It wants retailers to buy the soup at regular prices. In the process of charging more, Campbell will streamline its inventory practice, too, knocking out about four weeks worth of inventory from the channel. Because Campbell will no longer offer a discounted price each quarter, retailers are now working through warehouses full of old Campbell soup before buying more. Picture the end of the Raiders of the Lost Ark . Now imagine that all of the crates contain Campbell Soup.
Retailers now hold four to six weeks worth of soup in inventory.
Campbell wants to cut this in half and perhaps it will later fall to just one or two weeks as grocery store chains strive to reduce storage costs. It'd be interesting to know how much of quarterly soup sales were previously made at a discount price, but the information isn't disclosed and I haven't been able to obtain it over the phone with Campbell Soup. We might guess that up to six weeks worth of soup was bought at the discount every quarter. In fact, Campbell did not change its year 2000 EPS guidance. It expects the inventory issue to clear by the end of the fiscal year.