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The Cambell Soup Company Essay, Research Paper

The Campbell Soup Company

The Campbell Soup Company has evolved into one of the strongest food companies on the market today. For the past two decades, the company has employed three different CEOs with three different strategies. In my analysis, I will show with each CEO and each new strategy, how Campbell has managed to turn its obstacles into opportunities and remain ahead of its competitors.

George McGovern brought a corporate strategy that focused on satisfying the consumers’ expectations, developing new products, maintaining high standards of quality, and expanding the business with an acquisition strategy.

The main focus was to deliver what the consumer wanted in convenience food. The main desires were identified as nutrition in the food, convenience, price, quality, and uniqueness. Business managers were expected to fulfill these desires and improve or change as needed. McGovern’s strategy for each business unit focused on improving operating efficiency, developing new products according to ever-changing trends, updating advertising for both new and present products, and of course high standards regarding quality.

McGovern implemented a five-year plan that included four financial objectives. He wanted to see a 15% annual increase in earnings, a 5% increase in volume, a 5% increase in sales, and an 18% return in equity by 1986. The highlights of his plan were developing and introducing new products, and acquiring new divisions in the business that would bring at least $200 million dollar sales a year. His plan seemed to work, at least for a short time. By the end of 1984, sales were up by 31%, a total of $3.7 billion dollars! Earnings increased by 47%, to a total of $191 million!

McGovern preached customer satisfaction, and demanded high production quality, but his main focus was growth through new product development and acquisition. During his time at Campbell, the company introduced 922 new products. This is more than any other food company. McGovern was consistently looking into research for answers to remedy troubled divisions. Pepperidge Farms was Campbell’s third largest division, but some of its new products were not selling as it hoped to. As a result, he sent Del’s Vegetables in pastry back into research and development to improve quality. He also put a new management team to overlook and give an extension review of each new product. Because of McGovern’s in-depth research of customer’s wants and needs, he was able to create new flavors for the Vlasic pickle! The consumer wanted more variety; he produced.

McGovern’s strategy to get his managers involved in the new product development started at the grocery store, literally. McGovern himself shopped weekly for his family, part so he could see what and how the competition was selling, and part to make sure his own displays were shelved to his expectations. He often talked to other shoppers to get their suggestions first hand. He encouraged his managers to do the same. To reinforce this method, he often held meetings at the grocery stores themselves so managers could talk to shoppers afterwards. McGovern structured a free for all product development for the different units. This encouraged creativity and broke any limits that would put a frozen food unit in developing solely frozen foods. He began allowing 30 to 40 million dollars to support new product developments. He encouraged development, regardless of the failure rate. He wanted his teams to know it was OK to fail, which was just a natural part of the business.

McGovern also emphasized and changed the way the company advertised. Because of changing times in health and fitness, his ads reflected this change. The slogan went from ” Mmm. Mmm Good” to “Soup is good food.” I can personally remember the first time I saw a commercial that showed a slender looking woman in an even more slender looking dress, telling viewers soup is good food, and it only as 90 calories per can. It’s funny how a commercial can have such an impact. Every time I pull out a can of soup, I think of that woman, and think “great, I’m only eating 90 calories!”

McGovern expected no less than zero defects. He had nationwide conferences for managers that included ways to improve quality. One of those strategies was to conform the company’s equipment to produce products the consumer wanted. Before, it would produce what it could with present equipment and risk reducing customer satisfaction.

New product innovation is a great asset to the company, however Campbell spent too much time and energy on new products and excessive advertising. From 1982 to 1989 Campbell’s marketing budget grew from $275 million to $552 million dollars. It’s advertising expenditures went from $67 million in 1980 to $197 million in 1989. With the entire new product innovation came high risk. When Campbell’s started its new product campaign, it spent $30 to $40 million for creation of new product lines. Usually it would use $10 million to develop and test new products, and it also used $10 to $15 million in advertising to launch the new item. He insisted on new items, regardless of cost. He preached he would rather his divisions create new products and fail, than no creations at all. Typically in the food industry only 20% of new products lasted for more than a year. But Campbell surpassed this average. During the 80’s one out of eight products were successful.

McGovern had no limit to the amount of money he spent to encourage new products and acquiring businesses and updating the company. McGovern spent $150 to $300 million annually for production, packaging, and labeling. This decision was based on market considerations and consumer trends. As a result of overspending and turning manager’s attention to product innovation, the company began to

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