Campbell's to Drive $200M in Cost Savings
Campbell Soup Company shared its new cost reduction initiative and a significant initiative to simplify its organization structure in order to improve its agility in the marketplace. The company expects these steps to generate annual cost savings of at least $200 million over a three-year period.
“The changes now underway at Campbell have far-reaching implications for the conduct of our business and the future of our company,” says president and CEO Denise Morrison. “Our new enterprise design will align our structure directly with our core growth strategies and enable us to invest more of our resources in the areas of our business that can deliver the greatest growth. Through our critical new cost management initiative, we will generate significant additional funds for growth and margin expansion. And through our organization redesign, we will unleash the power of our people by reducing complexity, driving faster commercialization and delivering more rapid deployment of our talent against our largest opportunities.
“Since 2011, we have had a clear and consistent strategic framework for driving our company’s growth by strengthening our core business and expanding into faster-growing spaces,” Morrison continues.
“We remain fully committed to this dual mandate. The important transitions we are implementing now represent changes not in the ‘what,’ but in the ‘how.’ They are transformational steps to unlock the potential of our assets, advance our growth agenda and create value for our shareholders.”
Under the new enterprise design announced last month, Campbell’s businesses will be organized in three new divisions structured mainly by product categories rather than by geographies or brand groups. Each division will have meaningful scale, a clearly defined role in the company’s portfolio, and appropriate targets for growth.
As part of its planning for the new enterprise structure, Campbell has also been rigorously re-examining its cost structure and organization design. Based on this analysis, the company believes it has identified opportunities to reduce its annual overhead expenses over time by at least $200 million, or 2-3% of its annual sales, over and above the savings delivered through its longstanding annual productivity program.
Campbell will begin to capture these opportunities in fiscal 2016 through a zero-based budgeting process that will target cost savings in specific budget categories. The company is also developing plans to simplify and streamline its organization structure by eliminating excess layers of management and suboptimal spans of control, standardizing common processes across the business divisions, and implementing an integrated global services organization that will leverage the company’s scale and improve its capabilities through dedicated centers of excellence.
The company expects that full execution of the organization redesign and the new cost reduction initiative will require about three years. The company does not expect to deliver significant savings from this initiative in the current fiscal year.
“The changes now underway at Campbell have far-reaching implications for the conduct of our business and the future of our company,” says president and CEO Denise Morrison. “Our new enterprise design will align our structure directly with our core growth strategies and enable us to invest more of our resources in the areas of our business that can deliver the greatest growth. Through our critical new cost management initiative, we will generate significant additional funds for growth and margin expansion. And through our organization redesign, we will unleash the power of our people by reducing complexity, driving faster commercialization and delivering more rapid deployment of our talent against our largest opportunities.
“Since 2011, we have had a clear and consistent strategic framework for driving our company’s growth by strengthening our core business and expanding into faster-growing spaces,” Morrison continues.
“We remain fully committed to this dual mandate. The important transitions we are implementing now represent changes not in the ‘what,’ but in the ‘how.’ They are transformational steps to unlock the potential of our assets, advance our growth agenda and create value for our shareholders.”
Under the new enterprise design announced last month, Campbell’s businesses will be organized in three new divisions structured mainly by product categories rather than by geographies or brand groups. Each division will have meaningful scale, a clearly defined role in the company’s portfolio, and appropriate targets for growth.
- Americas Simple Meals and Beverages, the largest division, will include Campbell’s current U.S. Retail and foodservice businesses, Plum Organics, and the company’s simple meals and shelf-stable beverage businesses in Canada, Mexico and Latin America.
- Global Biscuits and Snacks will unify the Pepperidge Farm, Arnott’s and Kelsen businesses into a fully integrated global biscuits and snacks portfolio. The company’s simple meals and beverage businesses in Asia Pacific and Asia, including its soup and broth business in Hong Kong and China, and Pepperidge Farm’s U.S. bakery business, will also be operated within this division.
- Packaged Fresh will focus on building scale and accelerating growth in rapidly expanding packaged fresh categories across the retail perimeter. It will include Bolthouse Farms’ portfolio of fresh carrots, super-premium beverages and salad dressings, as well as Campbell’s retail refrigerated soup business.
As part of its planning for the new enterprise structure, Campbell has also been rigorously re-examining its cost structure and organization design. Based on this analysis, the company believes it has identified opportunities to reduce its annual overhead expenses over time by at least $200 million, or 2-3% of its annual sales, over and above the savings delivered through its longstanding annual productivity program.
Campbell will begin to capture these opportunities in fiscal 2016 through a zero-based budgeting process that will target cost savings in specific budget categories. The company is also developing plans to simplify and streamline its organization structure by eliminating excess layers of management and suboptimal spans of control, standardizing common processes across the business divisions, and implementing an integrated global services organization that will leverage the company’s scale and improve its capabilities through dedicated centers of excellence.
The company expects that full execution of the organization redesign and the new cost reduction initiative will require about three years. The company does not expect to deliver significant savings from this initiative in the current fiscal year.