Campbell Soup

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acquiring companies

markets

bring in $200 million in sales annually

in food)

production standards and product quality

about consumer food preparation habits, tastes, and eating preferences

Other strategy elements: Other strategy elements:

Case-TUTOR, Copyright © 2001 McGraw-Hill / Irwin

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Weak Points of Johnson's Strategy:

Complete the spinoff (divestiture?) of Vlasic Foods (a McGovern acquisition) Divest several other poorly performing businesses Place more emphasis on product innovation

Place more emphasis on advertising Campbell’s core brands and growing the sales of these

Revamp Campbell Soup’s value chain

Make new acquisitions aimed at increasing Campbell’s penetration of foreign markets Issue additional shares of common stock to raise additional equity capital Pay down Campbell’s long-term debt at a faster rate to reduce interest costs Realign Campbell’s divisions and business units Other actions and changes initiated by Dale Morrison:

Case-TUTOR, Copyright © 2001 McGraw-Hill / Irwin

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Operating Earnings as a Percent of Sales Revenues for Campbell’s Six Business Units During the Table 1: McGovern Era, 1980-1989

Source: Calculated from case Exhibit 1.

Operating Earnings as a Percent of Sales Revenues for Campbell’s Three Business Units During Table 2:

the Last Three Johnson Years (1995-1997) and Dale Morrison's Two Years (1998-1999)

Source: Calculated from case Exhibit 11.

Table 3: Comparisons of Campbell Soup's Consolidated Financial Performance During the Last Five Years of the McGovern Era (1985-1989) and the Last Five Years of the Johnson Era (1993-1997)

* Before the cumulative effect of accounting change.

Source: Calculated from case Exhibits 1 and 4.

Case-TUTOR, Copyright © 2001 McGraw-Hill / Irwin

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Others:

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Production fits among products in Soups and Sauces group (both skills transfer and combining of activities to reduce costs)

Cross-business leveraging of Campbell’s well-known and respected brand name

Distribution channel fits within both the Soups and Sauces group and the Biscuit-Confectionery Group and also fits between products in Soup/Sauces and products in Biscuits/Confectionery Others:

I favor the Johnson-Morrison strategy

Reasons:

Yes

No

Not sure

Reasons:

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His strategy was basically sound, but he was the victim of some unfortunate circumstances that just happened to occur on his watch - food industry stocks have underperformed the market and the February 2000 recall of canned soup containing pieces of metal was costly.

The decision to eliminate quarter-end promotions to retailers in 1999 (probably to try to enhance Campbell’s short-term profits) backfired and led to an 8% decline in U.S. sales of canned soup.

The decision not to raise prices by 3-7% in 1998 (to boost soup volume) backfired and resulted

Morrison put too much emphasis on trying to grow Campbell’s core businesses and core

Morrison’s actions were driven more by financial considerations (boost profits and hope that higher earnings per share will help push the stock price up) than by bold strategic initiatives (new product introductions, new acquisitions) to grow the business and position Campbell Soup in some attractive new segments of the food industry.

Morrison failed to appreciate that the food products is a slow-growth industry and that Campbell Soup badly needs to pursue unrelated diversification and get into industries that have more attractive growth prospects. Other reasons why Morrison failed:

Split the Soups and Sauces business unit into several groups - it is too big and contains too

Put considerably more emphasis on product innovation and introducing “new and improved” products (the Gordon McGovern strategy!) - Campbell Soup cannot achieve faster revenue and profit growth without a stream of new product introductions that catch the fancy of consumers.

Make some new acquisitions to put more snap into Campbell’s somewhat tired line-up of products and business - the current business-unit portfolio is not particularly attractive from the standpoint of growth potential.

Divest the Food Services group - it is a ho-hum performer with no real strategic fit.

Case-TUTOR, Copyright © 2001 McGraw-Hill / Irwin

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