“Intense competitive activity in a sluggish shelf stable juice category” hit second quarter sales in Campbell Soup’s US beverage business, with revenues dipping 3% owing to the lackluster performance of V8 original vegetable juice, said bosses Friday.
Speaking to analysts on a conference call, CEO Denise Morrison said she was disappointed by the division’s weak performance.
“V8 Splash [fruit juice-based beverages with a hint of carrot] continued to grow, but not enough to offset declines in V8 original 100% vegetable juice and V8 V-Fusion [a fruit and veg juice blend].
“Sales continue to be adversely affected by intense competitive activity in a sluggish shelf stable juice category.”
Expanding usage occasions
Asked what she planned to do to arrest the decline, she said: “We intend to step up our marketing support in the third quarter, but we recognize we have more work to do in engaging consumers.”
Meanwhile, the company has also started to ship a reformulated version of V8 original plus new line extensions such as Hint of Lime and Hint of Pepper, she added.
“We're also focusing on new innovation in beverages to expand usage occasions with our V8 V-Fusion + energy drink and juice boxes for kids.”
In the bakery business, we benefited from the market exit of Hostess
In its bakery division, Campbell had benefited from the exit of Hostess Foods, although some of the gains might prove temporary - as Hostess’s products return to shelves under new ownership later this year - acknowledged Morrison.
“In the US, we did have a windfall in our bakery business due to the Hostess bankruptcy…We gained additional shelf space and merchandising in our Pepperidge Farm fresh bakery business, partially as a result of the Hostess bankruptcy, but also due to better execution, as well as innovation in our line of Swirl breads.
“The snacks business had another strong quarter, reflecting solid growth in Goldfish snack crackers and the national launch of Jingos! crackers. Benefiting from a very successful holiday period, we delivered a strong sales performance in cookies.”
US food service business sales slump following loss of key customer
Sales in the North American foodservice business slumped 10% owing to the “loss of a significant restaurant customer, higher levels of promotional support and weaker consumer traffic in restaurants”, she said, with further declines expected in the second half expected to be partially offset by strong sales of retail fresh soup.
Soups and sauces ‘clearly picking up steam’
On a more positive note, the core US Simple Meals business, which includes soups and sauces, is “clearly picking up steam”, said Morrison.
“Sales increases were driven by improvements in dollar consumption and market share trends. In fact, as the second quarter progressed, consumption outpaced shipments.”
“Chunky consumption was up double digits”, she revealed, while early sales data for new Campbell Go Soups in pouches and Campbell Skillet Sauces was encouraging.
“Over time, we believe these breakthrough product platforms can contribute meaningfully to our growth.”
Heinz deal ‘surprising’
She declined to comment on the announcement that Heinz has agreed to be acquired by investment groups Berkshire Hathaway and 3G beyond saying she “found the news surprising”.
Q2 2013 highlights
Group net income in the second quarter was $190m, or 60 cents per share, down from $205m, or 64 cents per share, a year earlier.
Reported sales rose 10% to $2.33bn, while organic sales (excluding the Bolthouse Farm acquisition) were up 1%.
Q2 sales of US simple meals (soups etc) rose 1% to $833m; Global Baking and Snacking sales rose 7% to $561m; sales of US beverages declined 3% to $182m; and sales of International Simple Meals and Beverages rose 1% to $405m.
Sales in the US foodservice slumped 10% to $157m, while recent acquisition Bolthouse farms added $195m to the top line.
Click here to read our interview with Bolthouse Farms chief marketing and innovation officer Todd Putman.