The U.S. Canned Soup Market: A Competitive Profile

This paper follows the path of eight studies of U.S. markets: Men’s Shaving Cream, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, and Toothpaste. Porter associates high market share with cost leadership strategy which is based on the idea of competing on a price that is lower than that of the competition. However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition. In most consumer markets a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher, to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run. Quality, however, is a complex concept that consumers generally find hard to understand. So, they often use relative price, and a brand’s reputation, as a symbol of quality. In 2008 the U.S. retail sales for the Canned Soup market were $3.44 Billion. The market leader Campbell had a commanding share of 52.5%, followed by a far-distant second Progresso with a share of 17.8%. A notable feature of this market was the tremendous variety of soups, albeit many with minor variations, that equaled the unbelievable figure of 1011! We focused our attention on the two best-selling varieties of soup: (1) Chicken Broth canned, the market leader, with 11.1% market share, and (2) Chicken Noodle Soup canned, with a 7.4% share. Within each variety we chose the can-size range with the highest sales. Using Hierarchical Cluster Analysis, we tested Hypotheses I that a market leader is likely to compete in the mid-price segment. Employing U.S. retail sales data for 2008 and 2007, we found that for both Chicken Broth and Chicken Noodle Soup—for 2008 and 2007—the market leader Campbell was a www.scholink.org/ojs/index.php/jepf Journal of Economics and Public Finance Vol. 6, No. 2, 2020 154 Published by SCHOLINK INC. member of the mid-price segment. For Hypothesis II we wanted to test the proposition that the unit price of the market leader would be somewhat higher than that of the nearest competition. For Chicken Broth we could not test this hypothesis because Progresso, the runner-up, could not be included in this analysis. However, for Chicken Noodle Soup the results did not support the hypothesis because Progresso happened not to be a part of the mid-price, but that of the premium segment. Finally, we discovered four strategic groups in the industry.

This research is based on the notion that the path to market share leadership does not lie in lower price founded in cost leadership strategy, as Porter (1980) suggests. Rather, it is based on the premise-according to the PIMS (Note 1) database research-that it is customer-perceived quality that is crucial to long-term competitive position and profitability. So, the answer to market share leadership for a business is to differentiate itself by offering quality better than that of the nearest competition (Datta, 2010a(Datta, , 2010b(Datta, , 2012(Datta, , 2017(Datta, , 2018a(Datta, , 2018b(Datta, , 2018c(Datta, , 2019a(Datta, , 2019b(Datta, , 2020.

The Strategic Importance of Price Positioning
In a competitive market one would normally expect more than one major brand competing in the mid-price segment. So, the second step for a business seeking market share leadership is to position itself at a price that is somewhat higher than that of the nearest competition in the mid-price segment. This is in accord with P&G's practice based on the idea that although higher quality does deserve a "price premium", it should not be excessive (Datta, 2010b). A higher price offers two advantages: (1) it promotes an image of quality, and (2) it ensures that the strategy is both profitable and sustainable in

John Dorrance Introduces Five Soups
Within a year he came up with five varieties of condensed soups: Tomato, Consommé , Vegetable,Chicken,and Oxtail (Note 4).
Dorrance chose these five soups because "each was quite simple in character: rich, flavorful, but uncomplicated in taste and texture". He believed they would appeal most to the American public. At the same time, these soups had the "nice blend of sophistication and solid value", and a combination of "English thoroughness and French art". This was an idea that was articulated by then famous author and culinary expert, Fannie Merritt Farmer (ibid, p. 37; italics added). Now Dorrance was confronted with two new challenges. One, how to maintain quality, and two, how to market the soups to the American consumer?
At the turn of the century, America was not a soup-eating country, but a meat and vegetables nation. So, Dorrance felt it was easier for Campbell to make soup than to sell it. What he was hoping was to inculcate in Americans the habit of making high quality, nutritious, and tasty soup an integral part of their daily diet (ibid, p. 38).
At that time two soup companies, Franco American, and Huckins, had been trying to accomplish the same thing, but their soups were sold at a high premium price, and therefore had a very small market.
Dorrance, however, was looking for a much larger mass market. But he faced two challenges. One was to induce American public to eat more soup, and second to convince them that Campbell soups were truly of high quality (ibid, p. 38).
As it turned out, Campbell soups were an instant success. At the Paris Exhibition in 1900, they were awarded a gold medal (ibid, p. 41).
Once Americans were convinced of the high quality of Campbell soups, they realized that the price of 10 cents a can was indeed a bargain (ibid, p. 41).
An important benefit of Dorrance's soups was convenience. This was the time when American housewives were beginning to make a slow transition from wood-and coal stoves to those burning natural gas. They discovered that heating up a can of soup was quicker and cheaper than making soup from scratch (ibid, p. 41).

