Campbell Soup's acting CEO told shareholders Thursday morning the company is making meaningful progress in turning itself around, but cautioned that efforts to refocus and streamline the food giant are still in early stages.
Keith McLoughlin, the interim president and CEO, assured an estimated 50 shareholders at the company's annual meeting near Philadelphia that despite the proxy contest with investor Daniel Loeb dominating recent discussions, executives have "not been distracted from our mission turning around a business and maximizing shareholder value."
"There are significant changes happening at your company," McLoughlin said at the meeting. "We are pleased with the pace of our progress, but by no means are we declaring victory. This is the beginning. We recognize that much more work lies ahead of us. The turnaround of the Campbell's Soup Company is underway."
The nearly 150-year old soup company has been mired in challenges as consumers turn away from processed items such as canned soup, and it struggled to expand into areas like fresh foods through acquisitions such as Bolthouse Farms and Garden Fresh Gourmet. In August, Campbell Soup announced a three-prong plan to improve the company: strengthening its core business of snacks and meals and beverages; divesting non-core assets; and squeezing out cost savings from the business.
While many of the shifts in consumer preferences impacting Campbell Soup are being felt throughout the food industry by other well-established businesses, the company's recent stumbles and depressed share price have attracted investors like Loeb to agitate for change. The hedge fund manager, who has a roughly 7% stake in Campbell's Soup, has criticized the company's board for failing to act fast enough to turnaround its iconic soup business.
"We are pleased with the pace of our progress, but by no means are we declaring victory. This is the beginning. We recognize that much more work lies ahead of us."
Interim president and CEO, Campbell Soup
Loeb initially called for a sale of the company and a removal of the entire 12-person Campbell Soup board — which included three descendants of the founder who, along with another family member not on the board, control 41% of the company's stock. Loeb scaled back those demands to five nominees, and then again to two following a deal with the company announced Monday.
While the deal falls short of the sweeping overhaul he initially sought, it gives Loeb some representation on the board and a way to be more closely involved with the company as it aims to revive its business and undertake other key steps like appointing a new CEO.
Campbell Soup has noted Third Point lacked a concrete plan to turnaround the CPG giant, and said many of the changes proposed by Loeb were already underway before he became involved.
Concern among shareholders
Several shareholders attending the meeting Thursday peppered the acting CEO and other executives for information on Campbell Soup's efforts to combat growing private label adoption, the cost for the company to engage in the months-long proxy fight with Loeb, and its e-commerce presence. But some — many of whom have owned stock in Campbell Soup for decades or worked for the company — expressed trepidation and uncertainty about its future.
"I think the company is obviously at a very critical inflection point and the industry itself is clearly struggling," Phil Lippincott, a Florida resident who has owned Campbell Soup shares for more than 30 years, told Food Dive. "There is a real question as to where the company is going to be 10, 20 years from now and it needs to figure it out now and find a path — obviously one where they can still be unique and distinctive. It's not clear yet that that's going to happen."
Last week, Campbell Soup, which is under pressure to execute on its turnaround plan and expand its newly bulked-up snack business following the $4.9 billion acquisition of Snyder’s-Lance, posted a drop in profit during its first quarter. Comparable sales fell 3% compared to a year ago, and margins tightened amid rising costs. But the company said it is starting to see "improved trends" in U.S. soup, a return to sales growth in V8 and "continued solid performance" in Campbell Snacks.
The soup maker announced in May that former CEO Denise Morrison was stepping down after seven years at the helm, and it would undertake a three-month strategic review of its business. In August, it shared plans to to sell its fresh business and international operations to pay down debt, reduce costs and focus its attention on its U.S. snacks, soups and drinks operations. Campbell Soup is reportedly in discussions with Mondelez International to sell Arnott's Biscuits, which makes Tim Tams, and Kelsey Group, a producer of butter cookies.
"I think the company is obviously at a very critical inflection point and the industry itself is clearly struggling. There is a real question as to where the company is going to be 10, 20 years from now and it needs to figure it out now and find a path — obviously one where they can still be unique and distinctive. It's not clear yet that that's going to happen."
Shareholder, Campbell Soup
Campbell Soup is expected to divest these operations sometime during the first half of the year, using the proceeds to pay down debt and invest its core business.
McLoughlin reaffirmed that a new CEO will be appointed before the end of 2018. Earlier this week, The Wall Street Journal reported that food-industry veteran and former Pinnacle Foods CEO Mark Clouse was the leading candidate to be its next chief executive — though the paper cautioned there is no guarantee he will be the pick or even accept the position.
Sam Yake, a shareholder who lives a few miles west of Philadelphia, said he is closely watching the CEO appointment and the progress the company makes in revitalizing many of its well-known brands.
"It's a great iconic company, but it's in sort of a pathetic state right now," Yake told Food Dive. "It's sad that it got to this point, such a great company. It's a warning signal that even if you got a great company, you have to manage it right all the time or it can drift into a dangerous situation. That is what happened here. Of course they can turn themselves around, but they need to make major changes."