BRICs and beyond: Campbell Soup Co. looks to expand in China
With problems at home, it could have been tempting for Campbell Soup Co. to leave its emerging-market ambitions on the back-burner.
The US food group has had recent successes in its domestic market - its baked snacks business is motoring along nicely - but its core soup operation is struggling amid fierce competition and the company's promotional activity has failed to gain the traction it wanted with shoppers.
Alongside these domestic issues, Campbell is undergoing something of a management overhaul. After a decade, president and CEO Doug Conant is stepping down in July to be replaced by Denise Morrison, who moved from her role leading Campbell's North American business to COO in October in preparation for taking the top job.
Upon becoming COO, Morrison immediately made a number of senior appointments, including that of Sean Connolly to succeed her in running Campbell's North American operations. This week, Connolly's team was announced, with new appointments covering soup, simple meals, Campbell's sales organisation on the continent and its foodservice arm.
However, that was not the only notable announcement from Campbell HQ this week. The company also announced plans to form a venture in China, a market it first entered in 2007, but one in which it is now looking to expand. Campbell is set to formally team up with its Chinese distributor, Hong Kong-based Swire Pacific, and create a production, marketing and distribution venture run from the soup maker's offices in Shanghai.
Such have been the problems in the US that Campbell's business in China (and in Russia - the company entered both markets at roughly the same time) has been almost overlooked. Its presence in both countries remains small. In looking to build a soup business in China, Campbell ventured into territory where other multinationals had yet to tread. As a Campbell spokesman told just-food yesterday: "The competition in the market is home-made behaviour." China's soup market is huge but is very traditional - consumption of home-made soup dwarfs that of ready-to-serve soups - and Campbell faces an uphill battle to win over local consumers.
Nevertheless, the company believes in the potential of its foray into China. Announcing Campbell's venture with Swire, Conant said: "We continue to believe that developing a commercial soup market in China represents a tremendous business opportunity for our company."
Swire chairman Christopher Pratt also outlined his belief in the potential of the market. "The consumption of soup is an integral part of Chinese dining culture and its commercialisation has exciting potential which we believe this new partnership can realise," Pratt said, although his comments underlined just how early it is in the development of a 'Western-style' soup sector in China. Indeed, Campbell refuses to disclose its sales in China, insisting it is "early days" for the business in the market.
With such pressing issues at home, one could be forgiven for questioning why Campbell continues to press ahead with its business in a market like China, where it faces entrenched, traditional consumer behaviour.
However, the Campbell spokesman outlined why China remains an attractive market for the business. "The size of the market combined with the deep cultural affinity for soup makes China very attractive to Campbell. It is very infrequent that you see the combination," he said.
"To give you some context, soup consumption in China far exceeds that of the United States, where there are approximately 14bn soup servings consumed per year. Compare that to the 355bn servings of soup are consumed in China annually."
Campbell has recently expanded its product range in China from the concentrated broths it originally sold to several varieties of ready-to-serve soups. The venture, which could get up and running as early as this month, will look to build awareness of Campbell's products, a tough task in such a traditional sector. Campbell, however, remains committed to the market.
"We're pleased with our progress in China. We're moving ahead at deliberate pace. In both China and Russia, we've established relationships with the premium distributor in the country. That is very important progress," the spokesman said. "We have a long-term view for both China and Russia, as they each represent a significant growth opportunity for Campbell."
Companies: Campbell Soup Co.
Casino's anger towards the Diniz Group intensified this week as it became clear that its fellow shareholder in CBD had been in talks to merge the Brazilian retailer with the local operations of Carref...
Campbell Soup Co. has appointed former Coca-Cola Co. executive Gareth Edgecombe to the role of president of its operations in Asia-Pacific....
- On the move: What's in store from Tesco's new CEO?
- On the money: Can Premier build H2 sales momentum?
- Focus: Lindt plays safe with Russell Stover buy
- Interview: Bell hits out at German cartel ruling
- Focus: Progress but Campbell faces questions
- UPDATE: Premier establishes international unit
- Campbell issues warning on 2014/15 fiscal year
- S&A Foods announces restructure, 55 jobs to go
- Universal Robina to buy biscuit firm Griffin's
- Premier launches Oxo pots range in UK