Campbell Soup CEO Denise Morrison was speaking on a conference call with analysts this morning after announcing a $1.55bn deal to acquire California-based Bolthouse Farms, which has leading positions in fresh baby carrots and super-premium beverages and a growing presence in refrigerated salad dressings.
The move would bolster Campbell's presence in the fast-growing premium healthy beverages category and give it a platform to grow in fresh packaged foods, which represents a $12-13bn market growing at 6-7% a year, said Morrison.
Campbell plans to operate Bolthouse Farms as a separate business unit and will retain its senior management team, including president and CEO Jeff Dunn - a former Coca-Cola executive - she said.
“Bolthouse Foods’ strong position in the high-growth packaged fresh category complements our chilled soup business in North America, and offers exciting opportunities for expansion into adjacent packaged fresh segments that respond directly to powerful consumer trends.”
A unique growth platform
Campbell would benefit from Bolthouse’s strong presence in the specialty and natural retail channel while Bolthouse would benefit from Campbell’s strong relationships in traditional retail channels, she added.
However, some analysts on the call said they struggled to see the synergies between the two businesses and questioned whether the acquisition would distract from Campbell’s plans to stage a recovery in its core shelf-stable packaged grocery business, in which Campbell has struggled to gain momentum in recent months.
However, Morrison said the deal created a “unique growth platform” that would enable Campbell to develop new products in faster-growing parts of the grocery market.
Fresh carrots, super-premium beverages and salad dressings
Based in Bakersfield, California, Bolthouse has a “robust innovation pipeline”, said Morrison, who said she first started looking at the firm more than three years ago, although it was not then for sale.
Bolthouse, which was founded in 1915 and now employs 2,100 staff, markets its beverages and dressings under the Bolthouse Farms brand, and its carrots under the Bolthouse Farms, Earthbound Farms and Green Giant brands, as well as private label offerings.
It is currently owned by a fund managed by private equity firm Madison Dearborn Partners.
Deal expected to close in later summer
In the year ended March 31, 2012, it generated sales of $689m and adjusted earnings before interest and tax of $92m. From 2010 through 2012, it generated compound annual net sales growth of 7%.
The acquisition will be funded through a combination of short- and long-term borrowings and is expected to close in late summer, subject to regulatory approvals.
Campbell Soup Company
While Campbell has struggled to make progress in its core ambient soup business, with sales down 3% in the US in the nine months to April 29, its US beverages division and North American foodservice division have performed more strongly.