Campbell Buys In

Campbell Soup Company announced in early August it had completed the acquisition of longtime grower/shipper/processor Bolthouse Farms from a fund managed by Madison Dearborn Partners, LLC, a private equity firm. The price, $1.55 billion in cash, was the biggest acquisition in Campbell’s history.

Headquartered in Bakersfield, CA, Bolthouse is best known for carrots, and carrots remain about 50% of the company’s business. But in recent years it has launched premium lines of refrigerated products such as salad dressings. In fact, an extremely successful line of juices accounted for another 35% of the company’s annual sales, which totaled $689 million in the most recent fiscal year. Bolthouse employs about 2,100 people.

Campbell will operate Bolthouse as a separate business unit. Members of Bolthouse Farm’s senior management team will remain in Bakersfield and continue to lead the business, with Jeff Dunn remaining president. “It will be run independently, as we do with Pepperidge Farm, but with the backing and resources of a nearly $8 billion company,” says Campbell spokesman Anthony Sanzio from the company’s Camden, NJ, headquarters.

People Want Fresh

Campbell has been looking into buying Bolthouse for several years, says Sanzio, because it makes a great fit. Their products complement each other. For example, the Bolthouse premium juice line will fit into a price point above Campbell’s V-8 juice products. But perhaps even more important is the location of each company’s products in the layout of a modern retailer. “We’re center store, we have the center store business, but now we’ll be able to expand to the perimeter,” he says. “If you look at the perimeter — that’s where all the growth is happening.”

Indeed, dieticians often advise their clients to stay out of the center store. Campbell’s soup sales have not been strong in recent years, especially among millennials. The perimeter is where all the fresh products are found: fresh produce of course, but meats, dairy, etc. Modern retailers are beginning to blend these fresh areas. For example, the Bolthouse salad dressings and juices are sold either in the produce area, or adjacent to it. Also, Sanzio notes that millennials have a greater affinity for freshness than do other age groups, though it certainly doesn’t hurt to have such healthful products as carrots and premium juices for older baby boomers who want to live longer.

The acquisition should have little impact on other growers, Sanzio says. However, though they don’t use Bolthouse carrots for their soups now, they will of course look into it. Currently they use Bolthouse carrots just for V-8 juice. He declined to say whether they are considering any other acquisitions of vegetable growers, but did say they are very much interested in expanding their international footprint.

Economists Split

Observers differed on whether the Campbell acquisition of Bolthouse might be a trend. John VanSickle, a University of Florida economist, points out that there has been tremendous consolidation in vegetable production and distribution. He noted that in the early 1980s there were more than 200 registered tomato handlers in Florida, and now there are fewer than 50. It wouldn’t surprise VanSickle to see food companies enter the market in search of vertical integration. “Campbell is seeing opportunities there; they think they can position themselves better,” he says. “When one company succeeds it essentially invites others to do the same.”

But not so fast, says another economist, Roberta Cook of University of California Cooperative Extension. She says there has been a consolidation of handlers in part due to competitive challenges faced by grower-shippers, but that doesn’t mean other food companies like Campbell will get into farming. Though it did happen in the late 1980s when several companies, including, oddly enough, Campbell, tried to get into fresh tomato growing in California.

“But they underestimated the vagaries of the weather in growing fresh vegetables,” she says. “Publicly held companies who issue quarterly reports have a hard time dealing with seasonal variation in profitability.”

That said, Campbell’s latest foray does have a few advantages over their previous attempt, she explains. First, carrots have more consistent pricing throughout the year. Second, they’re not entering the commodity business so much as the value-added business and juice, and according to the most recent supermarket scanner data available, value-added vegetable sales were up 6.7% in the first quarter of 2012. Finally, Campbell says it’s leaving the Bolthouse team alone.

“If they’re smart they will let the people who are experts in perishable products handle it,” she adds.

For more information on the history of Bolthouse, go to page two.

Is the purchase of carrot-giant Bolthouse Farms the sign of a growing trend? Find out what two economists have to say.