Campbell Soup posts 'difficult' quarter as soup sales decline
- Campbell Soup said revenue during the quarter declined 2% to $2.16 billion, narrowly missing analysts who forecast $2.17 billion. Net income fell to $275 million from $292 million a year earlier, also trailing projections. The sales decline was the result of one key customer — likely Walmart, The Wall Street Journal reports — having a "different promotional approach" to soups, the company said.
- The soup maker said excluding items, it earned $0.92 cents per share, missing estimates of $0.97 cents. Campbell trimmed its fiscal 2018 adjusted profit to $2.95 to $3.02 per share from $3.04 to $3.11.
- "This was a difficult quarter, particularly for our U.S. soup business," Campbell Soup's CEO Denise Morrison said in a statement. "The operating environment remains volatile with a rapidly evolving retailer landscape and competitive activity pressuring the top line."
Campbell Soup posted a tough quarter as its iconic soup division saw a 9% decline in sales in the U.S. Its Campbell Fresh division, which includes Garden Fresh Gourmet and Bolthouse Farms, was also flat compared to a year ago. The company also faced higher costs during the period due to unfavorable weather for carrots and escalating transportation and logistical expenses following the hurricane season — contributing to its 12th straight quarter of declining sales.
Campbell Soup and other packaged food manufacturers have faced an exodus of consumers fleeing processed foods in favor of more natural, organic and better-for-you items with a list of recognizable ingredients. In response, the New Jersey food company has improved the ingredient content of many of its popular brands. It's also bulked-up its focus on fresh and organic through purchases of Garden Fresh Gourmet, Bolthouse Farms and Plum Organics. The soup icon extended that push when it announced this summer it would spend $700 million to purchase of natural and organic brand Pacific Foods of Oregon.
But despite efforts to redefine Campbell as more than just a soup maker, the company has struggled to grow its fresh offerings as fast as it initially projected. The fact that Campbell Fresh sales were comparable during the first quarter to a year ago.
Still, Campbell Soup said its fresh division remains a strong part of the company's future, with the recent period its second-consecutive quarter of sales growth for packaged goods behind Garden Fresh Gourmet and Bolthouse Farms' salad dressing. The company also has returned its beverage inventory to more normal levels, enabling it to reduce its promotional activity, and a decision to allocate carrots to its customers following bad weather should end next month.
"We continue to expect Campbell Fresh to return to profitable growth this fiscal year," Morrison told analysts.
Campbell Soup also has improved its soup offerings beyond the classic red and white can. Earlier this year, it introduced its Well Yes! line that includes "healthier" offerings like sweet potato corn chowder and black bean with red quinoa. These soups contain no artificial colors, flavors or antibiotics, and come packaged in cans that are non-BPA lined and recyclable. At least for now, Campbell's classic condensed soup remains ingrained in the company's past and foreseeable future, despite its efforts to overhaul the segment and expand into other areas.
"In this challenging climate, we are focused on sharpening our plans for the remainder of the year while continuing to position Campbell for growth through investments to differentiate our brands, drive innovation and accelerate our e-commerce capabilities," Morrison said.
Underscoring the challenging and rapidly changing environment in the food space, Campbell Soup said a dispute with a major customer was responsible for hurting sales. The Wall Street Journal has reported that Walmart and Campbell Soup disagreed on promotion pricing and shelf space for its canned soups. Walmart, the newspaper estimates, accounts for about 20% of the soup maker's annual sales.
Walmart remains a major player in brick-and mortar retail. With a growing online presence, it remains key to the future for Campbell Soup. At the same time, large CPG companies are watching as more consumers buy their groceries online through websites like Amazon, purchase meal kits, or flee to discounters like Aldi and Lidl, which push their own private label brands.
During its first quarter earnings report, Campbell Soup cut its outlook forecast for its current fiscal year, sending the company's stock plunging 7.6% to $46.12 in mid-morning trading.
The company appears to be on the right track toward responding to what consumers want throughout its food operations, but it can't seem to offset the challenges facing its core business. For a $14 billion company like Campbell, the change isn't going to come overnight, but perhaps the worst thing it and other CPG companies can do is stand still and watch as they cede more market share to upstarts viewed as more cognizant of what consumers want and able to more nimbly respond to it through their product offerings.
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