Bolthouse Farms Very Likely To Expand

Bolthouse Lineup

A few weeks ago I detailed a post where Bolthouse Farms had put up their “for sale” sign and solicited bids from interested companies (article link here). Not surprisingly, Campbell Soup Company was one of the bidders and the latest news indicated that it is now a closed deal – Campbell Soup Company has bought Bolthouse Farms for $1.55 billion dollars. With deeper corporate pockets, Bolthouse Farms now emerges as an even stronger competitor in the premium juice & smoothie beverage category. The linked article above detailed the benefits toward Campbell Soup Company and how it would impact retailers. But what we have not yet discussed is how it would affect the competitive landscape. Which manufacturers and brands will be impacted? Will this change anything in the retail environment?

The premium juice & smoothie beverage segment can count a few niche players as well as two large players. Arthur’s Fresh, Happy Planet, and the not-yet-in-Canada Evolution Fresh juice brand serve as the niche brands. At the other end of the spectrum you have Odwalla (owned by Coca-Cola) and Naked Juices (owned by Pepsi) as your national premium juice & smoothie makers. Bolthouse Farms previously stood closer to the niche end despite its broad distribution in Canadian grocers. Their primary operating space was in the fresh produce section in a grocery store, sitting on the shelf next to Arthur’s Fresh and Pom Wonderful products. This deal will not change where Bolthouse Farms is located, but it will help them on negotiating power and price their drinks more aggressivley because of their newfound corporate support.

Naked Juice 10oz bottle

The larger affect will happen outside of grocery stores, in channels such as drug, convenience, and on-premise. These channels are typically dominated by Coca-Cola and Pepsi drinks, and will likely include Bolthouse Farms products in the near future. Bolthouse Farms products are already in grocery for the most part, so their expansion plans would involve exploring new channels of growth. And if Bolthouse Farms provides their own branded coolers, then their channel penetration should speed up. Given that Coca-Cola & Pepsi both manufacturer other beverages where the public may view negatively (ie. soft drinks contributes to obesity), retailers may also be more willing to work with Bolthouse Farms with its clean company image.

While the expansion to other channels are immiment, I believe the prime targets to be the Canadian drug channel (ie Shoppers Drug Mart). With this retailer’s expanding its grocery offerings and abundant cooler spaces, Bolthouse Farm should see this retailer as a great expansion opportunity. To further help this fact is that drug stores typically have a healthier perception in the Canadian market (they have pharmacies, cater to the senior demographic, etc).

The sale to Campbell Soup Company just happened and it will take some time to integrate Bolthouse Farms’ operations. Once they have settled in and are ready to expand, be ready to find Bolthouse Farms at your local drug store, convenience store or local food joint.

Bolthouse Farms For Sale, Campbell Soup Company Interested

Bolthouse Lineup

Bloomberg – a business news source – recently cited that baby carrot and juice manufacturer Bolthouse Farms is on the market (link here).  Private-equity firm Madison Dearborn Partners LLC (Bolthouse Farms’ parent company), has received an initial offer from Campbell Soup Company among other bids.  While Madison Dearborn analyzes the different offers, I will assess the Campbell Soup bid to see if it makes any sense.

For a company that is famous for  canned soups, this may seem like a strange portfolio diversification to get into carrots and juices.  However, is it really that strange for a soup company to acquire Bolthouse Farms?   Aside from canned soup, the Campbell Soup Company manufacturers a variety of sauces, crackers and beverages (see their worldwide produce portfolio here).  Campbell Soup Company already has expertise in beverage manufacturing and marketing from its V8 line of juice products.  And Bloomberg’s article hints that V8 will be afforded more resources and receive a stronger focus, given their rising sales while the soup business’s performance is softening.  And it appears that if the deal was approved/concluded, Bolthouse Farms’ juice products would fall under the beverage division while the carrot farms and food processing would be integrated into a vertical supply chain for Campbell Soup Company.

V8 Brand - courtesy of http://www.campbellsoupcompany.com/our_brands.asp

Adding Bolthouse Farms beverages to the company’s beverage portfolio will improve scalability and distribution for both.   There will definitely be opportunities to optimize the two distribution networks since Bolthouse Farms products may be listed in retailers where canned soups may not be available (ie convenience/petroleum stores, organic/natural food grocery stores, etc).  Even if both Bolthouse Farms and Campbell Soup products are listed at the same grocery story, Campbell Soup still gains an incremental area of influence within the store.  Bolthouse Farms refreshments anchors the fresh produce aisle in grocery stores while Campbell Soup products typically resides within the non-perishable shelf stable aisles; and penetrating the fresh produce aisle will pay dividends based on the grocery consumer’s shopping habits.  Fresh produce are located near the entrance so there is an opportunity to influence the consumer immediately when she comes in.  And Campbell Soup can leverage Bolthouse Farms juices to scale up promotions by attaching a coupon to offer a different Campbell Soup product (ie V8 juices, Campbell’s Soup, Pepperidge Farm Goldfish crackers, etc), which are located in an alternate section.  When the shopper wheels the shopping cart down the various aisles, they may be more likely to purchase the Campbell Soup product since there’s a coupon offer.

