- Campbell Soup is selling its Garden Fresh Gourmet brand to an affiliate of Fountain of Health USA, a maker of hummus, dips, variety packs, prepared salads, pates and frozen desserts. Terms of the transaction were not disclosed.
- Garden Fresh Gourmet is part of the the soup and snack maker's Campbell Fresh division, which also includes Bolthouse Farms. Campbell Soup said efforts to sell Bolthouse Farms and its international divisions are both on-track. Campbell expects to name buyers by the end of its fiscal 2019 in late July.
- Separately, Campbell Soup said sales rose 24% to $2.71 billion in its fiscal second quarter, topping analyst expectations as it benefited from the recent acquisitions of Snyder’s-Lance and Pacific Foods. During the period, the New Jersey company posted growth in its V8 and Pepperidge Farm brands, while shoppers purchased less Prego. U.S. soup sales were comparable to the prior year with gains in ready-to-serve soups and broth, offset by declines in condensed soups.
Campbell Soup's decision to sell its Garden Fresh Gourmet brand for an undisclosed sum marks the beginning of the end for the company's fresh operations. After a few years diversifying away from its core packaged food business through a string of acquisitions, Campbell Soup appears to be making progress to undo what has proven to be a costly and challenging endeavor.
In its earnings report Wednesday, Campbell Soup reported a loss due to a $346 million writedown of its struggling Fresh division. According to Reuters, this is the fourth time Campbell Soup has written down the unit since September 2016, reducing its value in total by $1.35 billion.
Garden Fresh, acquired by the company in 2015 for $231 million, has struggled to generate consumer interest beyond its core audience in the Midwest. The sale of the brand comes just a week after Campbell Soup sold a refrigerated soup plant in Washington state that was part of the company's Fresh division. Challenges also have plagued Bolthouse Farms — a maker of carrots, smoothies, juices and dressings — including poor weather and a recall since its $1.55 billion purchase in 2012. The New York Post reported this week that Campbell Soup is looking at bids of more than $500 million for Bolthouse.
The sale of Garden Fresh and planned divestiture of the rest of its Fresh and international divisions in the first half of the year should help the maker of Pop Secret popcorn and Emerald nuts settle into a quieter 2019 following a prolonged period of turmoil. Campbell Soup has faced many of the same challenges as its CPG competitors as shoppers gravitate toward fresher, better-for-you foods and away from the processed, center-of-the store products that have filled grocery carts for decades.
“During the quarter, we continued to make progress against key strategic initiatives. Our efforts to stabilize our core business, integrate Snyder’s-Lance, deliver our cost savings agenda and focus and optimize the portfolio are all on track," Mark Clouse, Campbell Soup’s CEO, said in the earnings report. "Over time, these actions will enable us to increase investments in our core businesses while significantly reducing debt and creating meaningful value for shareholders. While we have made steady progress, there is much more work to be done to fully unlock the potential of our business."
Campbell Soup reported a mixed quarter in its business. Consumers purchased more V8, Pepperidge Farm and Goldfish crackers, but Plum and condensed soup struggled. In its beleaguered Fresh division, sales in the quarter decreased 7% to $239 million, driven by declines in refrigerated soup.
The decision to unload the Fresh division is a sound move that will enable the company to focus on areas where it has significant expertise. It also gives Clouse, the former Pinnacle Brands chief who took over in late January, fewer distractions as he gets acclimated to his new role and works on further integrating Campbell Soup's $4.9 billion Snyder’s-Lance purchase in 2018, the largest in its 150-year history.
Clouse will likely be given some leeway to turnaround the business, but his work is no doubt under scrutiny by activist investor Daniel Loeb. The head of Third Point reached a deal with the soup maker in November to appoint two people to the company's now 14-member board. Campbell Soup appears to be taking the right steps to stabilize its business, but time may not be on its side with Loeb and a changing consumer putting pressure on a iconic U.S. company.