Tuesday, November 21, 2017

Framing the Problem: The Decline of Campbell Soup & Other Packaged Food Companies

The Wall Street Journal reports today that Campbell Soup reported a disappointing quarter of financial performance yesterday, causing the company's shares to fall by 8%. The firm has now experienced 12 straight quarters of declining revenues. The newspaper explains the decreases in sales as follows:

Campbell and other packaged-food companies are facing difficulties in attracting consumers who increasingly want foods that they see as healthier, more natural and more environmentally sustainable. Companies also face a changing food-retail environment, with the rise of meal-kit providers, the growth of deep-discount chains in the U.S. and the food-selling ambitions of Amazon.com Inc. and its Whole Foods Market.

The article goes on talk about some of the company's recent moves intended to address these competitive threats:

Campbell executives have said they intend to use acquisitions and investments in new products to help lift the company’s fortunes and expand from its mainstay soups. In July, the company said it would buy organic-soup maker Pacific Foods for $700 million, as part of its natural-food push. It now expects to complete that acquisition by the end of the year. It has also invested in some food-related startups.

There's a lesson here about how you frame a problem. To me, the challenge facing Campbell Soup is much broader and deeper than simply the rise of organics or the margin pressures from Amazon and Wal-Mart. Campbell Soup faces a problem with respect to how people shop the grocery store these days. Increasingly, people are spending more time on the perimeter of the store and less time in the center. They are buying fresh fruit and produce, fresh meats and fish, and frozen foods and dairy items. They aren't buying as many packaged foods. Campbell Soup is in the center of the store. Adding a line of organics won't solve that problem. The issue is broader than organic soup displacing conventional soup. The broader challenge is that people are purchasing fewer packaged food items, period. There's a lesson here for all firms. Always make sure you think carefully about how you frame the competitive problem you face. How you frame a problem will, of course, shape the nature of the options you generate for future strategic action.

2 comments:

paul4innovating said...

Your problem framing is absolutely spot on. They are not solving the basic trends and will continue to undermine their existing core and not recognize the future core, to move towards it. They are stuck in the middle, a transition of sort, but not enough. The Three Horizon framework here is part of their need to work through, in bolder, more wider perspectives and lens

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