food, other competitors were gaining traction by offeringlower prices or more convenience. The recession forced shoppers toconsider alternative retail channels as they looked for ways tosave money. A big beneficiary of this consumer trend was thediscounters, which carried fewer items and national brands thansupermarkets but offered lower prices in return. For example,dollar store chains Dollar General and Family Dollar expanded theirfood selections to increase their appeal. Drugstore chains CVS andWalgreens expanded their food selections as well, especially inurban areas, to leverage their locations as a factor ofconvenience. Mass merchandiser Target continued to expand itsPFresh initiative, featuring fresh produce, frozen food, dairyproducts, and dry groceries.
Competition
Campbell operated in the highly competitive global food industryand experienced worldwide competition for all of its principalproducts. The principal areas of competition were brandrecognition, quality, price, advertising, promotion, convenience,and service.
Nestlé
Nestlé was the world’s number-one food company in terms ofsales, the world leader in coffee (Nescafé), one of the world’slargest bottled-water (Perrier) makers, and a top player in the petfood business (Ralston Purina). Its most well-known global brandsincluded Buitoni, Friskies, Maggi, Nescafé, Nestea, and Nestlé. Thecompany owned Gerber Products, Jenny Craig, about 75 percent ofAlcon Inc. (ophthalmic drugs, contact-lens solutions, and equipmentfor ocular surgery), and almost 28 percent of L’Oréal. In July2007 it purchased Novartis Medical Nutrition, and in August 2007 itpurchased the Gerber business from Sandoz Ltd., with the goal ofbecoming a nutritional powerhouse. Furthermore, by adding Gerberbaby foods to its baby formula business, Nestlé became a majorplayer in the U.S. baby food sector.
General Mills
General Mills was the U.S. number-one cereal maker, behindKellogg, fighting for the top spot on a consistent basis. Itsbrands included Cheerios, Chex, Total, Kix, and Wheaties. GeneralMills was also a brand leader in flour (Gold Medal), baking mixes(Betty Crocker, Bisquick), dinner mixes (Hamburger Helper), fruitsnacks (Fruit Roll-Ups), grain snacks (Chex Mix, Pop Secret), andyogurt (Colombo, Go-Gurt, and Yoplait). In 2001 it acquiredPillsbury from Diageo and doubled the company’s size, makingGeneral Mills one of the world’s largest food companies. Althoughmost of its sales came from the United States, General Mills wastrying to grow the reach and position of its brands around theworld.
The Kraft Heinz Company
The Kraft Foods Group and H. J. Heinz Company closed a mergerdeal in July 2015. The combined company was called The Kraft HeinzCompany, and became the third largest food company in North Americaand fifth largest in the world. Its most popular brands includedKraft cheeses, beverages (Maxwell House coffee, Kool-Aid drinks),convenient meals (Oscar Mayer meats and Kraft mac’n cheese),grocery fare (Cool Whip, Shake N’ Bake), and nuts (Planters). KraftFoods Group was looking to resuscitate its business in NorthAmerica. H. J. Heinz had thousands of products. Even prior to themerger, Heinz products enjoyed first or second place by marketshare in more than 50 countries. One of the world’s largest foodproducers, Heinz produced ketchup, condiments, sauces, frozenfoods, beans, pasta meals, infant food, and other processed-foodproducts. Its flagship product was ketchup, and the companydominated the U.S. ketchup market. Its leading brands includedHeinz ketchup, Lea & Perrins sauces, Ore-Ida frozen potatoes,Boston Market, T.G.I. Friday’s, and Weight Watchers foods. In 2013Heinz agreed to be acquired by Berkshire Hathaway and 3GCapital. The post-merger Kraft Heinz Company was alsodedicated to offering healthy food products to its customers byadapting to changing tastes and consumer preferences.
