Campbell Soup, which is reorganizing into three divisions based on product categories rather than brands or geography, plans to slash “at least $200 million” in costs over three years as it implements a zero-based budgeting process requiring annual justification of expenditures.
“The savings will amount to 2% to 3% of the company's annual revenue and provide money for expansion in product areas that are growing faster than its legacy soups, sauces and beverages that are sold in the center aisles of supermarkets,” reports Harold Brubaker in the Philadelphia Inquirer.
Meanwhile, Campbell CEO Denise M. Morrisontold the CAGNY conference in Boca Raton, Fla., yesterday that the company is working on the “ways we communicate and connect with consumers” without disclosing any details of what that might be.
“We are well aware of the mounting distrust of big food. We understand that increasing numbers of consumers are seeking authentic, genuine food experiences and we know that they are skeptical of the ability of large, long-established food companies to deliver them,” Morrison said as she was wrapping up her presentation that, for the most part, explained the reorganization and cost-cutting measures.
“We are also under no illusions about the difficulties that legacy food brands have recently faced in their efforts to reshape consumer perceptions about their products and respond productively to toxic messages in the public environment. It is a very tough assignment.”
Fortune’s Phil Wahba points out that “Campbell is by no means the only food maker struggling to adapt to new consumer behavior,” citing Kellogg cutting its long-term annual revenue growth estimate last week. Consumers are buying cheaper private label foods and cooking more at home as they shun cereals and snacks, Reuters’ Sruthi Ramakrishnan reported at the time.
And “Morrison’s comments about adapting to changing consumer attitudes echoed those of” Kraft CEO John Cahill last week,” Wahba writes. “I don’t think Kraft has done as aggressive of a job in this regard as we need to,” Cahill said, noting that Kraft lost market share in 40% of its U.S. businesses in 2014.
The three new Campbell divisions, which the company first disclosed at the end of January, will be:
Three Campbell insiders are leading the divisions. Mark Alexander is president of Americas Simple Meals and Beverages; Luca Mignini runs global biscuits and snacks, and Jeff Dunn is in charge of the Packaged Fresh division.
“I believe this reorganization will be a game-changing development, in the evolution of our company," Morrison said. “… It is the logical step toward our goals of shifting our center of gravity for our business.”
Annie Gasparro reminds us in the Wall Street Journal that this is “Campbell’s second major cost-cutting initiative in four years, following an effort focused on improving supply-chain efficiency that was announced in June 2011, just before Ms. Morrison was promoted to CEO.”
As for how the company intends to change its conversation with consumers, who are not only increasingly distrustful but also represent a “seismic social shift” in demographics as well as well as “preferences and priorities with respect to food,” stay connected.
Big budget “Mama’s Boy” campaigns may not fly with the “rising importance of new consumer populations such as Latinos and the millennial generation” as well as what Morrison identifies as the “mushrooming numbers of adult-only households, single-parent households, multigenerational households, multicultural households and same-sex households, all of which eat and shop differently than the traditional family as our industry long defined it.”