John Dorrance's Culinary Accomplishment of 21 Soups
Within five years of introducing his first five soups, as mentioned above, Dorrance expanded Campbell soup line to twenty-one varieties. Except for Mock Turtle and Pepper Pot, all are included in Auguste Escoffier's 1904 famous book, Fine Art of French Cuisine (ibid, p. 65).
These soups fall into two groups which are discussed following this section.
Although this list of 21 soups looks pretty familiar today, the composition of this product line was quite radical. It was the result of a well thought out and "sophisticated understanding of the history, taxonomy, and character of soup" (ibid, p. 66).
In developing this product line, Dorrance had two objectives. One was to persuade Americans to serve "high-quality, rich, and well-prepared soups" on a regular basis. Second, he believed that even more www.scholink.org/ojs/index.php/jepf Journal of Economics and Public Finance Vol. 6, No. 2, 2020 158 Published by SCHOLINK INC. important was that the soups be tasty (ibid).
Dorrance realized that, ironically, his major competitor in this taste-test battle were going to be American housewives who would compare Campbell soups with their own home-made soups. This was an odd rivalry that "pitted the pride of the housewife against the reputation of Campbell's chefs" (ibid).
Dorrance pursued a smart strategy to win this battle. First, Campbell Co. manufactured soups that tasted good. Second, he argued that because making soup at home was so labor intensive, there was hardly any need to follow this laborious path (ibid, p. 69).
To increase Campbell Co's sales Dorrance wanted to promote the idea of inducing Americans to eat soup on a regular basis, at least once a day. As such, he wanted to produce good-tasting soups that American public would feel comfortable with, and not be confused about. So, if one analyzes the initial list of five soups, one would conclude that it was a masterpiece: "a product so well put together that each item played its own role in enhancing the appreciation, and thus the sales, of Campbell's Condensed Soups" (ibid).

A Review of the 21 Condensed Soups
The twenty-one soups very "cleverly intermingled: the exotic (Mulligatawny) with the commonplace (Chicken); the foreign (Printanier) with the native (Clam Chowder); the rich and delicate (Consommé ) with the substantial and heavy (Vegetable); the gelatinous (Oxtail) with the smooth and creamy (Asparagus); and the universal and international (Tomato) with the regional (Tomato Okra)" (ibid, p.

72).
Most importantly, "there was soup for everyone, no matter what the individual preference, habit or desire" (ibid).
As mentioned above, these soups can be divided in two broad groups: (1) American, (2) Cosmopolitan.

The American Group
The To sum up, Dorrance was able to offer a product line with a cosmopolitan origin on the one hand, and a more familiar American heritage on the other: one that blended Fannie Farmer's goal of combining "British thoroughness and French art" (ibid).

How Skillful Advertising Has Contributed to Campbell Co's Success
Clearly, the invention of condensed soup by John Dorrance was the pre-eminent contributor to the phenomenal success of the Campbell Soup Co. In addition, offering a product line of good quality soups that also tasted good, the convenience of ready-to-eat soup, and the bargain price of 10 cents a can were also important factors in the company's accomplishment.
However, there is still another factor that also contributed to this success: a smart advertising strategy.
In 1898, a company executive attended the annual Cornell-Penn football game. He was so impressed by Cornell's bright red-and-white uniform, that he was able to convince Campbell management to use the colors on the soup labels (Note 3).
As it turned out, the red-and-white design proved to be the most important promotional decision the company ever made (ibid, p. 46).
In 1904

Campbell Co. Acquires Swanson Soup Co.
In 1955 Campbell Co. acquired C. A. Swanson Co. of Omaha. Swanson is primarily a maker of beef, chicken, and vegetable broth (Note 3).

