Necessity may well be the mother of invention, but it is even more the mother of re-invention. The company we are dealing with today, the American Campbell Soup Co, has become quite expert on re-invention during the past few years, reworking its recipe for success and re-positioning itself on the world-wide provisions shelf.
Thanks to artist Andy Warhol and over a century of dependability in the grocery store, Campbell Soups became an American icon, but even icons can have their problems.
At the beginning of this decade, Campbell struggled in the face of falling soup sales and a lack of product innovation. The company has set out to find new international growth and tap into the fads that are constantly a feature of the global food business. It has done so largely through acquisitions and the present buying spree may not be over yet.
The Campbell Soup Company traces its origins back almost to the American Civil War but the genius of a 24 year old chemist, Dr John T Dorrence, was a decisive influence. In the early years of the 20th century he developed a way of abstracting the water content in soup, while retaining the nutrients and flavour. Campbell never looked back.
The company did not confine itself to canning soup, even though soups and sauces still account for 35pc of the group's $8bn (€6.3bn) turnover. It produces an array of products like Swanson Broth, Prego pasta sauces StockPot, Paxo Mexican sauces and many more. It also has Pepperidge Farm, a producer of cookies. Its beverage brand V8 sells healthy drinks made from eight different vegetables with multiple combinations.
As mentioned earlier, the current decade has seen Campbell struggle. To revitalise the company, the new CEO, Denise Morrison, in 2011 launched a five-year plan. Its first objective was to arrest the decline of sales of soups and sauces in the US. The plan also called for international expansion and for growth in its snacks and health business. Last year the decline of soups in the US was reversed. International expansion shifted to faster growing markets like Asia and Latin America and surprisingly Campbell decided to exit Europe. It also opened a new $30m innovation centre, introduced 29 new soups, and is in the process of introducing 200 new products. The group hitched its wagon on the acquisition trail with special interest in firms that embraced healthy eating.
Last year it purchased Plum Organics, a leading provider of premium organic foods and shakes. This company satisfies the nutritional needs of not only adults but toddlers. It is the No 4 baby food brand in the US and No 2 in the organic food segment. Two years ago, Campbell acquired a company call Bolthouse Farms for $1.5bn. This is a vertically integrated food and beverage company based in California and focused on high value health products.
In keeping with the strategy of increasing revenue in fast growing products/markets it recently purchased a Danish company, Kelsen. A producer of quality biscuits, Kelsen sells in 85 countries and is strong in China, where it has been marketing brands like Royal Danske for over two decades. Campbell's is hoping Pepperidge Farm products can piggyback on Kelsen's expertise.
The company is worth $13.50bn with a share price of $42 up from $27 10 years ago. Total sales last year were $8bn; US soups and sauces sales contributing $2.8bn and global baking at $2.3bn. The company grew its net income from $460m to $820m, helped by a reduction in administration costs. Campbell is signalling that 2015 performance is likely to fall short of target but is projecting sales of $8.5bn in 2016. Some analysts continue to see some of Campbell categories like cookies, crackers and other snacks in trouble, suggesting more acquisitions may be needed. The present volatility in the market can be seen as a threat or opportunity for investors but at the current price I'm not sure Campbell's stock is cheap enough.
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