Campbell Soup Co targets China

17 January 2011

BEIJING: Campbell Soup Company, the food group, is seeking to enhance its position in China and exploit shoppers' changing habits.

The US firm is forming a joint venture with Swire Pacific, which is based in Hong Kong and has previously distributed some of Campbell's products.

Campbell's estimated that 355bn servings of soup are consumed in the world's most populous nation every year, but nearly all of them are home made.

When combined with the rapid expansion of the middle class, and the heightened desire for convenience food, the nation offers considerable potential for firms like Campbell Soup.

"We continue to believe that developing a commercial soup market in China represents a tremendous business opportunity for our company," said Douglas Conant, the firm's ceo.

"Realising the benefit of such an opportunity requires a long-term commitment and the right strategic partner."

One reason Swire Pacific fits this description is its vast distribution network, also leveraged by soft drinks giant Coca-Cola to ensure its brands gain from the widest penetration possible.

Another advantage of tapping a local ally is splitting the necessary investment, thus reducing the impact of any financial risk.

"This is the way to increase your non-US exposure and your growth profile more quickly," said Robert Dickerson, a food analyst at Consumer Edge Research.

"You usually have to sacrifice some margin to do so, but capital expenditures should be lower versus growing organically."

Data sourced from Campbell Soup Company, Wall Street Journal; additional content by Warc staff