As the saying goes, if you’re not growing, you’re dying. But when it comes to the companies that provide our most popular foods, the ability to grow has become difficult — for both companies and their investors.
Instead of wanting the products from their childhoods, many consumers today are turning to healthier choices and products with fresh ingredients. That’s caused many within established food organizations to reconsider their recipes.
In November, the Campbell Soup Co. (ticker: CPB) began to transition its products to appeal to this trend. It is removing disodium inosinate and monosodium glutamate and eight other ingredients from two children’s chicken soup varieties while adding flavors such as dehydrated chicken broth and onions. It’s a test to see how customers react before potentially doing the same for Campbell’s signature chicken noodle soup recipe.
Food consultants agree with Campbell’s approach. “You take small, calculated risks then check them out,” says consultant Aaron Allen of Aaron Allen & Associates in Orlando, Florida. “Chicken noodle is a much more bold move. They read the writing on the wall.”
It’s a big bet for Campbell Soup, which controls about 60 percent of the soup aisle at grocery stores. But its recent struggles have led to the experimentation — despite increases in profits as the company pushed prices up, revenues actually dropped 2 percent in 2015.
Campbell Soup, though, isn’t alone in its efforts to reverse this trend.
“Consumer product companies have in several instances been working to simplify the ingredient profile of their offerings,” says Morningstar analyst Erin Lash. “But ensuring that taste isn’t altered is a challenge.”
These attempts to tweak the ingredients can lead to major backlash. We’ve seen many instances where food companies change their recipes, only to discover their core customers didn’t want the modification. Such changes can do damage to the brand and the company for years.
Here are some notable times when companies changed the recipes of their well-known products. Sometimes innovation works, but there are also some flops as companies got creative with their best-selling products.
Beverage companies suffer setbacks. According to John Stanton, a professor at St. Joseph University and a food industry veteran, one of the reasons companies decide to alter their recipes is the evolving consumer palate. But they can also make the mistake of underestimating customer loyalty.
There’s no more famous example than Coca-Cola Co. (KO) and its launch of New Coke in 1985. At the time, PepsiCo (PEP) had started to cut into Coke’s market share. Pepsi had a sweeter taste than original Coke, so the Atlanta-based beverage maker decided to follow the trend.
But New Coke was a public relations disaster, causing so much acrimony with fans that Coke returned the original recipe to shelves within three months under a newly rebranded Coca-Cola Classic label. KO stock fell 7 percent when New Coke debuted, and shot back up again when the “classic” formula was reintroduced. “You better be sure you’re not hurting the base of the business that built that brand,” Stanton says.
A similar situation happened in England when Associated British Foods’s Twining brand of teas decided to tweak its Earl Grey, opting for more citrus-like flavors in 2011. After customers decried the move, launching social media campaigns in response, Twining brought back its old blend under a new name, Earl Grey The Classic Edition.
Domino’s reworks its sauce. Not all updates become public black eyes. When Domino’s Pizza (DPZ) decided to update its pizza sauce, crust and cheese in 2009, it had suffered two years of declining sales. The company knew it’s flavor could improve even though the entire pizza industry suffered declines in deliveries due to the recession.
In the kitchen, ch added more flavors to its crust with the addition of garlic and parsley and created a sweeter sauce with hints of red pepper. Instead of customers voicing outrage, the response was more like, “It’s about time.”
By moving first among its peers, a company gets the “opportunity to shape the story,” Allen says. And companies “hope people notice” when they change the recipe.
For Domino’s, there’s no doubt people did. Since the introduction of the new recipe, the company has jumped from just above $8 a share to nearly $110. It has proven so successful it may have created a trend — Pizza Hut, a division of Yum! Brands (YUM), added new pizza and sauce favors — and even a new pizza box — last year.
Oreos gets rid of the lard. You might not realize it now, but for the first 85 years of Oreos’ existence, Nabisco made the cream filling with pig fat. A problem arose when ice cream distributors across the country wanted to offer Oreos in their products, but many of the ice cream makers operated under kosher supervision.
The desire to increase this distribution opportunity encouraged Oreos to develop a lard-free cookie in 1997, which it continues to package today. Nabisco is now a division of Mondelez International (MDLZ).
“Most of the food companies are less proactive than what we might think,” Stanton says. “You would have to have some pretty strong pressure on you,” from government or advocacy groups to make the change.
“Don’t think that consumers are the only ones companies are worried about,” he adds.
Similar public pressure led Diageo (DEO) to change the 256-year-old recipe of Guinness beer last month, removing fish bladder during the filtration process so vegetarians and vegans could partake in the brew.
Campbell Soup’s attempt at lowering sodium. This isn’t the first time Campbell Soup has tweaked its recipe for health-related reasons. In early 2010, it reduced the salt content in many of its condensed soups. By the end of that year, sales had fallen for the company 4 percent from 2008 levels, and many blamed the salt-less soup. In July 2011, it reintroduced the old salt content and marketed a separate line of low-sodium options.
What’s different about Campbell’s earlier attempt at dipping into health-conscious consumers? The approach. In 2010, not enough testing before the dramatic shift in strategy left the company unprepared for the results.
Without a significant amount of consumer research, a company runs the risk of “coming up with a product that people don’t like,” says Eloy Trevino, partner at brand consulting firm Prophet in Chicago.
But if consumer tastes have changed, Trevino says the risk of doing nothing is greater.
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Campbell Soup’s New Recipe: 6 Other Times Companies Tweaked Their Products originally appeared on usnews.com
