July 9, 2007 / 2:01 PM / 13 years ago

UPDATE 3-Campbell to start Russia, China soup sales

(Adds details, quotes, byline)

By Nichola Groom

LOS ANGELES, July 9 (Reuters) - Campbell Soup Co. (CPB.N) laid out plans on Monday to start selling its iconic soups in Russia and China, the world’s largest soup consuming markets and two of its fastest-growing economies.

Campbell, which pared back its international business in recent years to focus on boosting sales in North America, said soup servings in Russia and China far exceeded those of the United States, representing a big opportunity for the company to increase revenue.

In the United States, about 14 billion servings of soup are consumed each year, Campbell said, compared with about 32 billion in Russia and about 320 billion in China.

But, nearly all of the soup consumed in Russia and China is homemade, and some analysts are skeptical about how well premade soups from an American company will sell.

Campbell said it ran into consumer suspicion in Russia while testing some of its premade products.

“Consumers would tell us they could taste the metal of the machine that made the product, or that it was most likely just a reconstituted bouillon cube,” Campbell’s president of emerging markets, Chris Delaney, said in an investor presentation broadcast on the Internet. He added that Russian consumers had said ready-to-serve soups “had no soul.”

As a result, Campbell plans to enter Russia and China with products such as broths and soup bases that aim to make old-fashioned homemade soup preparation easier.

The company’s entrance into both markets comes as income levels are rising and consumers look for convenience, Chief Executive Douglas Conant said.

GOOD PROSPECTS

In Russia, the company plans to introduce beef, chicken and mushroom varieties of “Campbell’s Domashnaya Klassika,” or Campbell’s Home Classics. The broths, which contain chunks of meat and vegetables to give them a more homemade look, will go on sale in the Moscow region in October.

Analysts say premade soup producers, including foreign ones, have good prospects in Russia.

“People used to prefer cooking at home and now, with many rushing doing business, people are actively switching to semi-finished products,” said Vladislav Kochetkov from Finam investment company.

“There are Campbell Soup’s products sold in Russia, but not very widely and the company does not promote its products here very actively,” Kochetkov said. “If it enters the market more actively and invests heavily in marketing and promoting its products, the prospects are not bad at all.”

In China, Campbell will introduce two Swanson-brand selections: a clear chicken broth and a classic broth known there as Gao Tang, with a combination of chicken, Hainan ham and pork.

Campbell has been selling Swanson broth for more than 20 years in Hong Kong, where it said it had more than a 90 percent share of the broth market.

The broths will make their debut in early October in five cities in the Guandong Province: Guangzhou, Shenzen, Donguan, Zhongshanand Foshan.

Analysts in China said that with a growing middle class and domestic consumption on the rise, Chinese are eating more and more “foreign” foods, pointing to the popularity of Starbucks Corp. (SBUX.O), McDonald’s Corp. (MCD.N) and other restaurant chains on the mainland.

In recent years, Campbell has had some success in the United States with new products like lower-sodium soups. The company has also improved its presence on store shelves with a new “gravity-feed” system that makes it easier to stock shelves and that highlights the soups.

But like most food companies, Campbell has had to adjust to rising prices for ingredients and energy, as well as competition from General Mills Inc.’s (GIS.N) Progresso soup and store brands.

Last year, the Camden, New Jersey, company sold its businesses in the United Kingdom and Ireland and used some of the proceeds to buy back stock.

Shares of Campbell rose 13 cents, or 0.3 percent, to close at $38.18 on the New York Stock Exchange. (Additional reporting by Tanya Mosolova in Moscow, Kirby Chien in Beijing, and Jessica Wohl in Chicago, editing by Deborah Cohen and Jeffrey Benkoe)

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