Campbell’s made one mistake when it attacked Progresso for using MSG in soup. This 2008 ad campaign set off a marketing war in which Progresso claimed victory in a taste test and slammed Campbell’s for using MSG in 95 soups.
Campbell’s made further mistakes in the years that followed, which led to U.S. soup sales declines of 4% in 2010 and 5% year-to-date.
An extensive analysis by Citi’s David Driscoll blames health overcompensation:
First off, Campbell needs to introduce more new varieties of soup, with an emphasis on flavour, lessening the focus on renovation and reformulation of existing products in the context of the health and wellness agenda. Moreover, the message to consumers should centre around taste, as across the various attributes of soup that is the one consumers care about most. Again, the Campbell’s soup trends suggest to us that the company has focused way too much on health oriented products at the expense of good tasting products, or at least on the perception of good taste, which is even more critical.
Campbell’s also stopped coming out with exciting new products:
Campbell needs to take its Chunky line and add premium, higher priced varieties. We offer the idea of adding premium, angus beef to the soup recipe. Angus beef has been a major national trend that has swept the fast food world over the last few years. The angus beef trend has been the most profound change to the hamburger business in decades. However, when we look at Campbell’s Chunky brand soup, we see 26 beef varieties like sirloin burger, beef rib roast, sirloin steak, and pot roast. Campbell’s appears to have missed the move to angus meats. This is critical to the mentality at Campbell’s that we think needs to change. Campbell’s instead has focused on lean meats. Is that what consumers want? It does not seem that way if you walk into any McDonalds. The fast food companies don’t apologise for selling high fat, calorie foods. They just sell what consumers want. On the price front, higher priced items like a premium Chunky soup, would help favourably shift Campbell’s mix. We reject the notion that you can’t sell higher priced items because the consumer is weak. This is just a too simplistic, homoginistic notion of who the consumer is. If the consumer wants it and values it, they will pay for it. The sales of premium angus burgers over the last two years proves this notion, as does the sales of upscale frozen skillet meals that are now widely prevalent in the freezer case. McDonalds would not have put angus beef on the menu, if consumers did not buy the relatively more expensive angus burger over the cheaper hamburger on the dollar menu.
Meanwhile Campbell’s ad spending collapsed following the Soup Wars.
Driscoll kept a hold rating on Campbell’s stock, while waiting to see if incoming CEO Denise Morrison adopts some of his turnaround strategies.
Here’s a look at Campbell’s Ready To Serve sales growth compared to other simple meals: