Campbell Soup Industry Analysis

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Campbell Soup Industry Analysis

Industry analysis is an assessment of the current business environment of a business entity. The analysis is particularly important for a business to know and understand the economic environment in which it operates and how the economics can be explored to create a winning competitive advantage. To conduct a successful industry analysis, a business or its consultants need facts about the economic market place, features such as economic and political underpinnings in the business environment, considerations of Michael Porter’s five forces model of industry analysis, suitable time and an expert point of view in the analysis. This paper assumes the role of an expert industry analyst for Campbell Soup Company. The analysis captures a brief history of the company and the industry it operates, the company’s profile with regards to membership of top management, the business model, and the milestone of the company. The paper further analyzes the size of the industry and the growth in the past five years and the resultant level of concentration, any changes occurring in the macro environment. Lastly, the paper uses the five forces to analyze the nature of competition in the industry, how dynamic the industry is, and the nature of the value added chain.

Section 1: Internal Analysis

The foundation of Campbell Soups Company traces back in 1869 by Joseph Campbell (fruit merchant in Bridgeton, N.J) and Abraham Anderson (icebox manufacturer from South Jersey). The company started with production of canned tomatoes, vegetables, soups, jellies, minced meat and condiments (Campbell Soup Co., 2020). The company has been one of the largest food companies globally, something attributed to the leadership of William Beverly Murphy between 1949 and 1972. Under his leadership, the company added more brands like Franco-American's gravies and pastas, Pepperidge Farm's breads, V8 vegetable juices, cookies, Swanson broths, and Godiva's chocolates. The company is a multinational food and beverage enterprise, headquartered in Camden, N.J and currently recording about $8.1 billion of annual sales. The company relies on its brand name, commercial sponsorship and heavy advertising as tools of managing competition. Currently the Company operates majorly in the US, Canada, and also has branches in Germany, Malaysia, Denmark, Great Britain and Australia (Campbell Soup Co., 2020).

The Company does business in Food and Beverage Industry, and is recognized for high quality soups and simple meals, snacks and beverages. Although this attribute is popular, the company has been faced with questions of health and GMO with regards to use of high doses of preservatives and genetically modified materials. The Company’s portfolio revolves around two businesses in North American market, first portfolio deals with Snacks and the second with Meals & Beverages. The strategy helps the company to leverage on their iconic brands and strong position in the market. The company’s portfolio also extents to Pepperidge Farm Cookies, Snyder’s of Hanover Pretzels, Plum baby food, Late July Snacks, Pacific Food broths, Lance sandwich crackers, Goldfish crackers, Prego pasta sauces among others (Campbell Soup Co., 2020). These products fall under the two divisions of operation namely Meals & Beverages and Snacks.

Top Management

Mark A. Clouse is the president and the CEO of the company from January 22, 2019 and thus the 14^th leader of the company. He has many years of experience in the Food industry which includes senior management with top companies like Fortune 200, Pinnade Foods, Mondelez International among others. He has over 20 years of experience. He is also an experience pilot, having served the U S Army after graduating from U.S. Military Academy at West Point with Bachelor Degree in Science in Economics (Campbell Soup Co., 2020).

Xavier Boza is serving as the Executive Vice President and Chief Human Resources Officer since July 2018. He joined the company in 2015 as the Vice President Human Resources for the Global and Snacks Divisions. He earlier worked at Kraft Foods for four years before serving as Vice President Human resource at Kellogg’s Latin America business wing. He has 30 years of experience after graduating with B.S degree in Business Administration from Western New England College and MSc degree in International relations from Webster University.

Mick Beekhuizen serves as the Vice President and Chief Financial Officer since September 2019 and is responsible for financial function such as tax, audit, eternal development, treasury among others. Before his current position where he served as Executive Vice President, and Chief Finance Officer at Chobani for three years, Executive Vice President and Finance Chief Officer for Education management Corporation and Managing director for Goldman Sack role for 13 year. He holds M.S degree in Industrial Engineering and Management from the University of Twente, Netherlands (Campbell Soup Co., 2020).

