Turnaround strategy putting Campbell on solid growth track, CEO says

By Hank Schultz

- Last updated on GMT

Related tags: Campbell, Campbell soup company

Turnaround strategy putting Campbell on solid growth track, CEO says
A strategy of rationalizing production, refocusing brands, key acquisitions and expanding into higher growth segments and markets is succeeding in reinvigorating Campbell Soup Company’s growth potential, CEO Denise M. Morrison told a meeting of analysts on Wednesday.

When Morrison took over the helm two years ago, Campbell was stalled, with a welter of stale brands positioned in slow growth categories. Morrison said a dual strategy was implemented at that time to strengthen the core businesses while at the same time seeking new opportunities in higher growth segments.

“Seismic shifts are occurring in our industry: changing demographics, including the growing importance of Millennial and Hispanic consumers in the U.S., our largest market; the dynamic growth of package fresh, driven by a broad range of consumers with active lifestyles and a focus on health and wellness; the rapid expansion of e-commerce, digital technology and social media, which are transforming the way that consumers talk about and engage with their favorite brands,”​ Morrison said.

Strategy yielding results

Morrison said the dual strategy is now yielding results. Campbell has now delivered four consecutive quarters of growth, and the full year sales growth is expected to be in the 10% to 12% growth range.

Rebuilding the core business has involved both refocus and reformulation to the launch of new products. In legacy brands, such as the Chunky soups line, brand messaging is returning to the core consumer: men who like football, Morrison said.

It also involved cost cutting;  Campbell closed a plant in Marshall, Michigan, and shifted production of ready-to-serve soups from Paris, Texas to facilities in Napoleon, Ohio and Maxton, North Carolina, both of which already produce ready-to-serve soups. The company also shuttered facilities in California and New Jersey.

But the company is also innovating in the space, too, said B. Craig Owens, Campbell’s CFO.  Campell launched 38 new soups last year, he said, and the newer brands are providing a bigger share of the pie as time goes on. 

“Our percentage of sale in soup from products launched in the last 3 years has gone from a pretty low level to steady increases. So I think it would be fair to say we will count on increasing amount of our revenue coming from new products as we move forward,”​ he said.

Make way for the refrigerators

On the acquisition side, Campbell has moved to cover the margins of the market by buying Bolthouse Farms, the Kelsen Group and, more recently, baby food manufacturer Plum Organics.  Kelsen has a strong snack business in China, a small overall market for Campbell now but one that is a target for the future, Morrison said. And the Bolthouse Farms addition—with its strong position in fresh carrots and fresh juices and dressings—helps Campbell compete as grocery stores transform their retailing space.

“You start to see refrigeration coming into the center of the store. So I think it's really both adding it and reconfiguring stores to have more refrigerated space,”​ said Bolthouse president Jeffrey Dunn.

Beverage woes

One area that remains a challenge for the company is the beverage category.  Competition has intensified, Morrison said, with a plethora of new fresh juice and beverage offerings in the refrigerated areas of stores and with lots of new premium skus from which customers can choose.

“Consumers now have an abundance of beverage choices in addition to self stable products in the center store. Although we've held our market share, I'm disappointed with the performance of our beverage business, but I'm not resigned to it,”​ Morrison said.

“The V8 brand gives us a lot to work with,”​ she said. “For example, with the upcoming launch of V8 V-Fusion Refreshers, we're providing a lighter fruit and vegetable beverage with a crisper, cleaner taste.”

Product pipeline

Morrison said the company is moving into higher growth segments and markets by launching more than 200 products in the coming year. These include products in the faster growing premium soups segment such asCampbell's Slow Kettle, Campbell's Bisques and Campbell's Go Soups. And the company created a dinner sauces product category with the introduction of Campbell's Skillet Sauces. The company plans to develop this segment further with the introduction of a line of sauces meant for use in slow cookers.

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