The soup business has grown cold. Can Campbell turn up the heat?
The many adjustments at Campbell, including the new products and the closing of plants, “felt like changing the tires on a moving car,” the company’s chief executive says.
In the research and development kitchen at Campbell Soup, chef Todd Lyons spent much of the past 18 months finetuning a batch of new recipes. Would shoppers go for chicken noodle soup with kale added as a healthful twist? (Answer: resounding yes.) Would a cauliflower soup seasoned with dill land in their shopping carts? (Answer: probably not.) Lyons was creating the culinary prototypes for two of three new lines that the packagedfood empire has rolled out on supermarket shelves in recent months. But it is also fair to say that he — along with an army of Campbell’s marketers, product developers and supplychain experts — was trying to cook up a recipe for the company’s future. Campbell’s soups are coldweather staples that debuted more than a century ago, products that were pioneers of mass food manufacturing and helped make shelfstable goods a fixture in the American pantry. But today’s growing preference for the opposite approach to eating — seasonal, fresh, organic — is hammering the famous brand.
Consumers ages 39 and younger have increased their consumption of fresh food by 23 percent from a decade ago, according to the market researcher NPD Group. And the center aisles of the grocery store — the long rows of canned goods, cereals, packaged cookies and the like — account for a shrinking share of supermarket sales.
Meanwhile, research from the market data firm Mintel suggests that shoppers are gravitating to small, boutique brands for food and other products. That’s a challenging pattern for a behemoth company that pulled down $7.96 billion in revenue last year, including from mass brands such as Pepperidge Farm and Goldfish, and whose products can be found in retail spaces as diverse as groceries, pharmacies and gas station convenience stores.
It is against this backdrop that Campbell’s U.S. soup business has entered a years-long rough patch, highlighted by sales that declined or remained flat for the past eight quarters. So the company has developed three new lines of soup — Well Yes, Garden Fresh Gourmet and Souplicity — to try to put its soup business back on a steady footing. Each line targets a slightly different shopper, looks starkly different from the red-and-white cans rendered in Andy Warhol paintings and is cast as an answer to shoppers’ desire to eat simple, healthful ingredients.
The marketing push is an effort to make store-bought soup a mainstay of millennials’ shopping lists. And its success or failure will offer lessons that could reverberate through the wider packaged-food industry, as Kraft Heinz, ConAgra and Mondelez International face serious head winds as consumers embrace fresh food.
On a different shelf
If shoppers are often steering clear of the center aisles, Campbell reasons it needs to meet them in the parts of the store that they visit. That is why two of the new soups, Garden Fresh Gourmet and Souplicity, are refrigerated products that come in plastic containers, not cans, that can be sold on the cold shelves that line a supermarket’s perimeter.
Souplicity is the highest-end line of the three, a single-serving organic product that costs $5.99 for a 17.6-ounce container and comes in such flavors as “Carrot Curry Ginger” and “Broccoli Parmesan Lemon.” This is designed for a health-conscious customer — picture, perhaps, a yoga devotee who already springs for items such as cold-pressed juices. Campbell made sure to markettest this one in Southern California, a hub of healthful eating.
“We saw an opportunity there for a very culinary experience, very clean experience,” said Suzanne Ginestro, chief marketing officer and general manager of innovation at C-Fresh, the division of Campbell Soup that makes fresh food.
Campbell made this line using a method called high-pressure processing, which is meant to help the product retain its color and flavor without preservatives. The company previously used this technique for organic juices and other Garden Fresh Gourmet items.
In Souplicity products, “there are broccoli florets that, without this technology, would be absolutely destroyed,” said Lyons, senior chef in the C-Fresh division. “Now they’re much more intact.”
Garden Fresh Gourmet soups, on the other hand, come in 24ounce containers, cost $5.99, and are aimed more at feeding a family. Campbell spent $231 million in 2015 to acquire Garden Fresh Gourmet, a health-focused brand that had built a loyal following for its small-batch salsa and hummus. The soups add to that offering and aim for similar brand positioning — no artificial flavors and sweeteners, but not organic.
Refrigerated soups also call for a different supply-chain execution than that used for canned soups: The shelf life of Souplicity, for example, is about 50 days, compared with two years for many canned soups. That means the new soups need speedier delivery to stores and must be transported in refrigerated trucks.
And then there’s the task of building a consumer base.
“Everything I’ve learned as a brand manager coming up through the ranks, I’ve had to unlearn,” said Ginestro, who has been in the food industry for about 20 years.
In her experience, a big food company takes a promising line nationwide right away, storming grocery store shelves and blitzing TV screens with commercials. That’s not what Ginestro is doing time, though. Since her team sees that shoppers are opting for small, artisanal food labels, they want to bring these brands to market in a similar way.
There are no major media campaigns now for Souplicity and Garden Fresh Gourmet. And the products so far are sold in just a small set of grocery stores, where Campbell can see how shoppers react to them and then slowly build into more stores.