Campbell Co. Introduces Home Cooking Soups
In 1983 Campbell Co. launches Home Cooking soups, which in 2013 became Campbell's Homestyle soups (Note 3).

Campbell Co. Introduces Ready-to-Serve Soups
In 2000 Campbell Co. launches ready-to-serve soups with easy-open pop-top lids (Note 3).

Campbell Celebrates its 150 th Anniversary
In 2019 Campbell Co. celebrated its 150 th anniversary (Note 3).

The Progresso Soup Co.
Progresso Most of Campbell soups are condensed. However, Progresso offers soups that do not require, unlike Campbell, addition of water. And that is why Progresso cans are generally larger than Campbell cans (Note 5).

Private Brands
It is important to clarify what private brands are. These are brands made exclusively for individual retailers, e.g., a supermarket, or a drug store. Usually, such brands are targeted at the economy segment, and, as such, are generally sold at prices lower than those of major name brands. One reason, retailers like private brands is because private brands tend to be more profitable than name brands (Datta, 2018b(Datta, , 2018c).
In 2008 Private Brands had 11% market share of the U.S. Canned Soup market.

The U.S. Canned Soup Market-Price-Quality Segmentation Profile
This study is based on U.S. retail sales for 2008 and 2007 (Note 6). The data includes total dollar and unit sales, no-promotion dollar and unit sales, and promotion dollar and unit sales (Note 7).
The U.S. retail Canned Soup sales for 2008 were $3.44 Billion, with Campbell, the market leader, carrying a share of 52.5%, followed way-behind by Progresso with a market share of 17.8%.

Hierarchical Clustering as the Primary Instrument of Statistical Analysis
We have used cluster analysis as the primary statistical tool in this study. As suggested by Ketchen and Shook (1996), we have taken several steps to make this effort as objective as possible:  First, this study is not ad-hoc, but is grounded in a theoretical framework, as laid out below.
 Second, we are fortunate that we were able to get national sales data for our study for two years.
Thus, this data provided a robust vehicle for subjecting cluster consistency and reliability to an additional test.  Third, we wanted to use two different techniques-KMeans and Hierarchical-to add another layer of cluster consistency and reliability. However, we found Hierarchical cluster analysis to be superior in meeting that test. So, we did not consider it necessary to use the KMeans technique.

Theoretical Foundation for Determining Number of Clusters-And Their Meaning
As already stated, a major purpose of this paper is to identify the market share leader and determine the price-quality segment-based on unit price-it is competing in.
An important question in performing cluster analysis is determining the number of clusters based on an a priori theory. Most consumer markets can be divided in three basic price-quality segments: premium, mid-price, and economy. These three basic segments can be extended to five: with the addition of super-premium and ultra-economy segments (Datta, 1996).
An equally crucial issue is to figure out what each cluster (e.g., economy, mid-price, and premium) really means.
Perhaps a good way to understand what each price-quality segment stands for in real life is to look at a socio-economic lifestyle profile of America. It reveals six classes (Note 8). Each class is associated with a price-quality segment typified by the retail stores where they generally shop: each a symbol of their lifestyle (Datta, 2011).

Guidelines for Cluster Consistency and Reliability
In addition to laying a theoretical foundation for the number of clusters, we set up the following guidelines to enhance cluster consistency and reliability (Datta, 2012(Datta, , 2017(Datta, , 2018a(Datta, , 2018b(Datta, , 2018c(Datta, , 2019a(Datta, , 2019b(Datta, , 2020:  In general, there should be a clean break between contiguous clusters.


