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July 18, 2007

Campbell's Soup goes to Russia


Julie Jargon's instructive article in the July 9, 2007 Wall Street Journal examined Campbell's belated, better late than never entrance into the Russian and Chinese soup space.

Julie Jargon?

Why, she threatens to dethrone Rhymer Rigby, a freelance journalist who writes frequently for the Financial Times, as the possessor of the best reporter name going.

Here's the WSJ story.

    Can M'm, M'm Good Translate?

    Campbell Rethinks Soup As It Prepares to Enter Russia and China

    American food companies have succeeded in persuading consumers in China and Russia to chew gum, guzzle soda and munch cookies. Now Campbell Soup Co. wants to sell those soup-loving countries on its signature product.

    It won't be easy. Wet soup in cans or boxes has yet to take significant market share in Russia and China, partly because of cost and because soup-making is a source of pride for many there. Campbell finally gave up after trying to sell canned soups in China in the 1990s. Other Western companies have had some success in the two markets, but the niche remains largely untapped.

    This time, the Camden, N.J., company is trying a different approach. For the past two years, cultural anthropologists employed by Campbell have visited the homes of Russian and Chinese consumers to watch how they prepare and eat soup and to ask about the role soup making has played in their lives.

    Although the company has learned that ready-to-eat soups still aren't likely to sell well, increasingly busy Chinese and Russians seem more willing to use it as a convenient base for other cooking. So Campbell this fall plans to roll out "starter soups" and broths designed to help consumers save time while making soups with their own touches.

    "The biggest soup company in the world should be developing the biggest soup markets in the world," says Larry McWilliams, president of Campbell's international division.

    If Campbell gets it right this time, the move could help drive the company's sales growth, which currently relies heavily on the U.S., with $5.1 billion of its $7.3 billion in 2006 revenue. Campbell recently has turned around its core U.S. soup business with the introduction of low-sodium soups, new supermarket soup dispensers and new varieties of broth. At some point, the momentum from those initiatives could slow and the company will need new sources of growth.

    Campbell officials won't disclose sales projections or how much they are spending to enter Russia and China. But they are planning a big marketing push, including television commercials, billboards, subway ads, Internet ads and product samplings.

    Chinese and Russians eat soup more than five times a week, on average, compared with Americans' once-a-week, Campbell says. In China, 320 billion bowls of soup are consumed each year, compared with 32 billion in Russia and just 14 billion in the U.S.

    In Russia and China, nearly all those bowls are homemade. In Russia recently, Mr. McWilliams asked a mother about soup and "her eyes lit up, she leaned across the table and for the next 30 minutes she told me what soup she likes and how she makes it," he says. "You'd think I'd asked her about her kids."

    But consumers in Moscow and China's Guangdong province, which Campbell will target with its early rollouts, are becoming busier as those areas have grown more industrialized. And with a rising middle class in both China and Russia, "you have improving consumer spending power, and as a result, the affordability factor is becoming more favorable for Campbell," says Mitchell Pinheiro, an analyst with Janney Montgomery Scott LLC, who has a "buy" rating on Campbell shares.

    Other food companies have made inroads into China, notably Yum Brands Inc. with its KFC fried-chicken outlets. McDonald's Corp.'s fast food has proved popular in Moscow. In most cases where Western companies have done well in the East, they have tried to adapt their offerings to native tastes.

    Campbell didn't do a lot of listening to consumers when it tried to enter China in the early 1990s. Rather than tailor soups to Chinese tastes and cooking customs, the company simply exported its condensed soups. Consumers, some wondering why they should pay for something that could be easily made from scratch, shunned the soups. Campbell pulled out.

    In China, the basic soup stock is often made by combining water and monosodium glutamate, a flavor enhancer known as MSG that has been linked to headaches, nausea and other health problems, the company says. The Chinese use that mixture as a base in rice and noodle dishes as well.

    "Our research shows that Chinese consumers add MSG to food to lift the flavor, but they know it's not good for them and they're looking for an alternative," Mr. McWilliams says, adding that Campbell's soups won't contain any added MSG.

    Campbell gave women in Shanghai recipes and samples of broths it plans to sell under its Swanson brand. One woman told Mr. McWilliams she didn't use any of the recipes but suggested using the broth as a replacement for water and oil in a stir-fry.

    The company has reformulated the broth to have a stronger chicken flavor, which its research shows is preferred by the Chinese. A second broth to be sold there will be an even more flavorful, cloudier version containing chicken, pork and ham stock.

    Campbell plans to set up booths in grocery stores in China for demonstrations of how to use broth to make soup and vegetable dishes. Because cellphones are so popular in China, Campbell will send text messages reminding people to pick up some Swanson broth. In both countries, products will be carried in the biggest supermarkets first and then, as brand awareness grows, in smaller mom-and-pop shops.

    In Russia, Campbell researchers learned that "Russians consider themselves the foremost experts on soup in the world, and they have words they only use for soup, which tells you how ingrained it is in the culture," Mr. McWilliams says.

    Among those words is navaristy, which refers to a thick, heavy soup like the ones Campbell plans to sell in Russia: a beef broth with pieces of meat, onions and potatoes; a chicken broth with chicken, onions and potatoes; and a mushroom soup with large pieces of mushrooms, onions and seasonings.

    The dense soups will have to be diluted with water, and Campbell plans to encourage Russians to use them as a base for soup, adding their own meat, vegetables and herbs.

    Campbell also learned that mothers do the bulk of the soup preparation, with daughters helping out by cutting vegetables. So the company decided to target newlywed women as they take on the role of household soup-maker. Campbell plans to give out coupons and recipes at buildings where couples register their marriage.

July 18, 2007 at 12:01 PM | Permalink


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It's actually rather pleasing when huge food (or any product for that matter) have to make these types of concessions just to gain a toehold. A country's culture and traditions are important and should be preserved Make Easy Recipes

Posted by: Anne | Jul 31, 2007 7:26:18 AM

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