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Why Campbell's Couldn't Crack the World's Second-Largest Soup Market

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Campbell's Soup announced yesterday that it would be trimming its global workforce by  700 jobs in "an effort to reduce costs and improve the efficiency of its operations."

130 jobs at Campbell's headquarters in Camden, NJ will be cut, as well as 190 retail merchandising positions, which will be outsourced to a Florida firm.

But, perhaps most interestingly, Campbell's will be "exiting the Russian market" after a failed four-year push to capture a slice of the world's second-largest soup market (China is, as with most everything else in today's economy, number one).



It seemed like a great idea at the time -- when the push into Russia (and China) began in 2007, Larry McWilliams, president of Campbell's international division, told the Wall Street Journal: "The biggest soup company in the world should be developing the biggest soup markets in the world."

Company spokesman Anthony Sanzio told trade publication just-food.com that Campbell's was ready to "commercialize the enormous soup consumption behavior," which was heartily seconded by then-CEO Douglas Conant.

"...[I]t's such a core behavior. Not just in the United States, but really globally," Conant told Kai Ryssdal of American Public Radio's Marketplace. "It is in every culture. Soup is one of the oldest foods they have. After they would slay the wooly mammoth, they would boil the bones and make soup. It's before bread; it's before any other prepared food. It's meat . . . vegetables . . . soup. That's what they made. And it's deeply embedded in virtually every culture around the world; and there's just great growth potential wherever you go."

However, as just-food's Katy Humphries noted, soup -- and soup-making -- has a rich history in Russia. Would consumers cotton to canned?

"Russia, so often cited as one of the world's most attractive emerging markets for food manufacturers, presents soup makers with quite a conundrum," Humphries wrote. "On the one hand, it is the second largest soup consuming nation globally. On the other, growth of the ready-made soup category has been held back as manufacturers struggle to convince consumers to abandon their traditional home-made borscht or schi."

According to the Journal's Julie Jargon, the Campbell's strategy involved "cultural anthropologists employed by Campbell" who spent two years visiting the homes of consumers "to watch how they prepare and eat soup and to ask about the role soup making has played in their lives."

Campbell's Larry McWilliams said that when he asked a Russian mother about soup, "her eyes lit up, she leaned across the table and for the next 30 minutes she told me what soup she likes and how she makes it. You'd think I'd asked her about her kids."

"Russians consider themselves the foremost experts on soup in the world, and they have words they only use for soup, which tells you how ingrained it is in the culture," he added.

Eager to put these findings into practice, Doug Conant told Marketplace's Ryssdal:

"Our plan in Russia is, is all about helping, uh, the person making the soup make it faster and better. All we do in, in Russia, our proposition first of all, they consume soup six times a week. They make soup twice a week. They make the broth for about three hours and then they make, put the fresh ingredients into the soup every other day. And our entry in Russia is focused on helping them make the broth. And then they add their own ingredients to make their soup just the way they want it. And so we're helping with soup preparation, we're not trying to replace the soup habit."

Tailoring established products to suit regional and local tastes is crucial to capturing new customers.

In locales where the McRib might not have proven to be a particularly hot seller, McDonald's re-jiggered their product offerings to suit local tastes:




As did Dunkin' Donuts:




And Kraft, which found that consumers in Pakistan preferred Lemon-Pepper Tang to the more traditional Orange:




Unfortunately for Campbell's, Russians never got past their aversion to ready-made soups, even as a "base."

COO and CEO-elect Denise Morrison said yesterday, "Though Russia remains an attractive potential growth market, the results of the business we launched in that market in September 2007 have fallen short of original expectations. We believe that opportunities currently under exploration in other emerging markets, notably China, offer stronger prospects for driving profitable growth within an acceptable time frame."

Doable?

The venerable Oreo cookie -- which failed to win over the Chinese when it was first introduced in 1996 -- became a turnaround success after they were remade for China's collective palate:




As for Campbell's decision to intensify its focus on China? Karl Gerth, an Oxford professor who studies Chinese consumers and author of “As China Goes, So Goes the World: How Chinese Consumers are Transforming Everything," tells the (Newark, NJ) Star-Ledger:

“It’s hard to imagine Chinese eating out of a can, but it was hard 25 years ago to imagine Chinese eating fast food."

Of course, there are some products that might never make it outside of their home countries.

Like Iran's Paxan Company, which manufactures the Islamic republic's laundry detergent of choice, Barf...




...in addition to a full line of Barf liquid and powdered soaps:




On the other hand, crazier things have happened. Hey, if the Chinese took a shine to Oreos...
POSITION:  No positions in stocks mentioned.

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