The acquisition of popular brands will strengthen Campbell's European portfolio. But it may not be enough. With a growing range of convenience foods to compete with, Campbell will have a difficult time attempting to revitalize interest in soup. Meanwhile, Unilever is likely to use the proceeds of the sale to help fund a bid for the Clairol hair care brand.
In a bid to satisfy European regulators following the purchase of Bestfoods last October, Unilever has sold its European dry soup and sauces business to US Campbell Soup Company. Facing stiff competition from Nestle and Heinz, Campbell won the battle in a $950 million deal, which sees the world's largest soup company acquire leading brands such as Batchelors, Royco and Heisse Tasse.
The acquisition signifies Campbell's commitment to grow the soup business despite recent setbacks. Still the world's largest soup maker, Campbell has seen sales slump in the past two years, as consumers are tempted by an ever-expanding array of convenience foods. With the ready meal market booming, Campbell is finding it increasingly difficult to renew interest in condensed soups, which account for two thirds of its sales and profits.
The US soup maker is hoping that the acquisition will revitalize its ailing fortunes. Armed with a stronger brand portfolio Campbell is well positioned to use Unilever's business to continue expanding its profile in Europe. Campbell will acquire six manufacturing sites in the UK, Ireland, France, Sweden, and the Netherlands.
With the soup business neatly sold off, Unilever is now free to focus on the integration of Bestfoods and the development of its business. Unilever has already sold its European bakery business to CSM and the sale of Bestfoods US bakery division would simply provide the icing on the cake. Unilever is expected to use the proceeds from these sales to help fund a bid for Clairol, the $2.4 billion hair care brand put up for sale by Bristol Myers Squibb last year.
Campbell will have to work hard however, if its recent acquisition is to pay off. Cold weather and consumer marketing campaigns are unlikely to be enough to revitalize long-term consumer interest in soup, when so many other convenience options are available.