In the Soup

If trade dollars really can be converted to consumer promotion, Campbell Soup Co. may be the first packaged goods marketer to prove it.

Camden, NJ-based Campbell is ripe for a marketing makeover, especially after a winter that started warm and exacerbated flaws in the company’s trade promotion practices. Since early ’98, president of the U.S. grocery division Mark Leckie has been remaking Campbell in the image of his alma mater, Kraft Foods, using multi-brand promotions and co-marketing campaigns to boost merchandising support. Now, with the heat on to even out trade spending, Campbell’s consumer promotion calendar may be more crucial than ever.

“We have been making over Campbell – we’re definitely bundling brands and doing more mega-event promotions,” Leckie said last fall. “We’ve put everything in place to make this all happen.”

Packaged goods marketers eager to maximize trade spending have courted retailers with co-marketing campaigns, but converted less than 10 percent of trade dollars to consumer marketing.

“Companies are still funding co-marketing first through consumer promotion budgets rather than trade budgets,” says Don Stuart, partner with consultancy Cannondale Associates, Wilton, CT. Only 49 percent of packaged goods marketing budgets pass through to consumers, with 51 percent going to retailers’ bottom lines, according to Cannondale’s spring ’98 survey of manufacturers. Co-marketing accounts for 9 percent of budgets, but because it is tied to trade deals, “you could make the case that co-marketing has increased the amount of money going to the trade,” Stuart says. “That makes packaged goods companies more dependent on retailers.” As supermarkets consolidate and control more consumer data, “it bodes well for retailers to maintain or increase their share of packaged goods marketing budgets,” notes Stuart.

“Someone needs to make the case to retailers that spending against consumers is more profitable for them in the long run,” says Jon Kramer, president of Campbell’s agency, J. Brown/LMC Group, Stamford, CT. “But it’s hard for grocers to sacrifice the known profit of selling merchandising to manufacturers for the unknown of consumer promotion.”

Campbell jumped into co-marketing this fall after a highly successful test with a handful of retailers last April. The company has relied this winter on mega-event promotions with co-op ad support, bundling brands like V-8, Prego, and Pace with soups to prod retailers to merchandise more.

“Our mega-events are one of the brightest spots so far for our performance this year,” says Kevin Tripp, director of consumer promotion. “We feel the overall approach of mega-events and co-op is very solid. Our results have been excellent, and we’re continuing our plans behind those areas. As we move forward, you’ll see more partnership with retailers as opposed to one-size-fits-all national programs.”

Campbell will seek out more ventures with kids’ properties after promo and product tie-ins with Nickelodeon and Fox Kids Network in ’98. “This year was a baby step for us,” Tripp says. “We’re feeling good about how it worked, so we’re looking for ways to expand” for red & white soups and Franco-American canned pastas. Already on the menu are a 10-million pasta can tie-in with Fox’s live-action TV series Mystic Knights of Tir Na Nog breaking this month and a 24-million soup can effort next month for the home video release of Paramount’s The Rugrats Movie.

Campbell has to even out how it spends an estimated $900 million on trade promotion while increasing consumer demand. With its back to the wall on those issues, the company is poised to aggressively fund consumer promotion and co-marketing.

The company didn’t boost consumer spending this winter, although ad spending rose about 30 percent to an estimated $300 million for the year. Promotion – estimated at $300 million for fiscal ’99 – could get a bigger chunk of Campbell’s estimated $1.5 billion U.S. marketing budget in fiscal 2000, starting Aug. 1. The money is more likely to come out of advertising than trade promotion, especially after the heat Campbell took for the saccharine “Good for the body, good for the soul” TV campaign that it broke in the fall via BBDO, New York City.

Tripp won’t discuss co-marketing plans beyond this year. “It’s premature to think where this could lead in three or four years. We’re just starting to get the data in to dissect the results” of three co-marketing efforts this year.

“We know we ought to be able to drive more consumption through better marketing, and we’re going to be focused on that,” says Campbell group director-corporate communications Michael Kilpatric. The company will play up convenience and kids’ involvement under its “anytime, anyplace, anywhere theme that takes soup out of conventional areas,” he says.

A Kraft graft Campbell has been laying the foundation for stronger marketing since September ’97, when Leckie took the helm. He brought Tripp in from Kraft, as well as vp-global business development Tim Callahan to supervise all corporate marketing services and global brand-building activities. He also hired J. Brown/ LMC Group as Campbell’s first promotion agency of record for co-marketing and mega-event promotions. Last year, the company spun off Vlasic Foods and pared down its portfolio to focus on soup and a handful of brands including V-8, Prego, and Pace, in addition to the Pepperidge Farm and Godiva Chocolate subsidiaries.

Mother Nature exerted pressure with a late, mild winter that hampered Campbell’s quarter-end trade deals. People just weren’t buying soup as fast as Campbell was selling in to grocers. Rather than drown in red & white, Campbell raised a white flag.

