Campbell Soup Is Taking On Japan
All-American Campbell Soup is taking on the Japanese--as a competitor and as a role model.
Since 1980, the Japanese share of the market for soups in the United States has grown from almost nothing to 9%, with products produced by Japanese companies taking a growing share of supermarket shelf space. Nissin Foods, maker of Oodles of Noodles, is the largest Japanese producer of soups for the U.S. market.
Despite that increase, Campbell still dominates the market in a fashion that many companies would envy: 62% of the U.S. market for all types of soup and 82% of the market for canned soups. But officials at Campbell say they would rather be vigilant than vulnerable.
“I think that people didn’t worry enough when the Japanese companies started competing with the auto manufacturers and the steel mills,” said R. Gordon McGovern, president and chief executive of the food company, which ranks No. 100 in the Fortune 500.
Campbell officials said they believe that Japanese food manufacturers may be able to establish themselves in the United States with low-cost, high-quality products and then expand. “So, I’m worried,” McGovern said. “Officially.”
There are four Japanese-owned soup plants in the United States now and another is being built in California, according to Campbell officials.
Campbell has committed itself to spend $1.2 billion between now and 1990 to upgrade and restructure its 22 plants in an effort to keep ahead of competition. The company plans to adopt many of the approaches that have contributed to the efficiency and quality of manufacturing in Japan.
Cutting Inventory Costs
One major facet of the program is revamping manufacturing to produce products in smaller batches--as they are ordered--to eliminate costly inventories, both of raw materials and of the finished product. McGovern said he expects that the company’s inventory costs will be cut by $50 million this year and that the capital that has been tied up in inventory will be used more productively.
The program also includes closer computer links with retailers, an attempt to develop closer relationships with suppliers to ensure the quality of supplies and revamping the sales force into 22 regional forces. Other major features are “quality circles,” in which workers can help devise ways to improve procedures, and more complete statistical monitoring.
The company has trained about 300 workers in statistics at the University of Tennessee to monitor processing better, and it has handed out copies of a book, “Japanese Manufacturing Techniques,” to Campbell employees.
“You’ve got to take about 10 years, because you’re changing a culture,” said Lewis W. Springer, senior vice president. Making those changes involves convincing employees that they will not suffer from the changes. “We’ve done a massive training program,” Springer said. “The major thing is getting those hourly people in a plant like Camden, N.J., to say, ‘I get it. I agree with it.’ ”
George Novello, an industry analyst with E. F. Hutton, said Campbell’s moves clearly constitute “an effort to copy a very successful (Japanese) manufacturing program.” He added: “You rarely see companies in the U.S. get as involved as Campbell.”
McGovern, who became Campbell’s president in 1980, is credited by industry observers with taking the company in a more consumer-driven marketing direction that has resulted in a proliferation of new products and an emphasis on freshness.
In addition to manufacturing soup, Campbell produces Pepperidge Farm products, Vlasic pickles, Mrs. Paul’s frozen seafood, V-8 vegetable juice, Prego spaghetti sauces, Swanson products, Le Menu frozen dinners and Godiva chocolates. It also sells fresh mushrooms and hydroponically grown tomatoes and avocados under the Campbell label.
Developing New Products
New products include Le Orient frozen dinners, Fresh Chef sauces and salads sold from the refrigerated shelves of groceries, and a constantly growing line of newly packaged or newly configured soups.
“We introduced dry soups last fall and have about 20% of the dry soup market,” McGovern said. “We’ve leased a ramen noodle factory in Ohio. We have microwaveable soups, frozen soups, soups in glass jars, low-sodium soups. We’re going to catch you every way we can.”
“I think what they’re saying is that soup in any form is their bailiwick, and they don’t want it taken away from them,” said Novello of E. F. Hutton. Soup accounts for more than one-third of the company’s total earnings, he noted.
The biggest evangelist for change within the company has been Springer, a former manager of the company’s oldest facility, its 97-year-old plant in Camden, which the company is spending $37 million to upgrade.
Springer preaches the gospel according to W. Edwards Deming. Deming was invited to Japan in 1949 by the country’s national society of engineers, who wanted advice about how to restore their war-ravaged economy. Deming emphasized statistical control of quality throughout production, in contrast to the American method of checking quality at the end of the manufacturing process.
If Campbell succeeds in reorienting itself, the transformation should result in both fresher products and substantial savings, according to company officials. “What we’re trying to do is reduce the cycle time” between the arrival of raw ingredients and when the soup or other food product reaches the stores, Springer said.
About two years ago, the cycle time for soup was about six weeks, according to Springer. That time has been reduced to about two weeks now. By Aug. 1, 1987, that time may be reduced to a single week, he said, adding: “The faster you can move it, the less money is tied up.”