Financials
In the 2016 fiscal year, Campbell’s earnings from continuingoperations decreased from $666 million to $563 million, due todisruptions in product availability for a period of time. Organicsales declined 1 percent, while adjusted earnings per share (EPS)from continuing operations decreased from $2.13 to $1.82. Thelarger pie of the sales came from the U.S. market, whereas about 19percent of the company’s total sales were from internationalmarkets outside the U.S. With regard to financials, Morrisonstated: For fiscal year 2017, the company’s sales for yearending 2016 declined by approximately 1 percent to $7.961 amid thenegative impact of exchange rate volatility and decrease in organicsales. However, most of the adverse impacts were offset by thebenefits achieved by acquiring Garden Fresh Gourmet. The decline insales could be larger if company had not increased the sellingprices in 2016 to offset the loss of sales by decrease in salesvolume.
Similarly, for America’s Simple Meals and Beverage division,Campbell’s sales decreased 2 percent amid the decline in V8beverages and soup, but increased costs were up, wearing awaymargins. Also, the Global Biscuits and Snacks division salesdecreased 3 percent but for the Campbell Fresh division salesincreased 1 percent, which could be better if the company had notgone through the trouble of execution issues and cropdestruction.
Sustainability
Campbell Soup Company was named to the Dow Jones SustainabilityIndexes (DJSI) repeatedly and to the DJSI World Index. Thisindependent ranking recognized the company’s strategic andmanagement approach to delivering economic, environmental, andsocial performance. Launched in 1999, the DJSI tracked thefinancial performance of leading sustainability-driven companiesworldwide. In selecting the top performers in each business sector,DJSI reviewed companies on several general and industry-specifictopics related to economic, environmental, and social dimensions.These included corporate governance, environmental policy, climatestrategy, human capital development, and labor practices. Campbellincluded sustainability and corporate social responsibility as oneof its seven core business strategies. Campbell’s Napoleon,Ohio, plant had implemented a new renewable energy initiative,anchored by 24,000 new solar panels. The 60-acre, 9.8-megawattsolar power system was expected to supply 15 percent of the plant’selectricity while reducing CO2 emissions by 250,000metric tons over 20 years.
Additionally, Campbell employees volunteered an average of20,000 hours annually at more than 200 nonprofit organizations.Supported by local farmers and Campbell, the Food Bank of SouthJersey was earning revenue for hunger relief from salesof Just Peachy salsa. The salsa was created fromexcess peaches from New Jersey and was manufactured and labeled byemployee volunteers at Campbell’s plant in Camden.
What’s Next?
Campbell’s advertising campaign failed to assist the companymuch in gaining the expected traction in the ready-to-serve soupbusiness. Campbell was trying to correct this by introducing newproducts offering unique flavors into what many considered a ratherordinary product line. If the economy continued to improve wouldCampbell be successful in its international expansion, especiallyin lucrative emerging markets such as China? As the recessionbecame a distant memory, would Campbell’s name still resonate withAmerican consumers or would consumers venture back to restaurants?Would Campbell Fresh become a success or would it spoil? WouldCampbell’s soup simmer to perfection, or would the company be inhot water?
Q1. Critically discuss the key factors and forces in the generaland industry environments that affect processed food industry. Whatimpact does Russia-Ukraine war have on these key factors /forcesand consequently on Campbell’s demand for its products and marketposition.
Suggest actions Campbell should take to keep its competitiveadvantage alive. (35 marks-850 words).
Q2. Based on your reading of the case study, critically evaluatethe key resources available for Campbell to effectively andsuccessfully compete within its boundary and sustain a competitiveadvantage.
Discuss whether Campbell market position is supported by itsvalue chain activities. (35 marks-850 words).
Q3. Based on your reading of the case study, critically evaluateCampbell Business-level and Corporate–Level-strategiescomponents.
As a strategist, what recommendations you may suggest that keepCampbell competitive in international markets? (30 marks - 500words)
Industry Overview
The U.S. packaged-food industry had recorded fastercurrent-value growth in recent years mainly due to a rise incommodity prices. In retail volume, however, many categories sawslower growth rates because Americans began to eat out more oftenagain. This dynamic changed for a couple of years when cooking athome became a more popular alternative in response to the recessionand the sharp rise in commodity prices in 2008.
