Campbell's Chief Looks For Splash of Innovation

Campbell's Chief Looks For Splash of Innovation

Campbell's Chief Looks For Splash of Innovation

 

Excerpts from an interview with the Wall Street Journal

When Douglas Conant became CEO of Campbell Soup Co. seven years ago, naysayers bet against him being able to revive soup with today's busy and health-conscious consumers. Mr. Conant proved them wrong after remaking the company's condensed soups, introducing soup in microwavable containers, revamping marketing and redesigning shelving systems in supermarket soup aisles.

Campbell CEO Douglas Conant is launching new soup lines next year.

Now, Mr. Conant, 56 years old, has more proving to do. Campbell, which also makes Pepperidge Farm foods and V8 beverages, is struggling with high ingredient and energy costs as well as a competitor that beat it to market with a successful new product.

An avid sports fan and reader of business-leadership books, Mr. Conant keeps his own personal mission statement in a frame on his desk. He recently talked about the challenges of selling soup in China, getting Americans to eat their vegetables and why more people are cooking with broth. Excerpts:

WSJ: In your latest quarter, you reported that total soup sales were down by 3%. Why is that?

Mr. Conant: We had lackluster innovation beyond reduced-sodium soup and it just wasn't sufficient to compete with what I think was pretty good innovation on the part of competition. So this year we lost the innovation war in soup. We're the leader in soup and that can't happen again.

WSJ: I assume you're referring to General Mills's Progresso soup. How did they beat you and what are your plans for addressing that?

Mr. Conant: Progresso had good execution of light soups tied to Weight Watchers points, which got good traction with their primary audience of women 35 and older. We have to have a competitive entry there and we will. Our Select Harvest line we're launching next year will have a full complement of light soups.

WSJ: You recently told investors that you didn't have the right pricing plan in place.

Mr. Conant: We had anticipated costs were going to be up 3% to 4% in this past fiscal year. It turned out they were up 7%. In much of our portfolio, we were able to price to begin to cover those costs. In our soup portfolio, we were not.

WSJ: The bright spot in your soup business this year was broth. What's behind the increased demand for broth? Are people cooking more?

Mr. Conant: Actually they are, and our campaign around broth is, basically, whenever you're cooking with water you can cook with broth and have a more flavorful product. Also, this past year we introduced new sizes [of broth packaging]. We created a chef size for the heavy user and a smaller size for the occasional light user. Just getting the right sizes for consumers helped drive our growth this year.

WSJ: You're moving into Russia and China with your soups and broths. You tried to enter China in the 1990s and it didn't work out. Why is this time different?

Mr. Conant: In the '90s we had this American sense of Manifest Destiny. We thought we could just take our existing products and ship them to other parts of the world and they would be naturally hungered for, somewhat like Coca-Cola or Pepsi Cola. Well, the difference is that in every culture you go into, soup is one of the first foods that was discovered by that culture. You can't just say 'Well, we like chicken noodle here so they'll like it in China.'

Half the world's soup consumption is in Russia and China and it all happens to be homemade. So what we had to do was put teams on the ground in Russia and China for three years, just living with consumers and studying how they eat soup and trying to uncover a way for us to participate in that soup occasion. We discovered they weren't prepared to accept ready-to-serve products. So we basically have soup-starter concepts.

WSJ: Does Campbell have a position on the food-for-fuel issue and the government mandate on how much corn should be used to make ethanol?

Mr. Conant: The world has changed since the ethanol incentives were put in place and what we're saying is, it has to be re-examined because it had unintended consequences. The people that enacted it didn't realize the impact it was going to have -- that by planting more corn you'd be planting less wheat and that the price of that wheat was going to go up so much because the demand for wheat globally is so high.

WSJ: Do you think food companies benefit in a slowing economy?

Mr. Conant: Typically, food companies in inflationary times are a safer haven for investors because people need to eat. This is an unusual time, because for the first time in my career, we have inflationary times but we also have this huge spike in our grain costs and our fuel costs are at unprecedented levels.

WSJ: You're going to replace your Campbell's Select line with a new soup line under the V8 brand. Why has it been so hard to come up with a successful premium soup?

Mr. Conant: The soup category, until this year, has grown at a faster rate every year for four years, which just signals that the current offerings are good. When you try to come in on top of that with a premium product in a value-sensitive world, it's hard. It's probably not the perfect time to introduce premium-priced items in a high-inflation environment. That having been said, if you get the right value proposition, it does work.

WSJ: You've reinvented the V8 brand from being a vegetable juice or a fruit juice to being a vegetable and fruit blend with your V8 V-Fusion line. Why did you do that and what have been the results?

Mr. Conant: Americans don't eat enough vegetables. Our scientists were able to come up with a fruit and vegetable blend, which doesn't have any of the taste of vegetables but delivers a full serving of vegetables in every eight-ounce serving. Wellness is the No. 1 trend, by far, in consumer foods right now and this is right in the sweet spot. V8 will be our next billion-dollar brand.

WSJ: Do you think the food industry will undergo further consolidation?

Mr. Conant: I personally don't see the value of consolidation. I don't think bigger is better and I think focused food companies are the way to win in a sustainable way. But that having been said, Wrigley was just acquired by Mars and Hershey is always rumored to be merging with Cadbury, so who knows.

WSJ: You recently hired a mergers-and-acquisitions expert (Tarkan Gürkan from Lehman Brothers). What kinds of acquisitions are you looking for?

Mr. Conant: We have our three cores: simple meals, baked snacks and healthy beverages, and we're going to be looking to build out those areas of focus both with internal development and also with strategic fold-ins and fill-ins.

WSJ: Since you're from the Chicago area, I have to ask: Cubs or White Sox fan?

Mr. Conant: Cubs! A friend of ours says, "You've got to be careful with those Cubs. They'll break your heart." But I'm an eternal optimist. I think this is the year. It's got to be.