Sunday, June 22, 1997

Campbell has taste for overseas markets

By SUSAN WARNER / Knight-Ridder Newspapers

TOKYO - At the Peacock supermarket, past the eel and urchin, next to the dry miso soup and the wasabe, sits the great American icon.

Campbell's Soup, occupying only an arm's length of two shelves, is an humble presence.

At a U.S. supermarket, Campbell's consumes nearly half an aisle in a blazing wall of red and white. Here, it looks like a token brand in the Acme ethnic aisle.

But to Campbell Soup Co. this grocery shelf in Central Tokyo, represents the frontier.

Up against slow sales and market saturation at home, Campbell is out to build new business overseas.

"For a long time, international was more a hobby than an area of strategic imperative for us," said Dale Morrison, Campbell's president of International and Specialty Foods. "We thought we could just put it out on the shelf and they would come."

International sales made up 31 percent of Campbell's total sales of $7.7 billion last year.

By comparison, H.J. Heinz's overseas sales were two-thirds of its total. At CPC International, the New Jersey maker of Campbell's key overseas competitor, Knorr dry soups, international overseas sales were 60 percent of the $9.8 billion in sales and 60 percent of its profits.

"That's the one thing that Campbell has been behind on. They need to grow internationally. It is an absolute necessity," said Mitchell Pinhero, who follows the company for Janney Montgomery Scott in Philadelphia.

For many large manufacturers, the global economy has meant the chance to shift production from the U.S. to take advantage of low-wage workers in emerging economies.

But as those industrial workers begin to earn more money, they increasingly become targets of American corporations, such as Campbell, as it forages for new customers.

Just as condensed soup took root in the U.S. during the industrial heyday of the early 20th Century, Campbell sees its time now dawning in newly industrializing nations.

Morrison, who has spent half his time overseas since taking his current job in January, sees global soup consumption - literally - as a foodchain.

At the bottom is homemade soup, which accounts for most soup consumed around the world. Little has changed in this product since caveman days. Water. Heat. Some vegetables, maybe some meat.

Once workers get a factory job, they have more money and less time, and start to speed up the soupmaking with boullion or prepared broth. When they get a little more money, they move up to dry, dehydrated soup.

The next step up the ladder is condensed soup. And as consumers in Asia and other emerging economies reach this point, Campbell expects to be waiting.

Europe is there already, and much of the U.S. market has been there for a long time.

Campbell is trying to extend the ladder in the United States. In the last year it has introduced premium soup in glass jars and frozen restaurant-caliber soups for U.S. consumers whose tastes and financial position have graduated beyond its signature red-and-white brands.

Outside the U.S., the market for commercial soup is about $5.2 billion a year, much of it in dry soup, said Morrison.

"Of this we have a tiny, little, minuscule, 10 percent share," said Morrison.

Japan, where most of the commercially sold soup is dry, is a prime battleground.

But consumers in Japan are uncertain about Campbell's.

"We already have our miso soups. I do not think this will be a success," said Chiaki Watanabe, a 25-year-old office worker.

The first obstacle for Campbell is the can itself. In Japan, most food is sold fresh, or in clear packaging. Cans are considered dirty.

So, when Campbell began its latest push into Japan two years ago, it decided to go with a cleaner, more expensive pop-top opener.

Then it created a character called Mr. Campbell, a talking soup can with a friendly smile, who stars in Japanese television commercials.

William Douglas, Campbell's regional director for International Grocery in Japan, said Mr. Campbell is leading Japanese consumers to feel affection for a can.

But Mr. Campbell is also building a brand name.

"You look all around Asia and you see a lot of emerging markets and one of the first things they appreciate are brands - whether they're moving from a bicycle to a television set to a car," said Douglas. "Brands are a way of demonstrating, 'I've arrived.' "

The cultural nuances of each nation require individual attention. But at the same time, Campbell is also looking for what Morrison calls "borderless ideas."

"Global brands are about taking a good idea from Japan, or anywhere else, and running it around the world," said Douglas.

At the Tokyo Peacock, Campbell sells a new variety of condensed" double corn" corn soup. The double corn idea sprang from Campbell's success last year with 33 percent more chicken in its chicken noodle soup.

In England, the company successfully introduced "half-fat" cream soups. Last year, it imported the idea to the U.S. with a new line of 98 percent fat-free cream soups.

Morrison said this amounts to a new interpretation of R&D he jokingly calls, "research and duplication."

Craig Rydin, president of Campbell's Godiva division, which is also launching an assault on Japan, said packaging is crucial.

Two years ago, Godiva formed a global packaging committee of executives from around the world that meets four to six times a year to plan the chocolatier's holiday packages.

"You might be predominately red in Europe and in North America and they may be blue in Japan - but they all have the same feel the same theme," Rydin said.

To bring products across cultures, Campbell needs to develop managers with global savvy.

"We're getting better at it," said Morrison, who worked in Canada and England for Pepsico. "We're starting to think and share ideas like a global company, rather than a U.S. company."

But Campbell is still thinking like a U.S. marketing machine.

Once consumers have enough money to buy Campbell's Soups, which sell for $2 a can in Tokyo, they are often living in urban areas, with newspapers, magazines, and television. That gives Campbell the mass media vehicles it needs to buy its way into the culture.

Campbell plans to double advertising spending in Japan next year, to help build a toehold in Tokyo, where in two years it has grown from a 2 percent market share to 9 percent.

He said he sees Japan and Australia - which contributes 8 percent of Campbell's total sales - as the two sides of a giant goalpost. China and Southeast Asia become the marketer's ultimate field goal.

In China, which is much farther down the foodchain from Japan, Campbell expects to push its broths as a convenient base for homemade soup, to ease consumers into commercial soup.

That, though, will be tricky, said Pinhero, the food analyst.

He said it was easier for Coca-Cola to introduce a totally new product into emerging markets, than it is for Campbell to introduce its interpretation of a homemade food that is well known.

"Even as fast as they want to run,it is going to be a slow process," he said.

In China, another huge obstacle for Campbell is a primitive distribution system. In Japan, where supermarkets are just now taking hold against traditional mom and pop groceries, Campbell has formed a joint venture with a Japanese prepared foods company giving it access to more than 200 salesmen throughout the company.

In Europe, where food retailing is even more advanced, Campbell bought a German soupmaker outright last fall and folded it into its own operations.

The company's global strategy is modeled, in part, on a program Morrison developed as president of Campbell's Pepperidge Farm subsidiary. The idea is to cut costs, then use the savings to pay for more marketing spending on a tight roster of key products.

Selling off businesses that pull profits from stronger brands is also a part of the strategy. Last week, Campbell said it would sell off a German cold-salad maker.

The program has seen results with Pepperidge Farm's Milano and Goldfish sales.

"The sleeping giant," Morrison said, "is soup."

Pinhero said that while Heinz and CPC have stronger sales overseas, they have a wide range of products and the costs of distributing them cuts into profitability.

"They're spread too thin," he said.

Morrison looks to Coke, that other great American icon, which earns 80 percent of its profits from overseas sales.

"Coca-Cola created this incredible business with all-guns-ablazing marketing," he said.

"And they didn't do it for just one year. They've been at it a long time," Morrison said. "We've got the same kind of opportunity."