The Homa Files

TakeAway: Campbell Soup wants to boost its business in China via a joint venture with the conglomerate Swire Pacific Ltd. to sell soup and broths.  Swire has been the company’s distribution partner in China, but with its varied business lines (it is also the largest Coca-Cola Co. distributor in China), Campbell can now access broad distribution channels in China.

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Excerpted from WSJ, “Campbell-Swire Venture To Market Soups In China” By Paul Ziobro, January 12, 2011

Campbell, which has slowly been building its business in the emerging markets of China and Russia, will control 60% of the joint venture, called Campbell Swire, which will launch early this year. The partnership will manufacture, distribute and market Campbell’s soups, broths and stocks in China. Profits and losses will be shared according to ownership.

Faced with slower growth in the U.S., food companies have focused on developing markets to inject growth into the business. China represents one of the biggest opportunities, with 1.3 billion consumers that have the spending power of the U.S. population, according to a recent PricewaterhouseCoopers LLP report. But challenges lurk in trying to develop enough scale to turn a profit and navigate a complex distribution network.

The arrangement has the potential of helping Campbell accelerate its growth there without having to pay most of the costs, although it is sacrificing some potential profits.

For Campbell, the prize in China is a demographic with one of the highest rates of per-capita soup consumption in the world, although most of it is homemade. Campbell says Chinese consumers have nearly 355 billion servings of soup a year.

Campbell will keep ownership of its brands and recipes, and license them to the joint venture.

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This entry was posted on January 26, 2011 at 5:56 am and is filed under Mktg - Market Development. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.