Microeconomics Industry Structure Analysis Campbell\'s

Microeconomics

Industry Structure Analysis

Campbell's Soup Company, located in Camden, New Jersey, is a producer and retailer in the foods industry, in the organic foods branch, in the ready made meals sector.

The organic foods industry is a monopolistic one. The industry's development in over the past decades and consumers' increased appetite for organic foods has led to the need for numerous producers, most of them focused on one category of products mainly, rather than on addressing all the food categories.

Given the special requirements that are necessary for this type of products, some of the companies in this industry can only function as suppliers for the producers. Other companies focus on the production only, while larger companies are able to handle both the manufacturing and the delivery of the products.

Campbell Soup Company's history started over 130 years ago, when the young chemist Dr. John T. Dorrance invented the condensed soup. He did not keep his invention to himself, but developed the Campbell Soup Company instead (Shea & Mathis, 2002).

The company has significantly expanded since its establishment, nowadays being represented across the world, in regions like South America, Australia, China, Russia, and others. Also, the company has expanded its products range, which now includes prepared foods and sauces, cookies, biscuits, and beverages (CSC, 2008).

The company's mission consists in building "the world's most extraordinary food company by nourishing people's lives everywhere, every day" (CSC, 2008). The industry in which the company activates has suffered several changes over time, and the company's strategies were modified in accordance with these changes.

Initially, the company's strategy was based on innovation. Later, when the company's range of products has developed, and so has its competition, the company started to base its strategies on promoting quality, together with the concern for consumers' health.

For example, instead of addressing numerous types of products that might confuse consumers, the company focuses on providing simple meals, baked snacks, and healthy beverages. As mentioned above, the company intends to continue its focus on wellness, quality and convenience.

Also, the company feels the need to increase the availability level of its products in potential and existing markets. In order to strengthen its position on the market, the company intends to address outside partnerships and acquisitions. Also, the company aims at increasing productivity, organizational excellence, diversity, engagement, and innovation. In order to prove its concern for all the stakeholders, the company commits to sustainability, and corporate social responsibility.

2. Given the monopolistic market in which Campbell Soup Company activates, it faces worldwide competition in all the main types of products it addresses (Annual Report, 2009).

The company recognizes competitors of all sizes. They include producers of generic and private label products, and also manufacturers of other branded food products. The main areas of competition are represented by brand recognition, quality, price, advertising, promotion, convenience, and service.

The fact that the company operates in a highly competitive industry is seen as a risk and addressed in accordance with this by the company's strategies. Some of its competitors dispose of significant financial and technical resources. Their actions might determine the company to address strategic measures like reducing pricing, increasing marketing and other types of expenditures, or losing market share.

The most important food processors in the organic food industry include: Lance, J.M. Smucker, nSpired Natural Foods, Sun Opta, Boulder Specialty Brands, Kerry Group, Swift & Co. Investment firms in this industry include American Capital Strat. Ltd., Charterhouse Group Inc., Iowa Farm Bureau, Solera Capital.

The company's main competitor is represented by General Mills Progresso. This company has very similar products to Campbell's, some of them released shortly before Campbell's. Also, there numerous other soup producers that do not threaten the company's position on the market, but may raise some competition on local level. Given the fact that their products are quite similar, Campbell must focus on following its gourmet soup reputation and on developing new products in order to stay in front of competition.

3. Regarding its position on the market, the Campbell Soup Company is the largest soup producer in the world. The company owns 60% market share in the $4 billion soup market (Wikinvest, 2010).

The company's situation on international level is completely opposite than that in the U.S. The company is poorly represented abroad. The company failed to sustain growth in countries abroad, which further translated into international market share loss. The ground was lost in the benefit of the company's largest competitor, General Mills, who reported 10% more sales abroad in comparison with Campbell's 1%.

However, the company intends to improve this situation by addressing emerging markets in Russia, Eastern Europe, and others.

4. The company's performance in recent years is related to the evolution of the organic foods market in general. Consumers' interest towards a healthier lifestyle has led to the significant growth and development of this market sector.

This situation helped Campbell to increase its customer base and its sales volume. Competitors experienced similar evolutions. However, Campbell was advantaged by the position the company already had on the market. The leader position of the company is based on a long tradition on the market, on quality products, and on the fact that Campbell is continuously researching and developing new products that are intended to address the changing needs and requirements of customers.

Campbell's international evolution was not as successful as its competitors' was. As mentioned above, Campbell does not benefit from a leading position on the international market, although the company is the world's largest soup producer.

Given the quality of the company's products and its position on the domestic market, it is obvious that Campbell's weak position on the international market can only be attributed to strategies that have not been properly developed in order to support an international position.

5. The financial and economic crisis has affected all areas of the global economy. The organic foods industry makes no exception. However, this industry sector was not as affected by the crisis as other sectors were. This is mainly because of the significant development of the organic foods sector over the past few years, which allowed this business to easier counteract the effects of the crisis.

Therefore, it is expected that the organic foods industry will continue its ascending direction. These forecasts are based on the results reported by this market. For example, the U.S. sales of organic foods and beverages have increased from $1 billion in 1990 to $23 billion in 2008. Furthermore, the organic food industry is expected to grow by 18% each year (OTA, 2010).

This sector is the fastest growing on in the foods and beverages industry in terms of sales, growing 20.9% in 2006. The same ascending trend has been observed in organic non-food products, which has grown 26% in 2006. In other words, consumers are more and more interested in organic products, whether one refers to foods and beverages, clothing items, or cosmetic products.

However, the increase in the organic foods and beverages might be threatened by the supply situation. Organic foods producers find it more and more difficult to find suppliers for organic raw materials. This is mainly because organic products need special cultivations conditions. The geographical areas in which they can be produced are limited.

Also, the technical capacity of suppliers is limited. Even if the demand for these products increases, it may not be entirely satisfied by the supply. This may further lead to increased prices of supplies, which further lead to increased prices for consumers.

Also, small organic foods producers might not be able to cope with the increased costs of production. This situation favors large producers that are able to control and to influence prices on the market.

6. It is expected that Campbell Soup Company will continue to at least maintain its position on the market. Given the trends of the market and the company's leader position, with the challenger quite far behind, Campbell cannot be threatened by decreased sales.

However, it is not expected that the company will benefit from significant increases in the number of customers.

The main challenge that the company will have to face in the following period of time is represented by its international representation. As mentioned above, the company is experiencing real difficulties abroad. The international sales have almost stagnated, in comparison with competitors' sales.