Campbell Soup plans to move more aggressively to change its product portfolio to include a wider variety of healthier, better-for-you brands sought after by consumers, with acquisitions expected to play a key part in that ongoing transition.
Denise Morrison, Campbell Soups' CEO, told investors Wednesday the food giant has gone to great lengths “to redefine the way people define Campbell” by expanding its offerings into fresher, more natural fare. Those products are increasingly in demand with millennials and other consumers who view food differently than their parents and grandparents. While expansion into the fast-growing health and well-being space hasn’t been without its challenges, the move has given the canned soup icon a platform for future growth and is changing the way "we make decisions and allocate resources," she said.
During her presentation at the company's headquarters in Camden, New Jersey, Morrison said recent acquisitions such as its $700 million purchase of natural and organic brand Pacific Foods of Oregon earlier this month have provided the company with “additional credibility and capability” to meet its goal of becoming a go-to marketplace for products with a slimmed-down roster of simple, recognizable ingredients.
"We need to redouble our efforts and move with urgency to evolve our portfolio. We need to add more relevant brands that resonate with consumers and customers," she said. “Some of this we can build ourselves, but in other cases we'll have to leverage external development, including M&A and partnerships. If we're to achieve our goal, acquisitions will continue to play a pivotal role.”

Growing Fresh not without its challenges
Campbell Soup, which makes a variety of household staples including Goldfish crackers, Pepperidge Farm cookies and Chunky soups, has purchased five companies during the last six years, most of them in an effort to boost its Fresh foods division. Bolthouse Farms, a maker of carrots, smoothies, juices and dressings, was acquired for $1.55 billion in 2012, followed a year later by children’s food and snack company Plum Organics. Garden Fresh Gourmet was purchased for $231 million in 2015, bringing its refrigerated salsa, hummus and dips into Campbell Soup’s portfolio.
But Bolthouse and Garden Fresh have been plagued by some periods of challenges since being acquired. Rainy weather in California last year disrupted Bolthouse's fresh carrot supply and the brand was forced to recall nearly 4 million bottles of protein drinks due to possible spoilage that caused some people to become sick. And Garden Fresh has struggled to generate consumer interest beyond its core audience in the Midwest.
"We've learned some tough lessons with [Campbell Fresh] ... but it's essential to separate strategy from execution. Without question, we could have done and should have been better. Our strategy was and is sound."

Denise Morrison
Cheif Executive Officer of Campbell Soup
Campbell executives defended the company's strategy, attributing the problems to execution rather than an underlying fissure in its long-term plan. So far, it appears Campbell is still working to straighten out the business. During its most recent quarter, Campbell said revenue decreased 6% to $248 million, driven by lower sales of Bolthouse Farms refrigerated beverages.
The food products maker said its Fresh division, which posted sales of about $1 billion during the last fiscal year or about 12% of Campbell's overall sales, is expected to resume organic growth next year in the mid-single digits. A new leadership team was put in place last fall to improve and grow the operation. Originally, the company set a goal of generating $2 billion in Fresh sales by 2020, but it has since abandoned that figure in favor of the annual growth target that removes the unpredictability of outside purchases.
"Let me be blunt. We've learned some tough lessons with [Campbell Fresh] ... but it's essential to separate strategy from execution," Morrison said. "Without question, we could have done and should have been better, and I believe it will significantly improve under the new C-Fresh leadership team. Our strategy was and is sound."

'Can't do everything ourselves'
Amanda O'Neill, an analyst with S&P Global, told Food Dive that Campbell's Soup strategy has successfully mirrored consumer trends taking place in the marketplace even though it hasn't shown up in revenue growth.
"The company's strategy is consistent with what we see across the industry, in terms of better-for-you products and the shift towards e-commerce," she said. "However, execution is key and they will face stiff competition from both branded and non-branded players that can limit their success."
O'Neill said like other firms in the packaged food sector facing challenging growth prospects, "M&A will continue to be the main thing that is going to get the top line to move."
Campbell's recent challenges symbolize those facing other 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.
Just this week, spice maker McCormick & Company agreed to purchase Reckitt Benckiser's Food Division, home to French's mustard and Frank's RedHot brands, for $4.2 billion — a price tag criticized by some analysts as high, considering that the division generated only $338 million in sales last year. Still, others on Wall Street said it was not surprising because the company had a unique chance to acquire an arsenal of well-known brands, a point borne out by the fact that other food giants including Unilever and Hormel were believed to be interested.
"Clearly, multiples are rising. Price is a limiting factor. We've walked away from a number of transactions."

Anthony DiSilvestro
Campbell Soup's chief financial officer
Anthony DiSilvestro, Campbell's chief financial officer, told the audience there is a lot of money in the market chasing an ever-shrinking pool of growth assets by companies eager to boost their margins.
"Clearly, multiples are rising," he said. "Price is a limiting factor. We've walked away from a number of transactions."
In an interview with Food Dive after her speech, Campbell's CEO Morrison said there is a growing realization "that companies like ours can't do everything ourselves with all the disruption and the new technologies" increasing the importance of partnering with other firms or engaging in an acquisition.
Morrison was asked whether Campbell would be open to a bigger deal — and she didn't dismiss the possibility outright. “We have looked at a number of different size deals, and we weigh each on its merit,” she said.