After years of expansions and acquisitions, U.S. packaged-foodcompanies were beginning to downsize. In August 2011, Kraft Foodsannounced that it would split into two companies: a globallyfocused biscuits and confectionery enterprise and a domesticallyfocused cheese, chilled processed-meats, and ready-meals firm.After purchasing Post cereals from Kraft in 2008, Ralcorp Holdingsspun off its Post cereals business (Post Holdings Inc.) in February2012.
Though supermarkets were the main retail channel for buyingpackaged food, other competitors were gaining traction by offeringlower prices or more convenience. The recession forced shoppers toconsider alternative retail channels as they looked for ways tosave money. A big beneficiary of this consumer trend was thediscounters, which carried fewer items and national brands thansupermarkets but offered lower prices in return. For example,dollar store chains Dollar General and Family Dollar expanded theirfood selections to increase their appeal. Drugstore chains CVS andWalgreens expanded their food selections as well, especially inurban areas, to leverage their locations as a factor ofconvenience. Mass merchandiser Target continued to expand itsPFresh initiative, featuring fresh produce, frozen food, dairyproducts, and dry groceries.
Competition
Campbell operated in the highly competitive global food industryand experienced worldwide competition for all of its principalproducts. The principal areas of competition were brandrecognition, quality, price, advertising, promotion, convenience,and service.
Nestlé
Nestlé was the world’s number-one food company in terms ofsales, the world leader in coffee (Nescafé), one of the world’slargest bottled-water (Perrier) makers, and a top player in the petfood business (Ralston Purina). Its most well-known global brandsincluded Buitoni, Friskies, Maggi, Nescafé, Nestea, and Nestlé. Thecompany owned Gerber Products, Jenny Craig, about 75 percent ofAlcon Inc. (ophthalmic drugs, contact-lens solutions, and equipmentfor ocular surgery), and almost 28 percent of L’Oréal. In July2007 it purchased Novartis Medical Nutrition, and in August 2007 itpurchased the Gerber business from Sandoz Ltd., with the goal ofbecoming a nutritional powerhouse. Furthermore, by adding Gerberbaby foods to its baby formula business, Nestlé became a majorplayer in the U.S. baby food sector.
General Mills
General Mills was the U.S. number-one cereal maker, behindKellogg, fighting for the top spot on a consistent basis. Itsbrands included Cheerios, Chex, Total, Kix, and Wheaties. GeneralMills was also a brand leader in flour (Gold Medal), baking mixes(Betty Crocker, Bisquick), dinner mixes (Hamburger Helper), fruitsnacks (Fruit Roll-Ups), grain snacks (Chex Mix, Pop Secret), andyogurt (Colombo, Go-Gurt, and Yoplait). In 2001 it acquiredPillsbury from Diageo and doubled the company’s size, makingGeneral Mills one of the world’s largest food companies. Althoughmost of its sales came from the United States, General Mills wastrying to grow the reach and position of its brands around theworld.
The Kraft Heinz Company
The Kraft Foods Group and H. J. Heinz Company closed a mergerdeal in July 2015. The combined company was called The Kraft HeinzCompany, and became the third largest food company in North Americaand fifth largest in the world. Its most popular brands includedKraft cheeses, beverages (Maxwell House coffee, Kool-Aid drinks),convenient meals (Oscar Mayer meats and Kraft mac’n cheese),grocery fare (Cool Whip, Shake N’ Bake), and nuts (Planters). KraftFoods Group was looking to resuscitate its business in NorthAmerica. H. J. Heinz had thousands of products. Even prior to themerger, Heinz products enjoyed first or second place by marketshare in more than 50 countries. One of the world’s largest foodproducers, Heinz produced ketchup, condiments, sauces, frozenfoods, beans, pasta meals, infant food, and other processed-foodproducts. Its flagship product was ketchup, and the companydominated the U.S. ketchup market. Its leading brands includedHeinz ketchup, Lea & Perrins sauces, Ore-Ida frozen potatoes,Boston Market, T.G.I. Friday’s, and Weight Watchers foods. In 2013Heinz agreed to be acquired by Berkshire Hathaway and 3GCapital. The post-merger Kraft Heinz Company was alsodedicated to offering healthy food products to its customers byadapting to changing tastes and consumer preferences.
