The Revenge Of The Fortune 500

When companies as big as Campbell start thinking like entrepreneurs, small companies had better start thinking about new ways to compete.

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Mark Sherman is a man obsessed by a radical marketing vision. The onetime proprietor of Gathering Winds, a tiny natural-foods company in upstate New York, he set off a year ago to seek a far more lucrative niche among the upscale shoppers of suburban Washington, D.C.

"As an entrepreneur, I go where the opportunities are," said the slender, 35-year-old Sherman as he inspected a supermarket kiosk stocked with prepared gourmet dishes -- Sole Veronique, Chicken Salad Jacques -- from his Today's Taste line. "There's a huge need for natural-food products for a market segment that isn't being served yet. Eldridge Cleaver used to say that you're either part of the solution or part of the problem. Here I'm effecting a solution in terms of fresh foods and the needs of the market."

Should this unrehabilitated child of the '60s, as Sherman calls himself, succeed in his mission, the effect could be revolutionary indeed for the nation's booming $11-billion specialty-foods industry. By offering fresh, low-fat, low-salt prepared foods at the supermarket counter, Sherman would pose a major challenge to the delicatessens, gourmet shops, and restaurants that have been fattening themselves on a market now growing some 20% a year.

The real threat, however, is not Sherman's messianic marketing concept, but the power that stands behind it. For while Sherman considers himself a small-business man at heart and calls Today's Taste "a university for entrepreneurial learning," the people paying the tuition -- and Sherman's fat consultant's fee -- hail from one of America's most venerable corporate institutions: Campbell Soup Co.

Some executives at the Camden, N.J.-based giant, which had sales of $3.7 billion last year, think its prepared gourmet food experiment might blossom into a $100-million business over the next few years. And Sherman's pilot project is just one part of the company's wide-ranging drive to expand outside its mainstream grocery business -- and into product lines hitherto dominated by small companies.

Much of this drive revolves around what Campbell marketing research director Tony Adams calls consumer "hot buttons" -- buzzwords like "fresh," "healthful," and "high quality." Fresh Chef, for instance, a project now being test-marketed in the Denver area, offers a line of salads that, like Today's Taste, could end up competing with thousands of specialized food packagers, stores, and restaurants.

"There's a sense of entitlement [among consumers] for top-quality food that entrepreneurs have captured really well," explains Adams. "If we're not participating in this type of business, we could end up competing for only 50% of the food dollar. We cannot stick with our traditional business alone. We must find new directions."

"IT'S LIKE GULLIVER IS GETTING UP"

"New directions" is an innocuoussounding phrase, but make no mistake: When a company the size of Campbell changes direction, small companies don't want to be in its path. And it isn't only food companies that need to look over their shoulders these days.

What is happening at Campbell reflects a broader trend among the Fortune 500 toward a more sophisticated form of giantism. By marrying the inherent advantages of bigness with the customer-oriented marketing savvy characteristic of small organizations, these increasingly intelligent leviathans are threatening the long-range health of literally thousands of small entrepreneurial companies.

"I don't think a company can stay small today and survive," says veteran Florida-based consumer product developer Wilson L. Harrell (see "Profile of a Compulsive Entrepreneur," April, page 78). "Any major company today knows more about the niche business than the entrepreneur running the company. Used to be the major companies had a syndrome: If they didn't think of it, it couldn't be right. But so many new products in the past decade came out of small companies and big companies have found that buying or imitating is easier than developing internally."

Harrell, of course, is overstating the case. Not every large company in America has learned the art of niche-marketing, and many small companies have found ways to survive onslaughts by the giants (see sidebar, page 41). What's more, the much-ballyhood notion of "intrapreneurship" -- the attempt to apply entrepreneurial techniques within large organizations -- is no more than a fad in many companies and, like most fads, it may fade before it has much lasting effect.

When a major corporation does develop an entrepreneurial intelligence, however -- or even an approximation of one -- entrepreneurs in the same industry have serious cause for concern. One obvious example is microcomputers. Just a few years ago, Adam Osborne scornfully predicted that IBM Corp. could never adjust to the fast pace of the personal computer business. Yet within three years of setting up its separate Personal Computer business unit in Boca Raton, Fla., IBM established a dominant 40% market share in the $6.6-billion industry, helping to drive many smaller competitors, including Osborne's company, into bankruptcy.

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