Top Spoon Stirs It Up
Having spiced up its earnings and margin growth, David Johnson is working on a new recipe for Campbell Soup it’s M’mm M’mm global. But does he have the patience and resources to build and sustain a global franchise?
November 1 1996 by JP Donlon
On his first day on the job as Campbell Soup’s CEO in January 1990, David Johnson was heralded by trumpeters playing the “M’mm M’mm Good” jingle. However, the tempo of the tune may have seemed more like a dirge than a fanfare at the time. The Dorrance clan, which owned 58 percent of the company, was riven with disagreements since the death the previous April of John T. Dorrance Jr.,
The son of ranchers from the
At 64, the flamboyant Johnson is on one level a consummate showman and cheerleader firing up the troops. He does not shrink from donning a chef’s toque and red-and-white apron, calling himself “souperman” or “top spoon.” On another level, he drills the listener with numerical benchmarks, financial ratios, and market statistics in a rapid-fire delivery. Not for nothing is he dubbed “quantification Johnson.” The irrepressible Australian set stretch earnings and EPS targets, which at the time were considered over the top (see charts).”There’s no such thing as mature markets,” he’s fond of repeating, “only tired marketers.
“Since Johnson took up the chief ladle, net profits have bubbled at a compound rate of 17.4 percent. The company closed its 1996 fiscal year with $7.68 billion in revenues, up 6 percent from the previous year. Net earnings and EPS were $802 million and $3.22, respectively, both up 15 percent from last year. The stock has nearly tripled since 1990 to about $80 a share, with a market capitalization over $17 billion, giving the Dorrance heirs at least one less thing to squabble over.
Having moved from the bottom of the food industry chain to what Johnson calls “best in class”-to use one of his favorite “dog show” terms-the company now is poised, he thinks, for “best in show.” Recently, he revealed his recipe intended to push Campbell Soup into the ranks of other consumer goods icons such as Gillette and Coca-Cola. The ingredients include a $160 million management reorganization calling for the dismissal of 650 employees, including 11 percent of headquarters staff; the $210 million acquisition of
While most analysts give Johnson high marks for his turnaround, several reckon it will be a long while before
Johnson brushes these points aside, saying, “six straight years of record results point to a future that brims with promise.” He aims to boost sales and earnings by building existing brands, buying additional ones, and lopping off those that don’t fit strategically. The company plans to “break away” from the food rivals by introducing more new flavors and tastes in both domestic and international markets. He points to
Can Johnson see it through? “There are no speed limits on the road to excellence,” says Johnson, rarely found without a ready aphorism. Recently CE caught up with him at
FOOD FOR THOUGHT
How would you grade your and
Here’s a report card: When I came on board, the market value was $6.9 billion. On
Like Coca-Cola, in some areas, such as soup,
First, we are going to pioneer frozen condensed soup in food stores. We’ll also give consumers what we call a “signature” soup that offers a superior taste and texture because it’s not cooked as long as the others.
We continually have to transcend ourselves in terms of technology and innovation, because there’s always the danger that somebody else will do it ahead of us. Clearly, we’re not going to be a Coca-Cola or Gillette in two years, but we’re inching toward that aim as we go into the next century.
Innovations and breakthroughs are so simple, but they come only if you’re immersed in your field and determined to make the necessary connections. For instance, take our Stackers, which are pickles sliced to lay flat on a sandwich. A simple idea, but it took off: The overall Stackers market grew 55 percent last year. In addition, we’re tapping into growing consumer segments, such as the healthy food category. For example, our new line of cream soups is 98 percent fat-free.
In addition to leveraging brand power innovation and making selective acquisitions, we want to become “best in show,” to use a dog show phrase. The art of winning was reaching the top of the mountain. We’re at that point now. The next part is leaping to move toward best in show. To do that, we have to make the investments behind the brands in new products and acquisitions. We also must build the top line by buying back shares, which will enable us to increase EPS.
Thus, we’re closing unproductive plants. We’re examining vertical integration-for example, processing our own poultry and making our own cans-and centralization of payables and purchasing. We’re also looking to sell off around $500 million worth of non-strategic, low-margin businesses over the next two years to generate cash profits.
Do you plan to expand into non-soup food areas that dovetail with your products?
We do that now. For example, we own a company called Fresh Start that supplies 20 percent of McDonald’s buns and muffins. We provide the filling in
In that regard, Intelligent Quisine exemplifies our drive for innovation and creativity, because it encompasses telemarketing, home delivery, food pioneering, and working with the medical community to come up with a food program for people with high blood pressure, high cholesterol, or diabetes.
AROUND THE WORLD
What about international expansion?
We’re expanding in the
Wall Street always says, “If you’re not in the empire outside the
People ask why we aren’t in certain countries. I tell them, “because we do our homework.” We cannot be in all zones. We’re not in
Some 56 percent of
That’s not true. First of all, John T. Dorrance III has announced that he’s selling some of his shares, and he’s no longer on the board. Secondly, only four of the 15-person
How do you get along with the family?
Terrific. My key executives and I meet with the family, and we explain what we are doing and why. It goes with the territory. And, of course, I’d be the first one out if the company didn’t perform. That’s the accountability part of the bargain.
You’ve brought the stock higher than it ever was. What do you do as an encore?
I want to keep the stock there. The very essence of our being is continually growing the stock price. That’s what we all live for. That’s the challenge. That’s how we know whether we’re succeeding or failing in our mission as business executives and leaders in the business community.
Would you like to remain as CEO beyond age 65?
Sure. There’s so much we haven’t done. There’s so much opportunity unfolding, I’m consumed by it. I have the work harness strapped on. We’re all driving to set new records-and plow straighter furrows than anybody ever dreamed could be plowed.