I’ve said we all need to evaluate what we’ve been doing- and what we need to do, now that we are all in startup mode.  (This is the last in the series of “We are all startups, now!)

Let’s consider what a large firm is- or is not doing.

Over the past few years, Campbell Soup has tried almost anything to become, once again, our go-to choice for soups.  And, as you can see in the chart below, it has failed miserably- with the exception of FY2013.

But, then… Pandemonium.

Once we were relegated to house arrest, consumers decided that prepackaged, nearly-ready-to-eat soups and other shelf-stable products were the way to go.  So much so that Campbell’s has a new problem- it’s unable to keep up with demand.  (Just like toilet paper producers!)

And, they want to promote the other brands they’ve acquired over the years- Swanson’s, Prego’s, Pace’s, Snyder’s,  and Pepperidge Farms.   Yes, even Pepperidge Farm’s “Goldfish” manifested empty grocery store shelves.

Note that this chart is only for soup sales.  Overall, Campbell’s sales were up 17% last quarter- but for the whole year, they expect a 6% increase.   And, they expect profits per share to be about $3 for the year.

For the short term (and, in my humble opinion, the longer term), Campbell had to cut production of their slow movers.  (Something they should have been more diligent at in the past!)  That way, they are able to match production to the higher demand products- not just soups, but things like Pepperidge Farm’s Goldfish!

And, they’ve done other things.  Like providing recipes to consumers.  Showing folks how to use their staple products (tomato soup) to dress up and enhance risotto and other dinners.

If Campbell’s want to keep increasing their gross margin (up 1 point to 34.7% in this quarter), they are going to have do even better to match demand and supply, to explain to consumers how their offerings improve the taste (and value) of the meals consumers choose nowadays.

The good thing is that less than 10% of their products have any outsourcing issues- because they are all made in the States.

The bad thing is how to keep this market share as we find ourselves able to frequent restaurants.  But, as long as we are cooking more meals at home, Campbells should use the extra revenue to improve their data integration to better match supply and demand, improve logistics, and the implied quality of their products, to keep this new market share.

 

 

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