Financials
In the 2016 fiscal year, Campbell’s earnings from continuingoperations decreased from $666 million to $563 million, due todisruptions in product availability for a period of time. Organicsales declined 1 percent, while adjusted earnings per share (EPS)from continuing operations decreased from $2.13 to $1.82. Thelarger pie of the sales came from the U.S. market, whereas about 19percent of the company’s total sales were from internationalmarkets outside the U.S. With regard to financials, Morrisonstated: For fiscal year 2017, the company’s sales for yearending 2016 declined by approximately 1 percent to $7.961 amid thenegative impact of exchange rate volatility and decrease in organicsales. However, most of the adverse impacts were offset by thebenefits achieved by acquiring Garden Fresh Gourmet. The decline insales could be larger if company had not increased the sellingprices in 2016 to offset the loss of sales by decrease in salesvolume.
Similarly, for America’s Simple Meals and Beverage division,Campbell’s sales decreased 2 percent amid the decline in V8beverages and soup, but increased costs were up, wearing awaymargins. Also, the Global Biscuits and Snacks division salesdecreased 3 percent but for the Campbell Fresh division salesincreased 1 percent, which could be better if the company had notgone through the trouble of execution issues and cropdestruction.
Sustainability
Campbell Soup Company was named to the Dow Jones SustainabilityIndexes (DJSI) repeatedly and to the DJSI World Index. Thisindependent ranking recognized the company’s strategic andmanagement approach to delivering economic, environmental, andsocial performance. Launched in 1999, the DJSI tracked thefinancial performance of leading sustainability-driven companiesworldwide. In selecting the top performers in each business sector,DJSI reviewed companies on several general and industry-specifictopics related to economic, environmental, and social dimensions.These included corporate governance, environmental policy, climatestrategy, human capital development, and labor practices. Campbellincluded sustainability and corporate social responsibility as oneof its seven core business strategies. Campbell’s Napoleon,Ohio, plant had implemented a new renewable energy initiative,anchored by 24,000 new solar panels. The 60-acre, 9.8-megawattsolar power system was expected to supply 15 percent of the plant’selectricity while reducing CO2 emissions by 250,000metric tons over 20 years.
Additionally, Campbell employees volunteered an average of20,000 hours annually at more than 200 nonprofit organizations.Supported by local farmers and Campbell, the Food Bank of SouthJersey was earning revenue for hunger relief from salesof Just Peachy salsa. The salsa was created fromexcess peaches from New Jersey and was manufactured and labeled byemployee volunteers at Campbell’s plant in Camden.
What’s Next?
Campbell’s advertising campaign failed to assist the companymuch in gaining the expected traction in the ready-to-serve soupbusiness. Campbell was trying to correct this by introducing newproducts offering unique flavors into what many considered a ratherordinary product line. If the economy continued to improve wouldCampbell be successful in its international expansion, especiallyin lucrative emerging markets such as China? As the recessionbecame a distant memory, would Campbell’s name still resonate withAmerican consumers or would consumers venture back to restaurants?Would Campbell Fresh become a success or would it spoil? WouldCampbell’s soup simmer to perfection, or would the company be inhot water?
Q1. Critically discuss the key factors and forces in the generaland industry environments that affect processed food industry. Whatimpact does Russia-Ukraine war have on these key factors /forcesand consequently on Campbell’s demand for its products and marketposition.
Suggest actions Campbell should take to keep its competitiveadvantage alive. (35 marks-850 words).
Q2. Based on your reading of the case study, critically evaluatethe key resources available for Campbell to effectively andsuccessfully compete within its boundary and sustain a competitiveadvantage.
Discuss whether Campbell market position is supported by itsvalue chain activities. (35 marks-850 words).
Q3. Based on your reading of the case study, critically evaluateCampbell Business-level and Corporate–Level-strategiescomponents.
As a strategist, what recommendations you may suggest that keepCampbell competitive in international markets? (30 marks - 500words)