But Campbell Soup’s IR man Leonard F Griehs finds that, like the product itself, investor relations is best consumed at more length. His can-do attitude to IR for the household name giant with $7 bn in annual sales is infectious.
I believe strongly in career IR,’ says Len Griehs, IRO for Campbell Soup. ‘I’m not interested in rotating through other management jobs.’ He is manifestly someone who has thought deeply about how the profession works. With one assistant and a budget below $500,000, he communicates with the investors in one of the world’s biggest companies, that makes everything from the eponymous soups to prestigious Godiva chocolates. ‘When I’m on an IR trip, analysts really love Godiva chocolates as gifts,’ he grins, conceding that cans of Campbell’s soup don’t seem to have the same appeal.
Griehs joined Campbell’s in 1990 after ten years with Gerber, another family-owned icon of American industry, moving with David Johnson, the CEO. When they arrived at Campbell’s Griehs discovered that insofar as any IR was being carried out, it took the form of a lawyer in the legal department keeping the founding Dorrance family advised of the progress of their considerable wealth. The company saw no real need to talk to Wall Street.
In fact there was a desperate need. Jack Dorrance, the founder’s son, had just died, and the generation-skipping trust had distributed the holdings to the grandchildren who promptly boiled down into sell, don’t sell and don’t know factions.
In the 1980s the company had underperformed the rest of the food industry. Forbes quoted one of its CEOs as saying that ‘we’re not running the company for the stock price’ – a surprising admission for a company that had gone public in 1954. Unsurprisingly, the company was regarded as ripe for takeover, with likely contenders being European companies such as Unilever and Nestl, which were known to be looking at American food interests.
But Johnson had turned Gerber around and the don’t sell family faction, which had gained the ascendancy, were looking to him to try out the recipe for Campbell. ‘When we were at Gerbers, David Johnson and I often discussed the potential of Campbell’s, so I wasn’t too surprised. But my wife wanted to know if I was sure of what I was doing when I moved over,’ Griehs recalls.
The first thing the pair did at Campbell’s was to go to Wall Street to recruit solid institutional investors. But when Johnson went to his first Wall Street meeting, almost the sole attenders were arbitrageurs waiting for the inevitable sale. The arbs were disappointed, but the family and Wall Street were not. Earnings jumped 30 per cent in the first year of the new regime and 22 per cent in the second.
So how easy was it to persuade Wall Street to invest in a family business? ‘Well, many institutions like us for our long-term performance, good brands and quality. The institutions are very interested in the feelings of the family shareholders, but they like the family-owned, old family business idea.’ With unconscious irony, given that Campbell’s built its fortunes on taking the liquid out of soup, Griehs says ‘We never had problems with the liquidity of stock.’
The socially responsible investors appreciate Campbell’s as well. They tend to expect family businesses to be as concerned with their reputation as they are with the bottom line. ‘I think there’s more and more growth in that area,’ Griehs says, suggesting that even institutions that are not explicitly ‘socially responsible’ are increasingly happy with companies that come out well from social audits. ‘I always fill in the questionnaires and talk to them,’ he says.
Obviously the family constituency on the board plays a large part in deciding the company strategy, which has involved raising dividends by 21 per cent a year for the last five years. That’s fine for the Dorrance family which, after all, lives on those dividends while hanging on to their stock. But institutions like a combination of growth and dividends. ‘We still invest more than many of our competitors, and our pay-out is less than some other food companies who pay out 50 per cent of profits in dividends,’ comments Griehs.
Campbell’s gets glowing reports for its corporate governance plan, which has become an increasingly important item for many institutions, who are anxious to see a board representing shareholder’s interests rather than management’s.
Except for the CEO, none of Campbell’s directors has an executive role at the company; they are obliged to own 1,000 shares within a year of election; and they are compensated entirely in stock. None of the four family directors works for the company. ‘The board has 44 per cent of the shareholders represented,’ Griehs says proudly.
Managers are also mandated to own stock, ranging from 50 per cent of annual salary for the lower levels to three times for CEO Johnson. It helps, of course, that their bonuses are paid in stock. But managers apart, most employees invest in the 401 (K) plans, accounting for more than 5 per cent of total equity in the company.
After the family and the institutions, there’s not much room for the retail investors some IR officers seek in order to balance their shareholder profile. ‘Frankly, it would not worry me if we never had another individual shareholder,’ says Griehs. ‘The family with its 58 per cent holding makes up quite enough long-term individual shareholders. I’m more interested in maintaining liquidity,’ he says.
Even so there are about 30 mn individually held shares out there and Campbell’s is usually in the top 50 for investment clubs and NAIC holdings. But that’s not a result of IR effort. ‘I only do a few days a year talking to brokers. 99 per cent of my work is with the institutions,’ Griehs confesses.
Although listed in London and on the Swiss Exchanges Griehs doubts whether more than 5 per cent of the shares are in overseas investor hands, even though there is an active IR programme in the UK. ‘We do business in Japan as well, but we are not listed there. If we were, it would probably be as much for PR as IR purposes.’
Ironically, one of Campbell’s biggest assets abroad has little to do with the company’s efforts. Andy Warhol’s painting of a Campbell’s soup can made it into a sort of corporate icon, venerated in galleries around the world. ‘Even though we’re not a big company in Europe, investors there always recognise us by the picture,’ says Griehs, who takes the trouble to pay them a visit every year or so to keep them in touch.