The Company uses two main models namely direct sales and franchising. The most dominant model is direct sales to consumers, retailers, wholesalers and supermarkets. The direct sales model is particularly dominant because the company’s brand is popular among millions of households and thus online ordering and delivery overrides franchising (Campbell Soup Co., 2020). Through the business model, the company has realized some significant milestones. The company delivered four consecutive quarters, meeting or exceeding its financial goals. The achievement is attributed to change of strategic direction by focusing on portfolio and improved leadership. The Company is also implementing a new operating model which is believed to be potential to fuel the business by balancing investment and building new capabilities. The Company is nevertheless faced with the question of the drastically increasing health awareness. Consequently, it had to bow down to pressure of labelling its products of GMO raw materials as well having to minimize use of preservatives (Campbell Soup Co., 2020).

Section 2: External Analysis

Industry Size

It is not easy to determine the size of food industry in which Campbell operates due to the fact that it operates in about 160 countries across the globe. Nevertheless, the Food and Beverage industry in the US can be determined as at 2019. According to Campbell Soup Co., (2020), the food industry in the US include foods sold by food retailers like grocery stores, drug stores, mass merchandise, convenient stores and food facilities amounted to $860,363 million with Confectionary & Snacks taking the greatest percentage of $267,366.7 million followed by meat at $142,678.2 million (Statista, 2020). The industry is thus huge, something attributed to the daily, and basicness of food. Worth to note is that the industry is characterized with bottleneck completion and Campbell in the same year has sales of about $8.1 billion only (Campbell Soup Co., 2020). In the NAIC codes, Food Services business is under the NIAC two-digit code of 72. The industry is partially concentrated. In other words there are subsector within the industry which are highly concentrated for example specialty canning (311422), flavoring syrup and concentrate manufacturing (311930), and other snack food manufacturing (311919) (Saitone & Sexton, 2017). Breakfast cereal manufacturing is moderately concentrated (Saitone & Sexton, 2017).Nevertheless the food industry is generally expanding to accommodate increasing population and food tastes preferences and taboos.

One of the main changes taking place in the macro environment is the increasing awareness and concern on health. Many people are increasing becoming concerned about their health with regards to consumption of highly processed and manufactured foods. Becoming are becoming concerned about the association of highly processed and refined foods to some types of health conditions like cardiovascular diseases, diabetes and some types of cancers (Duquesne et al., 2006). Additionally, some people are equally becoming concerned about consumption of GMO and GMO related products. Consequently, there is danger in the consolidation of some market niches. Campbell currently is obligated to label its products containing GMO materials, a factor which may see it lose some markets.

PESTDG Analysis

PESTDG Analysis is employed to analyze the segments and elements in the general environment, which is constituted by political and legal segment, economic segment, socio-cultural segment, technological segment, demographic segment, and global segment (Hitt, & Hoskisson, 2012).

The Political and Legal environment influences a whole lot of issues which directly or indirectly affects the business of Campbell. These issues include bureaucracy, legal policies and regulations, intellectual property protection, trade regulation tariffs, taxation, wage legislation, work and week regulations, industrial safety regulations, product labeling and mandatory employee benefits (Hitt & Hoskisson, 2012). Other political factors such corruption, political stability; risk of military invasion also affects the macro environment. At the present time, bans of international travel due to the global pandemic (Covid-19) has reduced the market size significantly.

Economic environment id defined by many factors including competition, inflation, minimum wage regulation among others (Hitt & Hoskisson, 2012). Campbell has been operating in a highly competitive environment with other global giants in the food industry. Additionally, it has to face inflation on the cost of product sold for which it uses strategies such as increasing price of commodities, commodity hedging and cost productivity initiatives. Furthermore, the company is also exposed to market risks such as changes in foreign currencies, interest rates and commodity prices (Campbell Soup Co., 2020). Nevertheless, the sensitivity to drastically changing market dynamics helps the company to re-strategize to remain commercially viable.

