Many of the headlines during 2017 have been about the tepid growth the leading food and beverage companies have experienced the past few years, but even more compelling is how competitive and fragmented the retail market has become. As competition has increased, retailers are adopting strategies to compete, whether it is focusing on price, offering distinct private brands, introducing more fresh choices or enhancing e-commerce capabilities.
The hypercompetitiveness referenced by Morrison is forcing retailers to become more demanding on margins. In the Aug. 31 conference call, Morrison modified Campbell Soup’s fiscal 2018 financial outlook for its soup business because it failed to come to an agreement for a promotional program with a large retail customer.
“We expect this will negatively impact our US soup sales with this customer, particularly in the first half,” she said. “Accordingly, we now expect our soup sales to decline in fiscal 2018.”
“…As hard discount has impacted certain markets around the world, and as e-commerce impacts markets around the world, we do see some traditional retail put more pressure on margin,” he said. “And a result of that is we work together with our retail partners so we can both win in the marketplace. And at times, you take a (bus stop), at times you take a customer dispute.
“We had one earlier in the year in Europe around Pringles. Pringles declined pretty significantly in the first half of the year. It’s back to growth in the back half of the year. The right long-term solution is to work with your retail partners. But if you have to take the dispute, you take the dispute and you move forward.”
“This puts two different kinds of pressure on food and beverage companies — dealing with greater purchasing leverage from dominant retailers and managing greater complexity from channel fragmentation,” he said.