Campbell Buys In
September 12, 2012 
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.
Bolthouse: A Brief History
According to the company website, the Bolthouse family began commercial vegetable farming in western Michigan in 1915. The company soon advanced from field packing celery to storing onions for off-season supply. Before long, local canneries relied on William Bolthouse for carrots, celery, spinach, and onions. These local canneries included such companies as Gerber Products, H.J. Heinz — and the Campbell Soup Company.
Carrots with the green tops attached were the standard in the 1940s and 1950s, but customers were interested in modern packaging. In 1959, William Bolthouse built a fresh carrot cellophane packing facility. With quality recognized by customers, the company began marketing to the newly emerging chain stores and supermarkets.
The chain stores relied on the quality of Bolthouse carrots, but there was one problem — customers wanted fresh carrots year-round. In 1972, William H. Bolthouse, son of the original founder, searched the country to find the right location to harvest carrots on a daily basis and decided that Bakersfield, CA, was the right spot.
As convenience became more important, in 1990, William J. Bolthouse, grandson of the founder, introduced SHORTCUTS, ready-to-eat carrots cut and peeled in a new processing facility. Demand was so great a much larger plant was added in 1994, and yet another one in 1999. In 2005, the company was sold to a private equity firm.
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