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Campbell to close four U.S. factories in efficiency, competitiveness move.

Campbell to Close Four U.S. Factories In Efficiency, Competitiveness Move

Restructuring will cost 2,800 jobs and one-time charge of $344 million to stockholders. Savings projected at $165 million. Meanwhile, unlike canned soup, frozen foods fare well.

The gates will soon close at four factories and the ax will fall on some 2,800 jobs as Campbell Soup Co. restructures its business to increase efficiency and better compete in a global marketplace. While thus far all the announced cutbacks affect only North American operations, overseas holdings are expected to be consolidated to some degree. The Camden, N.J.-headquartered diversified food processing concern--whose worldwide payroll boasts 48,000 workers -- has a number of plants in the United Kingdom and continental Europe (see related story on page 49).

"It's a move we had to make," R. Gordon McGovern, president and chief executive officer, said, adding that the decision reflects "an ongoing effort to slim down."

It is anticipated that the restructuring -- which will see the company's original soup factory in Camden shut down entirely -- will save some $15 million in fiscal 1990, which began on July 31. Projections call for an additional $150 million to be saved over the next four years.

In the meantime, a one-time charge of roughly $344 million against 1989 earnings, or $2.01 per share, will result. It could wipe out most or all of the firm's 1989 profit. In the first nine months of the fiscal year its net was reported as $207.8 million, or $1.61 per share, on sales of $4.37 billion.

Although the Camden factory will be eliminated by next July, corporate headquarters will remain in the city. McGovern said that the company's contribution to the local economy will continue to be substantial. It annually spends about $9 million in the purchase of goods and services there, and also directs $1.4 million of its corporate charitable budget to local programs.

As for other operations affected:

* Most of the Pocomoke City frozen food plant's workforce of 272 and its production will be shifted to the Salisbury, Md., plant, which was recently expanded.

* Production at the Mrs. Paul's Kitchens factory in Crisfield, Md., which employs 246 workers, will be moved to other Campbell plants.

* Manufacturing of refrigerated salads at the Mrs. Giles Country Kitchens facility in Smyrna, Tenn., which employs 84, will be transferred to a sister plant in Lynchburg, Va.

* Products made in the Camden factory will be shifted to newer canned food plants in Napoleon, Ohio, Maxton, N.C., and Paris, Texas.

* Campbell Soup Ltd., Toronto, Ontario, Canada, will shut down its operations in Portage la Prairie, Manitoba, in 1991, in favor of consolidation with a larger soup factory in Toronto.

Upgrades Still Planned

While five additional plants are expected to be closed in the near future, upgrades of existing manufacturing facilities are on the drawing board. For example, $430 million has been budgeted for systemwide modernization as well as the construction of a new Pepperidge Farm factory in Adamstown, Pa.

Analysts on Wall Street welcome the decision by Campbell to streamline operations, "Management decided it was time to fix the company up before someone else came in to fix it up for them," said Edward Stavetski of W.H. Newbold's Son & Co.

Another stock market watcher, Ronald B. Morrow of Smith Barney, Harris Upham & Co., noted that Campbell's U.S. plants have recently been operating at just 60% capacity. He added that the firm's performance has been lagging 5% to 6% below the food industry average.

Looking Ahead

Expect Campbell to continue its "back-to-basics" marketing strategy launched last year which emphasizes the introduction of fewer new products in favor of greater reliance on the established core brands such as Swanson frozen dinners. But it won't exclusively follow a philosophy of older is better.

The outfit has decided to go national with Souper Combos -- a frozen soup and sandwich range -- after logging successful test market results for more than a year. The rollout will reportedly be backed by a $13 million advertising campaign.

The fundamental marketing approach has been credited by Herb Baum, Campbell USA president, for greatly contributing to volume gains made by every company business this year. But a careful reading of the firm's third quarter report reveals that acquisitions generated some 40% of sales growth.

Most recent quarterly corporate sales of $1.45 billion were 21% higher than the $1.21 billion realized during the same period in 1988. Turnover for the first nine months was up 17% to $4.37 billion, compared to last year's $3.72 billion. Campbell USA company sales rose 11% during the same time, as operating earnings increased 18%.

The food packer's earnings for the quarter were pegged at $43.5 million, or 34 cents per share compared to $22.4 million, or 17 cents a share during the same period last year. Earnings in 1988 fell by $30.8 million, or 24 cents per share, reportedly due to "restructuring changes."

While recent quarterly momentum was described as strong by President McGovern, earnings fell by 14 cents per share. The top executive explained why in a report to shareholders:

"Unfavorable currency translations in Argentina and the effect of the recent run-up in the price of Campbell's stock on expense accruals for the management incentive program, which depressed earnings by eight cents per share; problems in the plant consolidation program in the United Kingdom and disappointing performance at the Lazzaroni baked goods subsidiary in Italy, which depressed earnings by an additional six cents."

The bottom line reflected disappointing profits for the first nine months of this fiscal year, holding them to $207.8 million compared to $201.9 million last year.

Frozen Shine

But the news was bright when it came to the manufacturer's frozen food lines. Swanson Great Starts breakfasts and Le Menu Light Style dinners were cited by McGovern for achieving "exceptionally strong volume growth" for Campbell USA. In addition, Pepperidge Farm was applauded for scoring solid volume growth in its frozen food and biscuit lines, which each charted gains of 16%. However, operating earnings growth was said to have slowed due to heavy marketing expenses associated with national rollouts.

McGovern was especially proud of the performance shown by LightStyle dinners, which recorded a whopping 87% increase in unit volume and a market share rise of 4.9 points over last year. On the market for about three years now, the diet dinner and entree range today commands 54% of the national segment, while enjoying a 10.4% share of the total premium dinner category. But success did not come easily, as the CEO explained:

"Early sales did not meet our expectations, due to strong price competition and the fact that consumers may have considered such varieties as Flounder Vin Blanc and Beef a l'Orange a little too high-priced and exotic. The marketers in (our) convenience meals group decided early to do a little fine tuning of what they believed would be a successful product.

"Through strict operating efficiencies they were able to work LightStyle's prices down to where it became a value leader in its category. Secondly, they phased out several of the more exotic varieties of the line and introduced a number of more `mainstream' varieties, such as Salisbury Steak and Herb-Roasted Chicken. But thirdly, and perhaps most importantly, they redesigned both packaging and advertising to emphasize LightStyle's nutritional elements."

Mrs. Paul's Smiles

In other Campbell news, seafood unit Mrs. Paul's (see related story on page 85) reportedly increased profitability and retained market share position, although sales dropped in a declining frozen fish fillet and stick category. The label is rated a very close second to the Gorton's brand, which has about 23% of the retail market according to AC Nielsen.

PHOTO : Campbell "fine-tuned" the image and lowered the price of its Le Menu LightStyle line to

PHOTO : turn an initial slow-mover into a winner.
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Title Annotation:Frozen Foods in North America
Publication:Quick Frozen Foods International
Date:Oct 1, 1989
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