The anchor clusters-the top and the bottom-should be robust. In a cluster-analysis project limited to a range of three to five clusters, a robust cluster is one whose membership remains constant from three-to four-, or four-to five-cluster solutions.
 Finally, we followed a step-by-step procedure to determine the optimal solution. First, we start with three clusters. Thus, the bottom cluster obviously becomes the economy segment and the top cluster the premium segment. Next, we go to four clusters, and tentatively call them: economy, mid-price, premium, and super-premium. Then we go to five clusters. If the membership of the bottom cluster remains unchanged from what it was in the four-cluster result, it clearly implies that the ultra-economy segment does not exist. Next, if the membership of the top cluster also remains the same from a four-to a five-cluster solution, then the top cluster becomes the super-premium segment. This means that even in a five-cluster solution we have only four price-quality segments: economy, mid-price, premium, and super-premium. It means that either the premium or the mid-price segment consists of two sub-segments (see Table 1).

External Evidence to Validate Results of Cluster Analysis
Whenever possible, we have tried to seek external evidence to validate the results of cluster analysis. For example, many companies identify on their websites a certain brand(s) as a premium or luxury brand. A case in point is that of P&G which says that its plan is to compete in all "price points": super-premium, premium, and mid-price: except the economy segment (Datta, 2010b).

Testing Hypotheses
 I-That the market-share leader would be a member of the mid-price segment.
 II-That the market-share leader would carry a price tag that is higher than that of the nearest competition.
The retail sales data presented us with a tremendous variety that equaled as many as 1011 types of soups in 2008: many with minor variations. That included a total of 222 brands, many very small, with just 29 brands topping 2008 sales over $1 million.
It is important to point out that canned soups are sold in two formats: condensed, that require the addition of water before they can be eaten, and larger cans that do not.
We focused our attention on the two best-selling varieties of soup: (1) Chicken Broth canned, the market leader, with 11.1% market share, and (2) Chicken Noodle Soup canned, with a 7.4% share.

Chicken Broth
In Table 1, we present results of cluster analysis for 2008 that focuses on the most popular can sizes-between 13.25-and 16 oz-except for Campbell which had only the 10.5-oz version. Where a brand had multiple can sizes in this range, we chose the best-selling size.
Since Chicken Broth is essentially a liquid, the general industry practice seems to be to sell larger cans that do not need the addition of water. Nevertheless, Campbell seems to an exception which offers even Chicken Broth cans in a condensed version.
The results support Hypothesis I: That the market leader-Campbell-with a market share of 52.5%would be a member of the mid-price segment. For 2007, too, the results were identical.
One brand that is missing from this analysis is Progresso because it offered only one huge can size of 32 oz which was way beyond the 16 oz size: the largest in this analysis.
So, we were unable to test Hypothesis II for the Chicken Broth segment.

Negative Results Do Not Negate Our Proposition Behind Hypothesis II
As mentioned above, the results of cluster analysis did not support Hypothesis II for Chicken Noodle Soup because the runner-up Progresso turned out to be a member of the premium, not the mid-price segment.
As we have mentioned earlier, in a competitive market one would usually expect more than one major brand competing in the mid-price segment. So, the second step for a business seeking market share leadership is to position itself at a price that is somewhat higher than that of the nearest competition in the mid-price segment.
Now while Progresso did manage to become the runner-up in the canned soup market, its market share was just one-third that of Campbell's. Therefore, it cannot be considered a direct competitor of Campbell.
So, here is a market that has a very large number of small competitors, but one giant company that dwarfs everyone else. Thus, given a structure that is not very common, a market of this kind does not lend itself to a situation where the proposition behind Hypothesis II becomes relevant and, as such, can then be tested.

Relative Price a Strategic Variable
Finally, we performed one more test to determine the consistency and reliability of the results of cluster analysis in this study. So, we ranked the unit price of each brand for 2008 and 2007, for Chicken Broth, and Chicken Noodle Soup.
For both soup varieties, all three measures of bivariate correlation-Pearson, and non-parametric measures Kendall's tau_b, and Spearman's rho-were found to be significant at an amazing 0.01 level!
We believe these surprising results became possible only because management in the U.S. Canned Soup industry must have been treating relative price as a strategic variable, as we have suggested.
While the price of a brand, compared to its nearest competition, may change over time, it is unlikely to change much from one year to the next. This is significant not only for the market share leader, but also for every brand no matter which price-quality segment it is competing in.