Although everything has gone well, Griehs is not complacent. Perhaps he discovered the need to avoid that through his experience at Gerbers in 1986, when a scare about broken glass in baby food caused the company’s market share to fall from 70 per cent to 50 per cent. Later the CEO dropped dead on the golf course, which took some soothing for analysts. (These events also provided Griehs with some of the key information necessary to author a paper on disaster management in IR for NIRI, on whose board he now serves.)
At Gerbers, the glass debacle also meant that Grieh’s job changed, switching to become exclusively focused on IR. That involved relinquishing his previous responsibilities for the company’s pension funds. Although he is a great believer in the professionalism of IR, Griehs certainly does not see his time with the pension fund as time wasted. ‘For me it was a real learning experience: to see what investment managers go through, and to see the struggles on that side of the Street for the first time.’
He points out that while IR people are repeatedly downplaying the significance of quarterly reports and appealing to analysts to take a longer term view, when companies are dealing with their own investment managers, they often insist on quarterly results information. ‘It’s like in the cartoon: We have met the enemy, and he is us!”‘, jokes Griehs, who notes that Campbell’s itself stopped issuing quarterlies some two years ago. ‘And no-one really complained at all. Analysts use quarterly reports less and less. They are a marketing tool for new shareholders rather than information for serious analysts. If I do my job properly the analysts will already have the information.’
Indeed, Campbell’s quarterly results are widely available, for instance on the company’s Web site (URL:http://www.shareholder.com/campbell/), where interim results and press releases can also be accessed. The site logs over 10,000 hits a quarter and investors can even use it to order up a DRIP(Dividend Reinvestment Plan). The less technologically minded can call a toll free 800 number (1-800-909-SOUP) to get the quarterlies and latest news.
Griehs’s department uses CDA’s analysis software to track shareholders and has also used Technimetrics, which is ‘very good as well.’ Griehs qualifies the value of these outside service products, however. ‘I think that it’s important to use them as a basis. If you just rely on the software you’ll miss some very interesting potential shareholders.We still do a lot of telephone interviews to identify potential one on ones. And we usually end up with more than the list, some of which are not in the slightest interested.’
Although not technophobic, ‘I’m still a firm believer that this is a human business. Screening is fine, but it’s no substitute for human interaction. You have to rely on your own judgement. When I go on a trip, which is monthly, through four or five cities, I have a consultant to identify the potential.’
Within the company, Griehs reports to the CFO, when there is one. In fact there has been a long gap while waiting for the results of a search for the new appointee Basil Anderson who took over on 1st April, having previously been with Scott Paper. ‘I feel the IR function is a financial one, and it can work best under the CFO, who’s the hub of a company,’ says Griehs. ‘Analysts ask who I report to, and they’re much more comfortable with someone who has direct access to the CFO,’ he maintains.
Anderson, who reports in turn to chairman and CEO David Johnson, will doubtless appreciate Griehs’s attitude to spending, since he consistently prefers to do a job in-house if it is cheaper. ‘You don’t need a big budget in investor relations,’ says Griehs, citing the example of the eight minute video he produces every two years. It costs $18,000 and is done mostly in-house. ‘When we’ve asked for quotes, outside tenders are for $60-70,000 for the same product.’
Griehs also agrees with analysts and investors who don’t like ostentatious expenditure on fripperies. The company’s headquarters are still in Camden, New Jersey, an archetypal rustbelt town remembered more for its glorious past as the home of Walt Whitman than its current prosperity. ‘Investors don’t want us to build the Taj Mahal for a company headquarters,’ he says.
Indeed, the annual meeting is held on the waterfront at Camden, although that doesn’t stop it attracting over 2,000 people. In fact, Griehs’s tiny IR department has to be supplemented by staff from other departments for special occasions like the annual meeting, at which shareholders ‘get a lunch of Campbell’s products and a giveaway bag.’ Griehs doubts that that is the main reason for the high turnout, however. ‘A lot of them treat it as an annual reunion,’ he says. ‘They just seem to enjoy themselves.’
Len Griehs seems to enjoy himself – and investor relations – as well.
What the Analysts Say
John McMillin of Prudential described Len Griehs as, ‘A consummate professional.’ He adds: ‘I dealt with him at Gerber and for the last six years at Campbell. 15 years in all. He’s always been accessible, close to his management and he does nothing to try to hide the management figures.’
In investor relations, McMillin says he looks for someone who is knowledgeable, accessible and smart. ‘Len Griehs is all of those,’ he says.
Lehman Brothers’ Michael J Branca says Campbell’s has ‘a very strong programme. And given the number of times the company has restated its segment details over the last four years, Len Griehs has done a terrific job.’
According to Branca, Griehs provides very helpful and detailed information. ‘He’s always the most responsive and diligent investor relations officer, doing an excellent job in providing details.’
Leonard G Teitelbaum of Merrill Lynch confessed: ‘I love to find fault, but in Len’s case, all I can say is that his investor relations is very effective. Of course,’ he adds, ‘it helps that the guy knows what he’s doing. Campbell’s isn’t the first company he’s worked for. He came from Gerber with a loyal following. We’ve known him for a long time and he knows us.’
More specifically, Teitelbaum says, ‘He’s very responsive, and he’s done well even with some bad patches. Apart from the early problems over the family’s plans, he’s had to cope with some questionable acquisitions, and a one line product identification. So he’s had to work for his reputation.
Nomi Ghez of Goldman Sachs credits Griehs with being ‘a very old hand,’ who does ‘an excellent job. That’s particularly because he is very close to management, which is important. He knows their psychology and their strategy.’
