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.
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.