Social-Cultural Environment is dynamic and diverse (Hitt & Hoskisson, 2012). With increasing information and awareness about the close association of food and health, most market have become more sensitive to highly processed and refined foods and thus avoid them. This has negative impacts on the market share. The company has therefore been compelled to put in place strategies to mitigate the dynamics for instance, introducing meals and snacks as the second division of its business.

Technological Advancement has seen the company improve its marketing strategies and well as production technology. The company not only uses the conventional media but heavily relies on social media for advertising.  Modern technologies have also been incorporated to expand the lines of products and currently the company has about 3,600 brands of food and beverage products (Campbell Soup Co., 2020). The social media technology has seen the company slightly cut down of advertising while improving its value chain structure in the consumer Goods sector.

The Demographic segment influences the market niches targeted by Campbell Company like any other. Demographic factors such as ages, awareness level, and income distribution influences income distribution, demand and tastes and presences (Hitt, & Hoskisson, 2012). Children, youths, middle aged adults and elderly people all have different tastes and preferences and since Campbell targets all of them, they have had to diversify their brands so that all interests are taken care of.

The global aspects are equally like the present outbreak of Covid-19 pandemic affects all markets. A more practical is the regulation with regards to global warming. All businesses across the globe are expected to include policies which help with the fight on global warming.

Five Forces Model

The model was first established by Michael Porter in 1979 as a framework for the assessment and evaluation of the competitive strength and position of a business enterprise (Dobbs, 2014). Figure 1 below summarizes the content of the five forces model.

Figure 1: Five Forces Model

Supplier power is an assessment of how easily suppliers of inputs influence prices. Supplier’s aspect of influence include their number, uniqueness of their products and services, relative size and strength of the supplier and the cost associated with switching from one supplier to another (Dobbs, 2014). The problem of dealing with supplier has partly been solved by Campbell by partly producing their own raw materials like potatoes, tomatoes and wheat.

Buyer power factor assesses how easy buyer can influence prices down. Buyer influence prices by their demand which depends on their number, cost to the buyer of switching from one supplier to another and the importance of every individual buyer to the organization. Controlling buyers depend on how many they are and whether they are powerful on not.

Competitor rivalry is an essential factor in any market (Dobbs, 2014).  The food industry in particular has many competitors who offer minimally differentiated products and thus making smaller. Consequently, Campbell has been compelled to invest in thousands of brands.

Threat of Substitution is rampant in the food and beverage industry because somebody can eat almost any food when hungry. Customers of Food and Beverage industry can easy get an alternative when prices change. The market is thus less attractive.

Threat to New Entry is a common challenge that the participants in the food industry, have to battle. The market is characterized by relatively stable demand and as such many entrepreneurs are attracted resulting into many competitors. Nevertheless, Campbell partly relies on their economies of scale to remain sustainable.

The Five Forces are essential for assessment and evaluation of the competitiveness of an organization in a market (Dobbs, 2014). The force helps in the identification of the major source of business power which can help in understanding the strength of an organizations competitive position as well as in decision making on strategy formulation.

Dynamics in the Market

Among the Dynamics in the industry are the drastically changing eating habits of many people.  Consequently demand of certain foods is significantly affects. A good example is the sensitivity of some segments of the market to highly processed and refined foods. Secondly, the competition in the market is growing with many small scale food and beverage retailers entering into the market. Many fast food outlets are populating congested streets and people often prefer them for convenience (Campbell Soup Co., 2020).

Values Added Chain

Value addition is the process of converting a product from raw materials to finished productions for consumption (Saitone & Sexton, 2017). The value added chain in the Food and Beverage Industry is summarized in figure 2 below.

Figure 2: Value added Chain in Food Industry

In Conclusion, Campbell operates in a highly competitive environment. Consequently it has developed many strategies of countering competition so as to remain relevant, sustainable and profitable. Among the strategies include intensive product differentiation, and expansion to leverage on economies of scale.