The company served analysts a bitter bowl in January, announcing plans to fix supply-chain operations by shipping less product to retailers for the fiscal quarter ended Jan. 31. Campbell expects a more efficient product pipeline to eventually save $100 million a year and stop the blitz of trade deals at the end of every quarter. Those price deals pumped too much soup into the pipeline and warm weather in November and December caught Campbell by surprise. The company projected total soup consumption would rise 4 to 5 percent, but it grew less than 2 percent, and condensed soup consumption fell a reported 2 percent for August-December. Ready-to-serve soup consumption grew about 6 percent in those four months.

“We still expect total soup consumption to be up 1 to 2 percent this year,” the first bump after years of flat or falling consumption, Kilpatric says. “We feel like we’ve definitely moved the needle – but have we moved it far enough?” To compensate for lost earnings, “the tough step we’ve taken is to eliminate the peaks and valleys in our trade spending. It’ll go retailer by retailer how they decide to adjust to this leveling out,” says Kilpatric, adding that Campbell “doesn’t know details yet” on exactly how it’ll handle trade deals now.

It was bad news on Wall Street, but good news for Leckie and Campbell’s marketing staff. “Mark seems to feel good after 16 months of banging his head against the wall, now that they’re biting the bullet and can move on to smarter business practices,” says a former colleague who spoke with Leckie a few days after the announcement. “They’ve got to give people more than nice advertising. They’ve got to give them a reason to use soup.”

Condensed soup accounts for 66 percent of Campbell’s U.S. sales and as much as 50 percent of sales in non-U.S. markets. Consumers are buying less condensed soup for cooking, and more ready-to-eat soup as carry-out. The company is testing single-serve, microwaveable Soup-To-Go; ready-to-serve tomato soup in resealable containers in the Northeast; and Supper Soups, which hit two small test markets in January. A hit on the order of V-8 Splash could bolster total soup sales, but does little for the flagship red & white line.

The hat trick After the April test, Campbell “embraced co-marketing wholeheartedly as a cornerstone for our fiscal ’99 mega-event plan,” Tripp says. The company ran three mega-event promotions with co-marketing overlays this year: An August push for its 25-year-old Labels for Education program; an October meal solutions campaign called Homemade in Minutes for soup, Prego, and V-8 Splash; and January’s Super Bowl/Souper Bowl of Caring food drive.

Campbell ran dedicated TV spots for Labels for the first time in the program’s history. Grocers who displayed red & white, V-8 Splash, and Prego could choose from three overlays: a local bonus labels program, discounts on Campbell products, and a loyalty program tie-in with deals for retailers’ cardholders. Campbell required each chain to run displays in 80 percent of its stores, as much as double the 40-50 percent compliance the company had been getting. The company tracked compliance with Information Resources Inc. data. Stores not tracked by IRI were checked by Campbell’s in-house detailing force, Team Retail, formed this year. Campbell also ran two Nickelodeon promos in August, putting Blue’s Clues characters on 18 million cans of Alphabet Soup and Rugrats kids on 25 million cans of Rugrats Pasta with Chicken.

Retailers accounting for nearly 60 percent of U.S. grocery sales participated in the Labels promo, and incremental volume jumped more than 80 percent. Red & white sales rose 2 percent to $1.3 billion, with volume sales flat at 1.5 billion units for the 52 weeks ended Dec. 6, per IRI. V-8 Splash sales hit $134 million, good for a 51 percent share of the $265 million bottled tomato/ vegetable juice segment, per IRI. Prego sales rose 2 percent to $191 million, leading the $1.4 billion spaghetti sauce segment with a 13.8 percent share, IRI reports. (Still, Campbell’s total spaghetti sauce sales fell 9.5 percent to $285 million, per IRI.)

In October, Homemade in Minutes gave grocers co-op TV in exchange for displays. The January Super Bowl push tied in with a grassroots group, Souper Bowl of Caring, that encourages churchgoers to donate canned goods on Super Bowl Sunday. Campbell’s promo gave grocers co-op TV, radio, and in-store appearances by NFL players. Displays carried a toll-free number to call for participating churches and synagogues.

“Co-marketing has proved its value in driving retailer compliance as well as consumer take-away,” Kramer says. “It becomes almost a self-fulfilling prophecy: If you can increase display, you can increase volume.”

Campbell hired J. Brown without a formal review. “Choosing J. Brown reflected my belief that their perspective on co-marketing and retailers is important for our general promotions and not just our official co-marketing promotions,” Tripp says. Davidson Marketing, Chicago, handles Franco-American promotions. Outside that, Campbell assigns occasional projects, but most promos are handled in-house.

The hardest part of upgrading marketing may be forcing change at the 130-year-old company. Campbell is historically an operations-driven business, focused more on squeezing costs out of production than on marketing. A former Campbell marketing exec says, “They can bring in a bunch of Kraft people, but the infrastructure is solidly in place, and there’s a whole host of people there thinking, ‘This, too, will pass.’ And it will.”

Officially, Campbell downplays what outsiders call “the Kraftizing of Campbell.” “A lot of people here come from a lot of places,” Kilpatric insists. “The Kraft impact isn’t any different from anyone else bringing their experience to the table.”

In the corridors of Camden, though, some are crossing their fingers that the Kraft touch takes hold.