Dive Brief:
- Campbell reported Thursday a 1% decrease in second quarter revenue to $2.2 billion and a 2% decline for the first six months of the year compared to last fiscal year, due in part to currency headwinds and lower volumes. Organic sales were comparable year over year.
- Campbell increased its gross margin to 37.2% from 33.3%, driven by productivity enhancements, higher selling prices, lower promotional spending, and improvements to its supply chain.
- As a result, adjusted diluted earnings per share rose 23% to $0.87 per share.
Dive Insight:
Campbell's two main focuses to combat slowing sales have been cost-savings and innovation. Since implementing its cost-cutting initiative a year ago with an original target of $200 million saved over three years, the company has increased that target to $250 million and now $300 million.
Campbell has also been focused on innovation and spicing up its brands portfolio. Once making up 40% of the company's total sales, soup now comprises 34% as the category, which has stumbled in consumers' search for fresh, whole foods.
As announced at CAGNY, Campbell will release products like Prego Farmer's Market sauce and three new varieties of Goldfish made with organic wheat later this year. This demonstrates Campbell's initiative to develop better-for-you products within its current brands rather than just acquiring companies that meet this consumer demand.
This commitment to innovation has included Campbell's recent announcement of its $125 million venture capital fund, Acre Venture Partners, which will be "a more strategic and methodical approach" than the company's previous early stage investments in startups, CEO Denise Morrison said at CAGNY last week. This approach will enable Campbell to begin relationships with startups earlier and become investors in promising companies.
The company promised labeling of GMO ingredients in its products over the next year and a half, a marked difference from its industry peers.