Campbell Soup Company will further solidify the company’s positioning as a manufacturer of healthy and family-friendly products.  The company’s current portfolio of products are already healthy, while adding Bolthouse Farms juices and smoothies further cements their reputation as a company that provides nutritious products.

Campbell Soup Company has been seeking to broaden its consumer appeal beyond canned soup.  While the company is called Campbell Soup Company, the company portfolio extends well beyond soups.  Their soup portfolio alone has come up with some new innovations, such as the microwaveable soup cups and soup pouches.    This is an indication of a company that recognizes where it needs to innovate and where it needs to acquire; internal growth can only add so much value before the organization must look for outside options.  Given its strong positioning on healthy and family-friendly products, bringing Bolthouse Farms into the mix makes great sense.

All that matters now is to how Bolthouse Farms’ parent company assesses the bids from interested companies.  While combining the two companies’ businesses makes sense from my analytic perspective, there are obviously other business and financial considerations.  However, if Campbell Soup does end up acquiring Bolthouse Farms, I can see many positives from this acquisition.

Just for Kids: Odwalla Smoothies

Odwalla Smoothies for Kids - courtesy of bevbet.comOdwalla recently launched Odwalla Smoothies for Kids, a fruit juice smoothie that comes in a kid-friendly juice boxes (link here).  This is a departure from the Odwalla beverages that are currently available.  Not only are they gearing part of their product portfolio towards youth, they are also developing new packaging that kids are accustomed to using.  Is targeting kids a good strategy for the beverage manufacturer, or will there be cannibalization from their base business: the environmental-friendly plant bottle smoothies?  Will Naked, Arthur’s Fresh, Bolthouse, and other smoothie producers follow Odwalla, and segment their business to market towards youth?

From a marketing standpoint, BevWire believes this to be a good strategy.  Distribution is one area where Odwalla can leverage upon to succeed for the new launch.  Aside from on-premise locations like coffee shops and food courts, Odwalla’s bottled smoothies currently has distribution in natural food stores,  high end supermarkets and specialty outlets.  These products’ availability in grocery shopping outlets help the juice boxes succeed since the typical household grocery shopper is the mom.  If moms already consume Odwalla products, she may introduce the healthy beverage to her children.  However, the bottled smoothies pose a challenge since the serving size are meant for adults and the resealable container’s caps are meant to be opened by stronger hands.  Kids can consume the smoothies but only in the presence of adults.  The Odwalla Smoothies for Kids goes after an entirely different consumption occasion – one that does not require the presence of mom to help open and close the bottle.

It is also because Odwalla is going after a different consumption occasion that will limit cannibalization.  Adults rarely drink from juice boxes so the cannibalizing effect will be minimized.  In fact, this may expand the business really well since the purchaser will be buying the bottled smoothie for herself, and buy the juice box version for her children.

Naked Juice 10oz bottle

How will the competition react?  It appears as if Odwalla is actually reacting to another competitor’s actions.  Naked Juice may have already thought about targeting the younger demographic, just differently.  While the typical on-premise serving size of these smoothie are 450ml (15.2oz) bottles, Naked Juice does have a smaller serving size container: the 295ml (10oz) bottle.  These bottles can be found in Starbucks coffee shops among other locations, but the rationale would be that moms get their coffee beverage while their children get the Naked Juice small bottles (most recently O.N.E. Coconut water has also appeared in Starbuck’s refrigerated coolers, but that’s a story for another topic).  Bolthouse Farms, another competitive smoothie manufacturer, also makes smoothies in the 450ml bottle variety.  They do have a smaller serving size, but only for the acai juices.  This would indicate that Bolthouse Farms currently does not have an offering available toward kids and the in-school drinking occasion.

Local Canadian manufacturer Arthur’s Fresh also produces smoothies and competes against Odwalla and Naked Juices.  With single bottles that have serving sizes of 325ml and 900ml, they are not marketing toward in-school drinking occasion nor are they going after the kids.  Happy Planet also only has their smoothies available in the 450ml (or larger) sizes, meaning that they have also not produced a product that kids can drink without their parents assistance.  However, their next move may be to push out new packaging designs or smaller sizes, since the category’s leading manufactures have products in smaller serving sizes and packaging that attract kids.

While Odwalla’s new products may not change the super premium juice and smoothie landscape completely or at all, they do have the other manufacturers thinking about cateringtoward a different drinking occasion or a different demographic.  It might not be a juice box that caters to kids.  But it could very well be caffeine-infused smoothie to target a completely different demographic.  Or it could be a new and even more friendly product package.

Whatever it is, Odwalla’s Smoothies for Kids offers a refreshing perspective on how creativity and market segmentation have helped expand a product category and maintain (or further accelerate) its growth rate.