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... trends. Johnson divested businesses that McGovern had purchased that were not complimentary to Campbell's portfolio. A total of 26 businesses were divested and those 26 businesses only had an average net profit margin of 1 %. Johnson also eliminated unprofitable and slow selling products from the Campbell product family.
Johnson had six initiatives to his strategy to help the company's performance: Divesting businesses that were non-strategic and reorganizing it's own division. Eliminating weak items from the company's product family. Using the 20 - 20 - 20 - motto for performance targets and insisting new products compliment Campbell's strengths. Focusing on the global marketing of the company's competencies and capabilities.
Expanding and creating low-cost business system at corporate level. Utilization of assets to maximize the return to stockholders. To utilize assets, Johnson sold eight plants and shut down twelve more worldwide. The remaining plants took the production of the closed plants, this lead to maximum efficiency in each of its plants. The plant in North Carolina was able to increase output by 50 %, and was the first plant to lower production costs lower than 50 % of its product's retail price.
Johnson also had new strategic incentives for each divisional unit. He emphasized the primary purpose of the corporation was to build shareholders wealth. He also concentrated on the name brand of Campbell. He instilled confidence with his employees by giving them responsibility for maintaining the existing brands, "People power" is what he called it. And last, he wanted to preserve the company's independence from mergers and other companies trying to take control. Another technique Johnson used that was changed from McGovern, was new product innovation.
Johnson researched and tested products before they were put on the market much more than McGovern did. He also limited ideas to where Campbell had experience and success. With this new technique, Campbell introduced a new soup, "Cream of Broccoli" that ranked on the top five selling list. A new soup hasn't ranked that high since 1935. When Johnson reorganized the business, he wanted the strategy to fit best with the company and its divisions.
During Johnson's first year, he developed a three-division structure. This improved communication and technology sharing between each of its subsidiaries. Eventually it helped Campbell focus more on the international market. Johnson began to see Campbell's growth reaching new heights.
He felt a sizable portion of its earnings could come from the international market. Their acquisition of Germany's Erasco increased their international soup sales to 21 % of total soup sales. They then bought an operation in Malaysia that would eventually enable them to produce their soup instead if importing it. Since tastes varied with each country, it was rather difficult to succeed in the international market.
Campbell failed in Europe, for they were accustomed to preparing their soup in a different way. So, when they approached Hong Kong, which had an unusual strong market for soup, they were more cautious. They started a taste kitchen for testing and perfecting the tastes of the country. As a result, they were successful. As I have shown, Johnson and McGovern's strategies were very different. While McGovern focused on new product innovation and encouraged frivolous new product financing, Johnson geared more towards taking care of the old.
Johnson built a firmer foundation in the company before he looked for bigger markets or new businesses to acquire. He was more cautious and more particular in the companies he chose to purchase. Johnson's plan was for the company to strategically fit together as a whole, all of it, not just parts of it. I think Johnson's strategy was more productive and less frivolous. McGovern seemed to have lost site of cost effectiveness. He was obsessed with new products, which lead their focus away from their primary purpose: to create stockholder's wealth and a strong company that was hard to compete with.
Even though McGovern acquired more businesses and created more products, Johnson's strategy brought more earnings to Campbell, not only in the U. S. , but in other countries as well. After Johnson retired in 1997, Dale Morrison was appointed CEO. He basically kept the same strategy as Johnson had started, but with only a few changes. Morrison focused on marketing a little more than Johnson did. He also improved the quality of packaging in countries where high quality packaging attracts more consumers.
Morrison continued to restructure Campbell's portfolio. He announced the spin off of seven low-growth businesses including Vlasic International. Campbell was confident this would enable their company to focus more on businesses with higher growth potential to acquire. And it gives Vlasic and Swanson opportunities for growth under a new dedicated management team. Critics thought it would be difficult for Vlasic to grow, but Campbell was confident with brands like Swanson, Swift, and Gourmet Specialty Foods, it would not have a problem. But it did find problems.
In the first six months of going on the market, shares fell from $ 22. 75 to $ 13 -$ 15. Their third and fifth quarter sales and earnings fell below projections, and pickles and frozen foods were down by 10 %. Morrison further restructured their portfolio by focusing on brands and businesses that related to either brand or image. They began to divest several operations, including their canning operation for their soup. This allowed Campbell to have enough funds to buyback some of their stock of the 451 million shares that were outstanding beginning in 1999 through 2001. In the mid 90 's, Campbell began to focus more strongly on the soup and sauces division.
The market represented soup sales were declining regardless of their efforts of introducing countless varieties of new flavors. They found success in their sauces. Consumers were now looking for a healthier way to eat and fat free foods proved effective. Their newest innovation was soup that could be stored in a reusable, refrigerated package.
They acknowledged that people went to their refrigerators to find quick meals, instead of their pantries. They hope that this reusable packaging will increase sales and begin a new generation of consumers. Throughout the past two decades, Campbell has grown into one of the strongest food companies on the market. They have restructured their company to focus on divisions that will compliment their existing operations. Campbell looks towards the future to grow into the most competitive company on the market.
As long as Campbell continues to recognize the ever-changing market and introduces products that will represent the changes, they will continue to grow. Consumers don't have the time they use to to prepare meals at home as often. People rely on restaurants and quick serving items to feed their families. I think their soup containers have much to be desired. Soups on the go, could be packaged with crackers, They need to introduce more products that will keep up with the busy lives of working, parenting, and school attending adults. They also need to keep focusing on fat free foods and healthier alternatives for burger and fries.
It seems Campbell's management has kept up with the changing trends of the consumer. With every new CEO, brings an opportunity for more growth. Campbell plans to continue to bring wealth to its shareholders in the years to come. Bibliography:
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