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| As Campbell Soup turns 150, the company is having to rethink the business of soup due in part to competition from private label companies. (AFP Photo/Jerod Harris) |
New York (AFP) - Buffeted by rising consumer taste for fresh ingredients, competition from upstarts and a tricky retail environment, 150-year-old Campbell Soup now finds itself having to rethink the business of soup.
It is a
similar tale at Kraft, whose once-popular yellow and white cheese singles are
no longer ubiquitous. And at Kellogg, which has seen demand for cereal go soft.
As the
travails of these and other companies show, iconic brands that dominated 20th
century American supermarkets are having a much tougher time in the
Amazon-Whole Foods era.
Kraft Heinz
last month announced a steep annual loss following a $15.4 billion asset
impairment, partly from writing down the value of the Oscar Mayer and Kraft
trademarks.
Some
experts see a broader reckoning in the American food industry akin to the
shakeout in other sectors, though technology is not really the main culprit in
this case.
Many of
Kraft Heinz's products are "geriatric brands" that were "created
in the early or mid-20th century, at a time when consumers aspired to eat
'American food' and advertising reached almost everyone through
television," said Anastacia Marx de Salcedo, author of "Combat-Ready
Kitchen," a history of processed foods.
By
contrast, today's consumers are more ethnically diverse, health-conscious and
food-adventurous, she said, adding that many of the older brands will see
market share fall further or disappear entirely.
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A huge
write-down by Kraft Heinz has sparked questions about a reckoning in
the
broader US food business. (AFP Photo/JUSTIN SULLIVAN)
|
Saved by
treats, snacks
The
industry's response thus far has included healthier options that are low-fat,
low-sodium or gluten-free items. There are also more flavors of flagship
products, with Special K breakfast cereal now available in vanilla and almond
as well as blueberry with lemon clusters, among other options.
But these
efforts have not reversed the trend.
Major food
companies also have popular cookie and snack products that can make up for
weakness in other products, although the industry's overall record with
consolidation is mixed.
Campbell
Soup, which has faced pressure from activist investor Daniel Loeb, has offset
weakness in soup with solid Pepperidge Farm sales.
The company
acquired Pepperidge Farm, known for Milano cookies and Goldfish crackers, in
1961.
But
Campbell Soup last year wrote down $748 million mostly on a 2011 acquisition of
Bolthouse Farms' refrigerated salad dressings, carrots and other fresh foods it
now plans to divest.
Soups,
meanwhile, remain challenged, suffering lower US sales in 2018.
Campbell's
blamed the decline on the change in promotion strategy by a major retail
customer and said retail sector consolidation and the rise of private label
competitors could further affect sales, according to a securities filing.
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General
Mills, maker of Haagen-Dazs, paid $8 billion for a pet food company,
raising
eyebrows (AFP Photo/Denis Charlet)
|
Campbell's
new Chief Executive Mark Clouse said last month he was still developing a
strategy for turning around soups but that a "much more holistic and
comprehensive" approach was needed.
Targeting
Rover
At General
Mills, which announced a $193 million write down last year on Progresso soups
and two other brands, part of the strategy is to diversify.
Last year,
General Mills, which makes Cheerios cereal, Yoplait yogurt and Haagen-Dazs ice
cream, bought natural pet food company Blue Buffalo for $8 billion, a sum that raised
eyebrows with some analysts.
Chief
Executive Jeffrey Harmening gave a bullish outlook on the brand during a recent
conference call, highlighting wet pet food and treats as two growth areas that
have high profit margins.
Treats
"are just pet food speak for snacking and we see snacking can trend in
human food and we see it in Pet the same way," Harmening said, calling the
dynamic the "humanization of pet food."
 |
Times
change: In an earlier era, now disgraced actor Bill Cosby marketed Jell-O
gelatin, a product of Kraft Heinz, which recently announced a big 2018 loss
(AFP Photo/
Michael Buckner)
|
Whither
Miracle Whip?
But the
dangers of acquisitions were underscored with Kraft Heinz, which shareholder
Warren Buffett has said was a case of spending too much.
Baruch Lev,
an accounting professor at New York University, said big mergers like Kraft
Heinz usually underperformed, undermining the logic of further deal-making by
the company.
Daniel
Binns, chief executive of Interbrand NY, said some of Kraft Heinz's brands,
such as pasta sauce Classico or Philadelphia cream cheese can be successfully
updated, while others, such as Jell-O or Miracle Whip sauce, could fade
further.
"It's
so rooted in another era," he said. "You're not going to create a
Miracle Whip for the 21st Century that's going to appeal to the farm-to-table
consumer."
But Moody's
analyst Brian Weddington predicts leading food companies will adapt to changing
consumer needs over time, adding that established brands still have
credibility.
"Brands
like these still resonate with the core consumer," he said.
"There's
no question that more consumers are looking for premium or fresher products,
but there will always be a very large market for products that give you
consistency and value as well. Everyone can't afford organic
products."
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