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Awaiting replacement for CEO McGovern, Campbell tightens up business strategy.

Awaiting Replacement for CEO McGovern, Campbell Tightens Up Business Strategy

Campbell Soup Co. was still searching for a new chief executive as this magazine was to go to press in late December. The top position has been vacant since R. Gordon McGovern opted for early retirement for "personal reasons" on Nov. 1, a move that caught many industry watchers by surprise.

Day-to-day responsibility for running the $5.7-billion diversified international food company was passed on to Herbert M. Baum and Edwin L. Harper. The former is senior vice president and president of Campbell U.S.A., while the latter is chief financial officer. Robert J. Vlasic, board chairman, announced that both are candidates for the CEO position.

Wall Street appeared to react positively to the news, as the Camden, N.J.-headquartered firm's stock rose. "This company has got to be more aggressively managed," said Pavlos M. Alexandrakis, an Argus Research analyst.

Campbell's return on equity has been unable to break the 15% mark, while the industry average is about 25%. While frozen food units have performed rather well, overall earnings have been stagnant and margins have declined. And the international performance has generally been a letdown. "The U.S. operations are humming, but Europe has been so bad that it's dragged all the numbers down," said John M. McMillin, an analyst with Prudential-Bache Securities Inc.

The company's 1989 annual report points the finger at poor results in the United Kingdom frozen food and Italian cookie sectors. To quote a few lines:

"...Italian business suffered from an overly aggressive and poorly controlled volume drive that resulted in excessive costs. The other international problem performer was the U.K. frozen foods business, the largest unit of Campbell Foods P.L.C. Freshbake frozen foods reported disappointing results. While still absorbing its own recent acquisitions, Freshbake was burdened with Campbell's troubled U.K. frozen food operations, extensive reorganization and plant closings.

"However, the U.K. grocery unit reported solid gains in volume, as did its European frozen food units - Morubel specialty seafood in Belgium and Groko frozen vegetables in the Netherlands."

Frozen foods beamed brightly in the United States market, especially Great Starts breakfasts, Le Menu LightStyle dinners, Swanson poultry, pot pies, and Pepperidge Farm's American Collection single-serve desserts.

Overall, sales were up 16% in 1989 on volume growth of 14%. Net earnings were put at $13.1 million, or .2% of $5.672-billion in sales.

Ex-CEO McGovern was criticized for launching too many new products during his nine-year tenure as Campbell helmsman. In recent times his "back to basics" streamlining policy saw the elimination of hundreds of products in the wake of a return to core brand emphasis.

The interim heads of Campbell apparently intend to keep their focus on profitability rather than chase revenue growth for the sake of expanding market share.

"What you are going to see right out of the box is a much tighter bottom line orientation and more focused, tighter business strategies," Mr. Baum said.

While McGovern's style of management has been questioned in some ranks, a review of the numbers generated during his career in Camden reflects a relatively successful picture. Company sales have risen from $2.8-billion to almost $6-billion since 1980, while earnings climbed from $130-million to $274-million. Campbell also became a food industry leader in No. 1 and No. 2 brands. And shareholders had little to complain about, as stock values advanced 600% during the McGovern years.

In addition to Baum and Harper, there was speculation that German-born Horst W. Schroeder was under consideration for the Campbell top spot. However, it is said that the former Kellogg executive, whose management style has been described as abrasive, might not fit in with the company's gentlemanly manner. But in the words of one analyst: "What they want and need now is a tough guy."

While word was being awaited as to the new heir to McGovern's chair, speculation mounted over the fate of Campbell's Mrs. Paul's kitchens frozen fish business. Despite increased earnings last year, unit sales were in decline and market share was off slightly in a sluggish frozen seafood category.

A report in The New York Times suggested that Campbell may soon try to sell the unit off. "They said they are going to take a very bottom line approach, that they are not adverse to divesting anything that is not earning its keep, and they hinted about selling Mrs. Paul's," a financial analyst who attended a meeting with Vice Presidents Baum and Harper was quoted as saying.
COPYRIGHT 1990 E.W. Williams Publications, Inc.
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Title Annotation:Campbell Soup Co.'s chief executive officer, R. Gordon McGovern and David W. Johnson
Publication:Quick Frozen Foods International
Date:Jan 1, 1990
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