The Role of Promotion
For 2008 promotional sales of the U.S. Canned Soup market averaged 36.1% of net retail sales. We performed bivariate correlation between total (net) retail sales vs. promotional (PROMO) sales. The results were significant for all three measures-Pearson, Kendall, and Spearman-at the 0.01 level.  Tables 1 and 2 show. So, if you are competing on low price, it is reasonable to suggest that you do not need to rely much on promotional discounts. However, it seems this group thinks low price alone is not enough, and that it has to depend more heavily on promotion in order to increase or to protect its market share.

Pattern Emerging in Price-Quality Segmentation Analysis
This study is the ninth in an analysis of competitive profiles of individual U.S. consumer markets. All these studies involved a testing of two hypotheses: (1) That the market leader would be a member of the mid-price segment, and (2) That the unit price of the market leader would be somewhat higher than that of the nearest competitor, also expected to be a member of the mid-price segment.
In seven of the nine studies-that exclude Men's and Women's Razor-Blade markets-a pattern has emerged, and so let us look at it.
The seven market leaders were: (1)  In all seven cases the market leader was a member of the mid-price segment, as we have hypothesized in this study.
In five of these markets-Men's Shaving Gel, Lager Beer, Shredded/Grated Cheese, Refrigerated Orange Juice, and Toothpaste-the unit price of each market leader was somewhat higher than that of its runner up, all of whom were also members of the mid-price segment.
In the Shampoo market, the runner-up was Head & Shoulders which found itself in the premium not the mid-price segment.
However, a simple explanation of this deviation is that while the market leader Pantene is a regular shampoo, Head & Shoulders is a specialty anti-dandruff shampoo: a kind that is always more expensive. We could not test Hypothesis II for Chicken Broth, but for Chicken Noodle Soup, the runner-up Progresso was competing in the premium, not the mid-price segment.
This deviation, too, can be explained easily. As we have noted earlier, that while Progresso did manage to become the runner-up in the canned soup market, its market share was just one-third that of Campbell's. Therefore, it cannot be considered a direct competitor of Campbell, and therefore this

Conclusion
This study is based on the idea that in most consumer markets, a business in pursuit of market-share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality superior to that of competition: at a somewhat higher price to connote an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run. The middle class is the socio-economic segment that represents about 40% of households in America.
Quality, however, is a complex concept that consumers generally find difficult to understand. So, they often employ relative price and a brand's reputation as a symbol of quality. from the company, and was succeeded by Arthur Dorrance as President. In 1914 his nephew, John T.

