Campbell attracting new consumers and occasions

by Eric Schroeder
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CAMDEN, N.J. — Campbell Soup Co. kicked off its new fiscal year with a solid start in a number of businesses, including ready-to-serve soups, condensed cooking soups and broths, said Denise Morrison, president and chief executive officer of Campbell, during a Nov. 20 conference call to discuss first-quarter financials.

“We also successfully executed our previously announced price increase on condensed soup,” Ms. Morrison said. “It is too early to judge our breakthrough innovation, particularly our Campbell’s Go Soups and Campbell’s Skillet Sauces, but these launches are showing good retail acceptance.”

Ms. Morrison described the launches of Go Soups and Skillet Sauces as the start of strategic innovation platforms that Campbell intends to build over time.

“These products are outcomes of a reengineered innovation process to accelerate our speed to market,” she said. “They feature contemporary packaging and offer new global taste aimed at attracting new consumers for serving new occasions.”

And even though Campbell has introduced more than 50 new products in 2012 in U.S. Soup and Simple Meals, up from 3 three years ago, Ms. Morrison stressed the company is not “breaking out the champagne yet.”

“We are encouraged, but we have more work to do on this large and important business,” she said.
U.S. Soup sales during the first quarter of fiscal 2013 increased 2%, with condensed soup sales down 1% and ready-to-serve soup sales up 4%. Campbell said volume gains in Campbell’s Chunky canned soups were partially offset by declines in microwavable soups.

Asked by an analyst how Campbell feels about the progress the company has made in getting people to actually go home and eat its products, Ms. Morrison said, “Well, I think it is early days on the new products to declare victory there. I do think that the new products are helping to create somewhat of a buzz about soup in general, which is important, because people don’t think about it as often as they should, and so reminding them is important.

“But I think we have done a good job in terms of executing at Campbell’s to put some new experiences out to market for the consumer to enjoy, and particularly younger consumers to attract them into the category. We are going to continue to build on those platforms; this is not going to be a one-year wonder.”

Elsewhere, Ms. Morrison said the company’s first quarter with Bolthouse Farms was strong and the integration is on track. Bolthouse, which was acquired in August for $1.55 billion from Madison Dearborn Partners, L.L.C., has a leading position in fresh carrots and premium beverages as well as a presence in refrigerated salad dressings.

Ms. Morrison said the new products introduced by Bolthouse this past spring, including Coffee Protein Plus, Orange and Carrot, and Fresh Nog, all achieved distribution targets in the quarter.

Other areas of Campbell’s beverage business have been faced with slackening consumer demand, though, Ms. Morrison said.

“The beverage category, particularly the shelf stable juice category, has been under pressure for quite some time now and we continue to observe behavior that consumers are trading down, particularly from the 100% juice businesses that we are in,” she said. “There has been some competition that has been very price aggressive that has negatively affected our V8 vegetable juice and V8 V-Fusion. However, our V8 Splash continues to perform very well, and our new item innovations are continuing to contribute to sales growth but they haven’t been sufficient enough to overcome the category weaknesses or the aggressive price pressures.

“So what we are going to do about it is we are shoring up the core business with line extensions on V8 and improved Pace. We are also playing in value by pushing V8 Splash and then are innovating in high-growth segments such as energy and kids. And we think that a combination of easing inflation and productivity improvements will help us with improved EBIT for the year.”

For the quarter ended Oct. 28, the company had earnings of $245 million, equal to 78c per share on the common stock, which compared with income of $265 million, or 82c per share, during the same quarter of the previous year. Sales for the quarter were $2,336 million, up 8% from $2,161 million during the same quarter of the previous year. The results included costs related to the acquisition of Bolthouse Farms and a previously announced September 2012 restructuring program.

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