Campbell ponders low-price strategy

It is understood Campbell Soup is poised to introduce an 'everyday-low-price' marketing policy for its flagship red-and-white soup line.Industry sources say the new policy will take effect Aug. 1, when the Toronto-based company launches its 1993-94 marketing strategy.Sources say the strategy...

It is understood Campbell Soup is poised to introduce an ‘everyday-low-price’ marketing policy for its flagship red-and-white soup line.

Industry sources say the new policy will take effect Aug. 1, when the Toronto-based company launches its 1993-94 marketing strategy.

Sources say the strategy will resemble what is commonly known as everyday-low price, or edlp, and will result in a reduction in the amount of money Campbell devotes to retail trade incentives.

Campbell declined interview requests by Strategy to discuss its marketing plans.

In the u.s., Campbell began introducing an edlp program about two years ago.

Archie van Beuren, business director on condensed soups for Campbell in the u.s., says the firm’s approach south of the border is to offer retailers the choice to continue doing business as usual, wherein they can take advantage of regular price specials.

Or they can sign on to an edlp program in which the saving that would have been realized during the price specials are spread out across the entire year.

‘Either way, it costs us about the same and the retailer saves about the same,’ van Beuren says.

Max Roytenberg, vice-president of the Canadian Council of Grocery Distributors, says it is news to him that Campbell intends to move away from its traditional ‘high-low’ pricing strategy and adopt an edlp policy.

In the Canadian packaged goods industry, most companies are known as ‘high-low’ manufacturers in that they regularly offer price reductions to stimulate buying activity by the retailers.

The retailers, in turn, sell a portion of the goods bought on sale to consumers at a ‘low’ or reduced price.

However, the retailers also sell a portion of the discounted goods at the regular or ‘high’ retail price, thereby realizing greater profits for themselves.

It is well known the manufacturing community would dearly like to put an end to ‘high-low’ pricing. For one thing, they feel it enables the retailers to make higher profits at their expense.

For another, it is more costly from an operational standpoint to run a ‘high-low’ operation, since the manufacturer must constantly gear up and gear down to keep pace with the fluctuating demand.

Conversely, edlp generates a stable demand, so the manufacturer has the luxury of running at a steady speed.

Finally, and perhaps most importantly, many marketers believe regular price specials erode consumer brand loyalty since consumers learn to buy whatever is on sale rather than their favorite brands.

Roytenberg says retailers would be concerned to hear Campbell intends to introduce an edlp program, particularly if it involves a reduction in trade spending.

‘Generally, retailers arrange their budgets ahead of time,’ he says. ‘If manufacturers were to suddenly bring in edlp and cut their trade allowances, it would lead to a reduction in cash flow in the short term.’

‘We’re not against the idea of edlp. But nobody wants to get hurt by it.’

At the same time that it is said to be developing an edlp marketing strategy, a source inside the company says Campbell intends to increase its red-and-white brand advertising in 1993-94 over 1992-93 by more than 100%.

As an example, the source says, Campbell’s red-and-white media budget for Ontario will climb from $1.6 million in 1992-93 to $4 million in 1993-94.

According to the source, Campbell’s approach for 1993 will be to run flavor-specific advertising in place of the umbrella red-and-white brand ads it has run in past years.

Campbell’s Canadian ad agency on red-and-white is Toronto’s Backer Spielvogel Bates.