TORONTO — The Campbell Soup can is an iconic cultural artifact, immortalized alongside Elvis and Marilyn Monroe by pop artist Andy Warhol in the 1960s, and, in one form or another, a pantry staple for almost 150 years. But its celebrated history isn’t helping to prop up sales these days.
The planned shutdown of Campbell Co. of Canada’s Toronto-area factory over the next 18 months, resulting in a loss of 380 manufacturing jobs, illustrates the ongoing erosion of the country’s food processing sector, which has lost about 30,000 manufacturing jobs during the past decade, according to industry estimates.
Closing the facility makes a lot of business sense since, like many food manufacturing plants in Canada, it was a smaller, older branch plant owned by a foreign company, and, as such, likely reached the chopping block before a more modern facility elsewhere. Campbell’s factories in Paris, Tex., Maxton, N.C., and Napoleon, Ohio, will now fulfill its production.
But a bigger reason for the sector’s decline is a wholesale change in the way people shop, cook and eat that the global food-processing giants are scrambling to address.
About 60 to 65 per cent of the soups produced at Campbell’s Toronto factory are canned, with the remainder in sterile packaged cartons. But the only kind of soup that has had any sales growth over the past five years, according to market research, is the fresh variety, which accounts for a tiny portion of the overall soup market, sold chilled on grocery store cooler shelves.
People are eating less frequently at home than they used to and are choosing more fresh, unprocessed items than they did in the past, regardless of where they eat.
Everyone from fast-food giants to grocery stores is trying to cash in on the trend: Starbucks Corp. sells sandwiches and protein-rich salads, and grocer Metro Inc. bought a meal-kit company last year even though it also sells all the discrete items customers need to make their own meals.
Those trends have the 149-year-old Campbell Soup Co. trying to innovate to keep sales from slipping down the drain.
“One factor is the consistent decline of the consumption of canned soup — in Canada, it has declined 30 per cent in the last 10 years,” said Ana Dominguez, president of Campbell Canada.
“That decline is happening in both Canada and the U.S. We had to make the difficult decision to consolidate. The Toronto plant was the oldest and the smallest. We produce more soup than we can actually sell, so we have excess capacity.”
Overall soup sales in Canada declined to $699.9 million in 2017 from $709.4 million in 2012, according to data from market researcher Euromonitor. So-called shelf stable soups accounted for $559 million of those sales, while chilled fresh soups, growing at a rate of about six per cent a year for the past five years, accounted for $15 million.
Campbell, with a market share of 59.3 per cent between its Campbell and Habitant soup lines in Canada, Campbell would take the lion’s share of the hit in packaged sales. The next closest rival is Unilever-owned Knorr, which has a market share of 9.1 per cent, according to Euromonitor.
But it’s not just canned soup that has fallen out of favour with consumers. A push to eat more fresh foods and reduce our collective dietary intake of salt, trans fats and sugar has hit many packaged goods makers hard, forcing the grocery industry to change its definition of “convenient” food.
Back around the time of the First World War, salt intake wasn’t top of mind when the use of canned food proliferated and became more than just a quick food source. Aside from not spoiling — or, at least, not for a very long time — canned food was easy to transport and was a reliable option when fresh food ran short.
Canned condensed soups were a ubiquitous presence in mass-market recipe books by the 1940s and 50s and continued as a popular kitchen staple for decades, used in soufflés, casseroles, pot pies and side dishes.
But consumer perceptions about many packaged foods including soup began to emerge in the 1990s, corresponding with the rise of Martha Stewart, who demanded the authenticity of good old-fashioned elbow grease in her always-from-scratch recipes. Just a decade later, TV celebrity cook Rachel Ray was widely scorned by the chattering classes for using canned goods as short cuts in her recipes.
Nowadays, eating foods that were once viewed as convenient and tasty — Tang drink crystals, margarine, crackers, soda pop, many dry breakfast cereals — is actively discouraged by dieticians, who encourage the consumption of fresh food and home-cooked meals, using whole grains and raw ingredients.
That trend has had a cascading effect on the manufacturers of those products.
Manufacturing sales of breakfast cereal in Canada fell to $488 million in 2016 from $1.57 billion in 2012, according to Guelph, Ont.-based food industry analyst Kevin Grier, citing Statistics Canada data. Sugar and confectionary manufacturing sales declined to $3.7 billion from $4.6 billion during the same period.
“That’s due to a combination of plant closures — cereals declined dramatically due to the closure of the Kellogg plant in 2013 — and the overall business shrinking, in response to industry trends,” Grier said.
“Demand (for processed food) is not what it used to be. The centre of the grocery store (where packaged goods tend to reside) is getting smaller, and that is probably going to continue.”
Indeed, grocers are shifting space to meet consumers’ increasing demands for fresh food and fully cooked meals.
“We offer ready-to-eat, ready-to-heat meals in all of our stores,” Metro chief executive Eric La Fleche said on the company’s first-quarter conference call in late January. “Certain stores have a more expanded offer. It’s a growing business for us that we are putting more focus on. The quality for us is improving. We think we can get more share of stomach than we have currently.”
Campbell Canada’s Dominguez acknowledges the shift.
“Consumers’ preferences have definitely changed, and our job and our commitment is to change with them and adapt to where they are going,” she said. “Consumers are snacking more, less often having three square meals a day, and they are looking for healthy foods, better-for-you foods and, obviously, the taste profile of the foods is evolving.”
Sylvain Charlebois, dean of management at Dalhousie University in Halifax, said the result of all this healthy eating is creating a “bloodbath” among foreign-owned mass food manufacturers in Canada, citing Campbell’s Toronto plant closure and the planned closure in May of the Dr. Oetker frozen pizza factory in Grand Falls, N.B.
As a result, Charlebois said is a decline in national brands: those boxed, canned and jarred goods with labels such as Nabisco, Kellogg and Chef Boyardee.
“Most national brands are slaves to their past branding strategies,” he said.
Those brands, he added, are finding it hard to shed the ingredients that dieticians see as problematic and they have compounded their business problems by participating in too many deep markdowns with grocery chains.
“Every time I walk into a grocery store I see national brands that are on sale cheaper than store brands. It’s amazing,” Charlebois said. “They are trying to protect their market share as much as possible, and price doesn’t matter anymore. They are just trying to make sure that the products are moving.”
Campbell, Dominguez said, is changing and diversifying its food portfolio and the types of recipes it provides to consumers, while it also grows sales in areas such as chicken and beef broth, which are used as a base in many recipes.
The company will also open a new food innovation food centre in the Toronto area that will employ about 200 people after the existing factory closes, she added. That centre will test and develop new products specific to the Canadian market, even though future production will be fulfilled in the U.S.
More innovation and development within Canada is needed to spur growth in its food processing industry, Charlebois said, adding that a handful of new incubator programs for the agri-tech sector could help the sector grow again.
But even if that happens, packaged food manufacturers will still have to convince the major grocers to give them back some shelf space.
“Metro, Sobeys and Loblaw are all trying to increase the size of the periphery (of the supermarket),” he said, the area that is home to fresh baked goods, deli foods, meats, dairy products and, more recently, ready-to-eat meals. “They are taking more and more space. They are still stuck with some of these national brands to a degree, and want to sell some of them. But to attract the attention of consumers is becoming more challenging.”