Advertising, innovation pay off for Pepperidge

by Eric Schroeder
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Goldfish crackers and Milano cookies, Pepperidge Farms
Pepperidge Farm sales growth was driven by strong performance of Goldfish crackers and Milano cookies.

CAMDEN, N.J. — Operating earnings in the Global Biscuits and Snacks division of Campbell Soup Co. decreased 2% in the first quarter of fiscal 2017, bogged down by increased advertising expenses that only partially were offset by the favorable impact of currency translation. Earnings in the first quarter ended Oct. 30 totaled $112 million, down from $114 million in the same period a year ago. Sales, meanwhile, increased 3% to $671 million from $652 million.

Denise Morrison, Campbell
Denise Morrison, president and c.e.o. of Campbell Soup

“Sales growth in the quarter was driven by gains in Pepperidge Farm on strong performance of Goldfish crackers and Milano cookies,” Denise Morrison, president and chief executive officer of Campbell Soup, said during a Nov. 22 conference call with analysts. “Operating earnings decreased 2% as we invested in increased advertising. In the U.S., the team delivered sales and share gains in both Goldfish crackers and Milano cookies. Goldfish benefited from increased advertising investment, channel gains leveraging multiple pack sizes and innovative new products.”

Ms. Morrison said the company’s efforts to expand its health and well-being offerings are on track.

Whole grain and organic Goldfish crackers, Pepperidge Farms
Both multigrain Goldfish and Goldfish made with organic wheat contributed to the sales gains.

“Both multigrain Goldfish and Goldfish made with organic wheat contributed to the sales gains,” she said.

At the company’s Investor Day in mid-July, Ms. Morrison shared Campbell Soup’s plans to focus on building brand equity and increasing marketing investments in the company’s cookie portfolio. Four months later, she said the company is beginning to see results.

“Effective new advertising and flavor innovation drove sales and consumption gains for Milano cookies,” Ms. Morrison said. “Sales in fresh bakery declined in the quarter in the face of intensified competitive activity, and we have taken steps to address this with improved innovation and quality on our Pepperidge Farm swirl bread. Looking ahead in the U.S., we are focused on driving growth in Goldfish, increase innovation in cookies, including the relaunch of our Pepperidge Farm American Classic cookie line, and the new fresh bakery quality improvements to take hold in the market.

Pepperidge Farms swirl bread
Pepperidge Farm has improved innovation and quality of its swirl bread.

“Additionally, expanding both Tim Tam distribution and our West coast bakery operations remain top priorities.”

Globally, Ms. Morrison said Campbell Soup has maintained momentum in Malaysia behind strong sales of sauces, but sales in Indonesia have been adversely affected by aggressive competitive activities in the general trade. In Australia, the company delivered sales growth in biscuits driven by strong performance in chocolate biscuits despite declines in Shapes crackers.

“We’ve taken action to address Shapes’ performance, and we are beginning to see signs of improvement,” Ms. Morrison said. “Looking ahead, we are focused on delivering consumer-driven product innovation in Tim Tam chocolate biscuits with a new range of seasonal varieties. We also expect our Shapes performance to accelerate behind our new marketing campaign highlighting both new and original recipes.”

Arnott's Shapes crackers, Pepperidge Farm
The company expects Shapes performance to accelerate behind a new marketing campaign highlighting both new and original recipes.

Overall, Campbell Soup net income in the first quarterincreased to $292 million, equal to 95c per share on the common stock, up from $194 million, or 63c per share, in the same period a year ago.

Sales during the first quarter fell 6% to $1,361 million from $1,448 million the year prior. 
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