Campbell’s Food Industry Competition

Campbells Food Industry Competition The rivalry among companies in the food processing industry is high and intense. These food processing companies are competing on price, quality, taste, health factors, product innovation, and product benefits (The Food Processing Industry 2006). Campbell’s major rivals are General Millis Progresso, Heinz and Kraft Foods. As a multinational food processing company, Campbell’s faces an extremely competitive market in internationally, nationally and locally due to the similarities between each soup producer and wider selection of products provided by other food processing company. (Ellison, Sarah 2003) On the other hand, various types of generic soup brands in the existing market which offer products in lower price have raised the competitive pressure. However, the Campbell’s high quality of soup products and the ability to keep low production costs weaken the rivalry of the generic soup brands. For instance, Campbell’s price their soup products only 20 t o 25% higher than generic brands while maintaining a level high quality. Campbell’s would have to continue developing superior healthy food to distinguish itself from Progresso and smaller soup maker companies. 3.1.2 Threat of New Entrants The threat of entry depends on the presence of entry barriers and the presence of new entrants to a food processing industry typically bring to it new capacity and the want to gain market share. (Wheelen & Hunger J.D 2007) Campbell’s major rival- Kraft foods and General Mills, create high entry barriers in food processing industry through their high levels of advertising and promotion. Besides, the intense competition in the food processing industry makes it hard to access in the market. Smaller food processing companies often have difficulty obtaining supermarket shelf space for their products as large retailers charge for space on their shelves and give priority to the established companies who can pay for the advertising needed to generate high customer demand. According to Ghemawat & Collis (2001), the economy is a major factor as if the company wants to be a part in this food processing industry it must be able to face high costs for strong competition. Moreover, the slow market growth rate for the food processing industry causes acquisition between companies, resulted the barriers to entry are high with so many food processing companies and little to zero capacity remaining for any more companies. 3.1.3-The Threat of Substitutes Products The rivalry from firms of other industries which offer substitute products is intense as they are producing, supplying and serving the same food products that the food processing companies are. For example, Dunkin’ Donuts is in the foodservice industry and Campbell Soup Company is in the food processing industry, yet Dunkin’ Donuts serves soup and Campbell Soup sells soup. Consumers can still go to Dunkin’ Donuts and acquire the similar soups that Campbell sells. (Wall Street Journal 2003) 3.1.4- Bargaining power of buyers Consumers affect the food processing industry through their ability to force down prices, bargain for higher products quality and services, and play competitors against each other. The bargaining power of buyers is high as there are huge tendency of new entrance with new and variety of products. Besides, consumers prefer choosing products which offer lower prices. For example, Campbell’s soup products price is relatively 20 to 25% higher than generic brands in grocery stores, hence some consumers would choose generic brand products in the market rather than Campbell’s. Besides, the profitability obtained by the company is also determined by consumers. Food processing companies would be forced to lower prices if consumers think that the prices are too expensive as consumers tend to stop buying their products or switch to supplements.