“It’s much more organic, from the ground up. And that helps you deliver on this smaller, authentic, real [principle],” Ginestro said. “Let’s be completely transparent and let this business grow organically.” spins on traditional recipes, such as a “Chicken Noodle Soup” with white beans or a “Sweet Potato Corn Chowder.” It’s not organic, although artificial flavors and ingredients are shunned in manufacturing it.
The suggested retail price of Well Yes is relatively low, at $2.69 per 16.6 oz. can, and that’s crucial for reaching its target customer. This shopper, which Campbell dubbed “Maria” during its development process, is a young Generation X-er or a millennial. Maria already buys canned soup.
“She doesn’t restrict herself, she doesn’t have a bunch of rules in what she eats. But she does try to make positive changes along the way that will better her health,” said Sophie Arsenlis, director of soup and broth strategy at Campbell.
This may turn out to be an effective approach to hooking customers.
“Consumers don’t want to consume products where they feel like they’re on a diet,” said Erin Lash, an analyst at the investthis
Counting on ‘Maria’
The third new soup line, Well Yes, isn’t quite as much of a reach for Campbell. It comes in a can; you’ll still find it in center aisles. But the idea is to offer some healthful cues that shoppers are looking for — chicken meat without antibiotics, for example, and ingredients such as kale and quinoa. The flavors are different ment research firm Morningstar who studies the packaged-food industry.
Indeed, targeting a diet-minded shopper has tripped Campbell up in the past: Several years ago, it went big with low-sodium soups, trying to cater to the nutrition concerns of the moment. Turns out, customers didn’t find the soups very tasty without the salt. While Campbell still offers some low-sodium varieties, it pulled back significantly on this strategy.
At a presentation for investors last year, chief executive Denise Morrison spoke candidly about the hurdles Campbell faces. She noted that shoppers “continue to redefine the meaning of health and well-being” and that many “consider fresh to be the litmus test for health.”
Lyons, the chef, talked about brainstorming 60 flavor combinations before settling on four for Souplicity. He and his colleagues would taste a recipe again after it had been refrigerated for two weeks, tweaking it when, for example, they noticed how pronounced the lemon taste became over time.
The Well Yes team, meanwhile, created a group of everyday shoppers — people who fit the profile of the Marias the company was hoping to reach. They were brought in routinely for activities such as taste-testing soups and offering feedback on the label design. Campbell went into customers’ homes, poked around their pantries and tried to understand how soup fit into their lunch and dinner routines.
But it’s hardly a sure thing that these efforts will add up to success.
On a recent afternoon at a Giant supermarket in Washington, Maura Cortez, 24, said she hardly ever sets foot in the aisles containing canned items.
“I like to see what goes in my food,” Cortez said while making her way along the salad bar, assembling a lunch of lettuce, cucumbers, tomatoes, carrots and grilled chicken.
Samira Harris, 28, picked up some hot chicken noodle soup from the prepared-foods area a short time later. Would she ever buy canned soup?
“It has a metal taste to it, to me,” Harris said.
Plus, she added, she tries to cook from scratch most of the time for her four daughters so that she can avoid additives and ingredients she considers unhealthful.
Such sentiment is an enormous challenge for a company whose flagship product is a canned good you can stockpile in your basement for years. For many baby boomers, that quality was an emblem of convenience and reliability. For millennials, it is sometimes a drawback.
There is no guarantee that the company will change minds this time. It has made big moves before to reinvigorate soup sales, including with its 2012 introduction of exotically flavored soups served in microwaveable pouches, not cans. That brand, Campbell’s Go, also was meant to court millennials, and while it still exists, it hasn’t exactly been a transformational force.
And then there are the questions raised by the new products: Well Yes is aimed at people who already eat canned soups, and the goal is simply to encourage them to eat it more often. But couldn’t that simply cannibalize sales of existing Campbell’s products? Plus, it doesn’t do much to acquire new customers.
Garden Fresh Gourmet and Souplicity could bring in new shoppers, but if these items are deliberately withheld from the wide release accorded to other Campbell soups, they can generate only so much sales revenue.
With all the challenges facing the soup business, and packaged foods generally, Campbell has begun steering itself to be a different kind of company. In addition to the purchase of Garden Fresh Gourmet, it spent $1.55 billion in 2012 for Bolthouse Farms, which sells fresh carrots and refrigerated beverages. In 2013, it bought Plum Organics, a popular food line for babies and toddlers.
Making these deals and other changes, such as closing five manufacturing facilities to cut costs, “felt like changing the tires on a moving car,” Morrison said at the investor meeting.
The competition, after all, is coming from all directions.
“There’s an asymmetry in the food industry today, with smaller, more nimble competitors that fly under the radar,” she said. “Unless you’re paying close attention — and we’re paying very close attention.”
Souplicity This new product line is organic and comes in single-serving packages. It is designed for healthconscious consumers.
Well Yes! Intended for young folks who care about health but are not dogmatic about it.
Garden Fresh These soups have no artificial flavors or sweeteners but are not organic.