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June 29, 2011

GLOBAL: Cost-cutting Campbell quits Russia, shuts US plant

Campbell Soup Co. has decided to leave the Russian market four years after its entry as part of a series of measures to reduce costs at the US food company.

By Dean Best

Campbell Soup Co. has decided to leave the Russian market four years after its entry as part of a series of measures to reduce costs at the US food company.

The initiatives, which also include plans to close a US production facility, were announced yesterday (28 June), will lead to the loss of around 770 jobs.

Campbell said it would incur costs of around US$75m from implementing the moves but said it would enjoy annual savings of $60m in fiscal 2012. Those savings would rise to around $70m in its 2014 financial year.

The company plans to close its office in Moscow and wind up its business in Russia. Fifty jobs will be lost. Campbell entered Russia in 2007 as part of moves to boost its presence in faster-growing markets. The soup maker entered China at the same time and, speaking yesterday, COO and CEO-elect Denise Morrison said the company’s prospects were better in that market.

“Though Russia remains an attractive potential growth market, the results of the business we launched in that market in September 2007 have fallen short of original expectations. We believe that opportunities currently under exploration in other emerging markets, notably China, offer stronger prospects for driving profitable growth within an acceptable time frame,” Morrison said.

In the US, Campbell plans to shut its manufacturing site in the US city of Marshall in Michigan. Campbell will consolidate the production of its microwaveable Soup at Hand products at its site in Maxton in North Carolina.

The closure in Marshall is part of Campbell’s moves to revamp its production in the country. The company plans to move the production of ready-to-eat soups from a plant in Paris in Texas to two sites – the site in Maxton and a plant in Napoleon in Ohio.

The Paris plant will continue to make other Campbell’s soups, as well as sauces and beverages.

Some 130 jobs will be lost at Campbell’s HQ in Camden in New Jersey. The company also plans to outsource more of its US merchandising to retail agent Acosta Sales and Marketing.

In Australia, Campbell wants to automate packing at a biscuit plant in Virginia in the state of South Australia. The company will spend $40m on the move but said the switch will lead to the loss of 190 jobs, subject to union consultation.

Morrison, who will officially become Campbell president and CEO on 1 August, said all the moves would help Campbell fund the growth of the business.

“The supply chain initiatives will enable us to improve manufacturing efficiency and further adjust the utilisation of our assets to evolving consumer demand,” she said. “While a workforce reduction is always a very difficult decision, these actions will streamline our organisation and improve the level of coverage and the effectiveness of our sales merchandising activities.”

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