Campbell’s CEO Reviews a Bowlful of COVID Learnings

Campbells Soup Co.’s move to refocus on its core business paid outsized dividends during the coronavirus crisis, but work on the future of the soup category upended by the pandemic is only beginning, CEO Mark Clouse said this week.

Reviewing the chain’s third-quarter earnings in a conference call with analysts, Clouse revealed big sales gains—and some supply challenges leading to share pressure—that came with initial stocking-up as the pandemic struck and increased demand for soups as mitigation efforts kept shoppers, schoolchildren and workers in their homes and preparing their own meals. These trends are likely to be “sticky,” Clouse told analysts, while the experience of the previous months are informing the company’s decisions about how to tackle assortments, availability and shopping modalities going forward, in partnership with retailers.

Ultimately, Clouse said the pandemic proved out Campbell’s moves over the last year to refocus itself on soup and snacks, while leaving behind ambitious but ultimately unsuccessful efforts to diversify the Camden, N.J.-based company.

“The actions we have taken over the last year to focus the portfolio and organization, reduce debt and return resources to core brands was critical for our preparedness to react to this crisis,” Clause said in prepared remarks, according to a Sentieo transcript. “This environment does not require a change in strategy for the company, in fact, it has materially advanced our strategy of building relevance in our classic core brands while accelerating growth in our differentiated snack brands.”

Clouse said the pandemic accelerated consumer demand for comfort foods, trustworthy brands, quick scratch cooking and value—all strengths of its soup portfolio. Sales were up by 35% in the period.

Blizzards Every Day

Clouse described two distinct phases of consumer demand since early March. He described initial stocking up as a psychological response to the impending events, “not unlike you might see in a weather-related pantry load, although in this case, it would be the equivalent of a blizzard in every city in the country.”

Demand increases during this period exceeded 140%, he said.

That was followed by what Clouse described as an “exciting” period of behavioral demand changes, “and what I mean by that is changes in things that they are actually doing within their life, whether that is the result of being sheltered in place, whether that is the need to build quick-scratch cooking, as an example, as a new skill set. And the role that our products play within those behaviors has really generated, I believe, the sustainment of demand and, more importantly, the repeat [demand].”

These are the trends that will be “sticky” in coming months as the country faces “an immediate new normal,” marked by a slow rebalancing of eating habits, accompanied by economic pressures, Clouse predicted. “However you see the economy opening back up, I think there will be a slower migration to away from home. I think they will maintain a level of remote working where lunch is maybe virtual schooling in some cases, where our products will continue to be highly relevant," he said.

Assortment Reductions and the Store Shelf

With these trends in mind, Campbell has been collaborating with retailers on what grocery shelves and virtual assortments for soup online will look like, Clouse said. To meet pandemic demand, the company curtailed selection so as to increase production of core items, and is now working with retailers “to really understand that optimal assortment and making sure that inventory remains kind of balanced with where demand is going to come from, that we're selective and thoughtful about what that assortment looks like while making room for innovation that we still believe is going to be important.”

One question the company is trying to tackle, Clouse said, is, “Do we need item number 30 or 40 in some of the tails of our businesses? … So these are some items that we've made the decision perhaps in the short term to rationalize, and we need to really think about longer term what the right answer is.”

In connection with this, Campbell is also looking at how to best meet online shopping demand fulfilled through stores and the effect that may have on shelves.

“We want to really understand how to utilize that space in the most effective way, and that’s inclusive of supporting retailers, as many are dealing with the realities of their shelf being both a reflection of what the retail shopping experience looks like, while also the online click-and-collect environment as it, in essence, becomes a bit of the warehouse, if you will, for that approach to shopping,” he said. “And so we have tackled a pretty extensive and very detailed work to try to put our best foot forward in collaboration with customers to try to really identify where that goes.”

Clouse confessed, “we didn’t get everything perfect” in regard to product availability, leading to some share loss to competitors during the period, particularly in the ready-to-eat category where Campbell’s market share is relatively weaker.

“Overall,” he added, “we are in a good place with our retail partners. And in fact, I believe we have further improved our relationships as a result of the constant communication and collaboration throughout this crisis. It has been a process of planning, learning and replanning to ensure we are meeting all our customers' needs to the best of our ability in this dynamic environment.”