Dorrance became President.
Around the time when this business was founded, America was slowly making a move from an agrarian to an industrial economy. This created an urgent need to ensure that fresh food remained unspoiled during its trip from rural farms to urban consumers.
Two important inventions proved valuable to the development of the canned soup industry. One was the invention of canning in 1809 by the French Nicholas Appert who is called the "father of canning".
But, much more important to the growth of the canning industry was Englishman Peter Durand's invention of a light, durable can that could replace the heavy, breakable, glass bottles that were central to Appert's canning process.
John Dorrance-a nephew of the President Arthur Dorrance-an MIT Chemistry graduate, with a Ph.D.
from the University of Göttingen, Germany, joined Campbell Co in 1897.
At the turn of the century, America was not a soup-eating country, but a meat and vegetables nation.
What John Dorrance was hoping that he could inculcate in Americans the habit of making high quality, nutritious, and tasty soup an integral part of their daily diet.
At that time there were just two major soup producers in the U.S which were selling ready-to-serve soups in bulky cans. But, because of this excessive weight they were expensive to ship. However, John Dorrance had a solution. And that solution was to cut down the weight of each can by halving the quantity of its heaviest ingredient: water!
Within a year he came up with five varieties of condensed soups: Tomato, Consommé , Vegetable, Chicken, and Oxtail. Dorrance chose these five because each was quite simple in character: rich, flavorful, but uncomplicated in taste and texture. He believed they had the nice blend of sophistication and solid value, and a combination of "English thoroughness and French art".
As it turned out, Campbell soups were an instant success. At the Paris Exhibition in 1900, Campbell soups were awarded a gold medal. Once Americans were convinced of high quality of Campbell soups, they realized that the price of 10 cents a can was indeed a bargain.
John Dorrance wanted to promote the idea of inducing Americans to eat soup on a regular basis, at least once a day. So, if one were to analyze the initial list of five soups, one would conclude that it was a masterpiece: a product so well put together that each item played its own role in enhancing the appreciation, and thus the sales, of Campbell's condensed soups.
An important benefit of Campbell's soups was convenience. This was the time when American housewives were beginning to make a slow transition from wood-and coal stoves to those burning natural gas. They discovered that heating up a can of soup was quicker and cheaper than making soup from scratch.
Within five years of introducing his first five soups, Dorrance expanded Campbell soup line to twenty-one varieties.
The twenty-one soups very "cleverly intermingled: the exotic (Mulligatawny) with the commonplace (Chicken); the foreign (Printanier) with the native (Clam Chowder); the rich and delicate (Consommé ) with the substantial and heavy (Vegetable); the gelatinous (Oxtail) with the smooth and creamy (Asparagus); and the universal and international (Tomato) with the regional (Tomato Okra)".
Most importantly, "there was soup for everyone, no matter what the individual preference, habit or desire".
Clearly, the invention of condensed soup by John Dorrance was the pre-eminent contributor to the phenomenal success of the Campbell Soup Co. But, offering a product line of good quality soups that also tasted good, the convenience of ready-to-eat soup, and the bargain price of 10 cents a can, were also important factors in the company's achievement.
Another factor that contributed to the company's success was following a skillful advertising strategy.
In 1898, a company executive was so impressed by the bright red-and-white uniform of Cornell's football team, that he was able to convince Campbell management to use the colors on the soup labels.
The red-and-white design proved to be the most important promotional decision the company ever made.
In 1904  were $3.44 Billion, with Campbell, the market leader, with a share of 52.5%, followed way behind by Progresso with a market share of 17.8%. The cluster analysis is restricted to the two most popular variety of soups: Chicken Broth, and Chicken Noodle Soup.
We first tested the hypothesis that the market-share leader would be a member of the mid-price segment.
Using Hierarchical Cluster Analysis, we found that the market leader, Campbell was indeed a member of the mid-price segment-both for 2008 and 2007-for Chicken Broth as well as Chicken Noodle Soup.
One brand that is missing from this analysis for Chicken Broth is Progresso because it offered only one huge can size of 32 oz which was way beyond the 16 oz size: the largest in this analysis. So, we were unable to test Hypothesis II for the Chicken Broth segment.
However, the results for Chicken Noodle Soup did not support Hypothesis II, because Progresso was found to be a member of the premium segment, not the mid-price segment.
Now while Progresso did manage to become the runner-up in the canned soup market, its market share was just one-third that of Campbell's. Therefore, it cannot be considered a direct competitor of Campbell.
So, here is a market that has a very large number of small competitors, but one giant company that dwarfs everyone else, that does not lend itself to a situation where the proposition behind Hypothesis II becomes relevant and, as such, can then be tested.
As we have hypothesized, we found that relative price was a strategic variable. We ranked the unit Kendall's tau_b, and Spearman's rho-were significant at an amazing 0.01 level! This result is also in accord with eight earlier studies that we have mentioned before.
We also found four strategic groups: Finally, a pattern is emerging in price-quality segmentation analysis. This is the ninth study in the analysis of competitive profiles of individual U.S. consumer markets. All these studies involved a testing of two hypotheses: (1) That the market leader would be a member of the mid-price segment, and (2) That the unit price of the market leader would be somewhat higher than that of the nearest competitor, also expected to be a member of the mid-price segment.
In seven of the nine studies-that exclude Men's and Women's Razor-Blade markets-the results supported Hypothesis I, while five of the studies supported Hypothesis II.