Campbell’s China Buy: Soup On The Way?
Campbell (NYSE: CPB) maybe a household name in the west, but its famous soup cans are unknown in China where homemade broths are the norm and instant soups are a foreign concept. But that could change soon, with word that Campbell has purchased a Danish cookie company with a strong presence in China. Normally I’d say this purchase alone doesn’t mean that Campbell will necessarily use Denmark’s Kelsen as a platform to roll out its soups in China. But in this case Campbell seems to be making extra effort to highlight the China angle in its announcement of the deal, which makes such a move seem more likely.
More broadly speaking, such a move by Campbell reflects a broader trends towards instant, packaged foods that are quick and easy to prepare for the growing legions of busy, young Chinese professionals. The nation is already home to a huge instant noodle market, and a wide range of other easy-to-prepare foods are also slowly finding their way into Chinese supermarkets and consumers’ homes. That move parallels a trend seen earlier in the west, especially as more women entered the workforce and had less time to spend preparing meals for their families at home.
Let’s take a closer look at this latest news, which has Campbell saying it will buy Kelsen, known for its premium butter cookies, for an undisclosed price. (company announcement) The announcement points out that Kelsen, whose brands include Kjeldsens and Royal Dansk cookies, has a presence in 85 countries, with distribution networks in Asia, South America, the Middle East, Africa and the US.
But the announcement gives special emphasis to the China story, pointing out that Kelsen is a leader in its category in the country after exporting its cookies to China for more than 20 years. It doesn’t give a sales figure for China, but points out that Kelsen’s sales in the market have grown by an average of 28 percent over the last 3 years, outpacing the world market.
I can personally attest that these cookies are quite popular in major Chinese cities like Shanghai, where they are often seen as an attractive, moderately priced gift to give when visiting friends and relatives and on holidays. What’s more, I can also confirm that Kelsen does indeed have a strong distribution network in these cities, as its cookies are widely available in most major supermarkets and even at many smaller chains and convenience stores.
Such a strong distribution network and long operating history would indeed seem to make this Danish company an ideal partner for Campbell to roll out its namesake instant soups and other products in China. Such soups are nearly nonexistent right now, although they can sometimes be found in small quantities in large supermarkets catering to foreigners and white-collar Chinese.
The big question, of course, is whether Chinese who have eaten homemade soups all their lives are ready to try out an instant product instead. We saw similar moves take place last year, when US food giant Kellogg (NYSE: K) formed a joint venture to bring its instant breakfast cereals to China. Around the same time, Shanghai’s Bright Food Group purchased British breakfast cereal giant Weetabix for more than $1 billion, and announced a similar plan to bring Weetabix cereals to China. (previous post)
At the time of those moves, I predicted that China could indeed be ready to embrace these cold cereals, as young urban professionals looked for fast and tasty breakfast alternatives to more traditional fare like congee and fried dough sticks. I would make the same argument again, namely that those same busy professionals could easily embrace instant soups if a company like Campbell can develop good products and market them properly. Accordingly, I wouldn’t be surprised to see Campbell announce a major new push for its soups in China within a year or so, and would give the product a strong chance of success in major cities like Beijing and Shanghai.
Bottom line: Campbell’s purchase of a cookie company with a strong China presence could presage a launch of its instant soups in China.
Related postings:
