Brief

Campbell's profit lags as demand wanes for its soups, V8

Dive Brief:

  • Campbell Soup said net income fell to $176 million in its third quarter from $185 million. Net sales declined to $1.85 billion from $1.87 billion. Analysts on average forecast revenue in the period of $1.87 billion, according to Reuters.  
  • The food manufacturer reported sales in its Americas Simple Meals and Beverage category for the quarter decreased 2% percent to $982 million driven by declines in soup and V8 beverages, partly offset by gains in Prego pasta sauces. Sales of U.S. soup decreased 4%, driven by declines in condensed soups and broth.
  • Campbell lowered its guidance, predicting sales for the year will be between flat and down 1%, compared to a prior forecast of between 0% and a gain of 1%. “We are adjusting our fiscal 2017 guidance, reflecting our performance in the quarter, the difficult operating environment and our outlook for the remainder of the year," Denise Morrison, Campbell’s president and CEO, said in a statement.

Dive Insight:

Campbell's disappointing quarter reflects challenges facing many large food manufacturers, many of which are trying to stoke growth by reformulating their brands or turning to deals to acquire smart, innovative companies whose products reflect changing consumer tastes.

“This was a challenging quarter across the food industry as top-line growth remained scarce, especially in center store categories," Morrison said. "The industry, including Campbell, experienced significant consumption declines early in the calendar year. These industry trends coincided with weak consumer spending, which was at its lowest growth rate since 2009. While we rebounded with sales growth in March and April, we were unable to offset the earlier declines."

She added the company expects to offset lower sales with ongoing cost-savings efforts "which are ahead of our expectations."

As consumers gravitate away from processed foods and toward snacks and high-protein, all-natural products, Campbell and other food manufacturers have seen sales of their flagship products struggle. During the quarter, Campbell said sales of its condensed soups and broths slumped 4%, despite an increase in demand for its ready-to-serve-soups. 

Perhaps the biggest disappointment came in its Campbell Fresh division, which includes Bolthouse Farms and Garden Fresh Gourmet brands. These were acquired by the company in 2012 and 2015, respectivelySales in the quarter decreased 6% to $248 million, driven by lower sales of Bolthouse Farms refrigerated beverages. 

With more than three-quarters of consumers looking to eat more fresh versus processed foods, Campbell’s strategy is understandable. Campbell has high hopes for its Fresh division, with a goal of generating $2 billion in sales by 2020, but it appears that target could be a difficult one to reach. The difficulties that Campbell has had with its Fresh division shows the challenges large CPG companies can have to integrate and expand the business, which often requires nimbleness, innovation and levels of execution that may be better handled by smaller players.

Filed Under: Manufacturing Corporate Beverages