Campbell Soup Co. to counter ‘pockets of share pressure’ with new products, marketing
To win back these losses and ensure its competitive position in categories where it is growing, in the fourth quarter Campbell will bring back promotions and marketing and lean heavily on product innovation to demonstrate value even as it pushes through a third wave of pricing previously announced in April, company executives said during Campbell’s third quarter earnings call yesterday.
During the quarter, CEO Mark Clouse reported organic net sales climbed 9% thanks in large part to inflation-driven pricing now reflected on shelf, but also increased consumption to the tune of 4% versus the prior year across the business as a whole.
At the same time, he also acknowledged some short-term market share pressures on certain brands where supply was constrained or price increases were not closely followed by other players – creating volume declines and what he expects is a temporarily outsized price-gap.
‘Pockets of share pressure’
For example, in the soup segment, Campbell saw overall consumption grow 5% over the prior year and 14% over three years ago, but Clouse acknowledged, “we did see pockets of share pressure” where inflation and private label players were slower to take pricing.
This was most acute in condensed and ready to serve soup, share of which dropped 2.2 points and 1.1 points respectively from the previous year.
Most of the share losses were concentrated in the baby boomer cohort, which Clouse said tends to be more price sensitive.
While no loss is good, Clouse said he is pleased to see most new consumers, including younger millennials who came to the brand early in the pandemic, remain committed and household retention remains strong.
He also explained that the dip in ready-to-serve business could also be attributed to prioritizing core brands, such as Chunky, which gained 1.6 points market share from a year ago, and Well Yes.
To help recover in these areas and build on the momentum elsewhere in meals, soups and sauces, Clouse said Campbell will roll out a “robust pipeline of new products” in the category in 2023, including a line of home quick-scratch meals that includes Campbell’s Flavorup! concentrated sauces that allow consumers to adjust the intensity and portion.
Prego also will expand its line up in fiscal 2023 with Spicy Marinara and Creamy Vodka as consumers continue to eat at home to save money and seek value in the current inflationary environment, Clouse said, adding that younger consumers in particular are looking for new specialty flavors.
New products within soups include recently launched Chunky Spicy Chicken Noodle, which Clouse said is rapidly approaching the first quartile of all ready to serve soup and has strong trail and repeat sales.
“We are also launching an Old Bay season variety of clam chowder in conjunction with limited edition Old Bay season Goldfish,” Clouse said.
Finally, he noted, “we’re also excited about Pacific ready-to-serve soups and chilis, which will be launching in the fourth quarter of fiscal 2022.”
He predicts that these innovations will be a significant growth driver next fiscal year and solidify the company’s leadership in organic soup by creatin a “formidable portfolio and full range of choices for all consumer cohorts and price points.”
Snacks remain resilient, but supply challenges hurt some brands
Like soups, Campbell’s snack business fared well in the quarter with most brands gaining market share, but a few slipped in the face of “expected pressure” related to a delay in supply and promotional recovery in the quarter.
Overall the segment saw net sales increase 8% and consumption improve 4% with standout gains by Kettle Brand chips, up 17% yoy, and Cape Cod, up 10% yoy. But not all brands fared as well. Late July saw consumption drop 16% and Pepperidge Farm cookies fell 2% yoy.
Clouse explained that these brands suffered in part because of ongoing supply challenges as well as some expected pressure – but for the most part the salty snack category saw little elasticity or trade down due to price sensitivity, he said.
“In fact,” he added, “private label and value brands lost share in the snacks category in the quarter.”
This could be due in part to innovation and marketing that underscore the value and reliability of beloved brands, including Goldfish crackers, which Clouse said has grown from a favorite kids’ food to a top choice of their teen siblings and their parents.
“In the quarter, Goldfish consumption was up 8%,” with family size and Mega Bites versions taking the No. 1 and No. 2 slots for fastest turning cracker innovation in 2022, fueling a rate increase of 11.4% year-over-year for the brand.
“Our strategy to broaden our consumer base is working as evidence by more than half of buyers being households without children and Mega Bites performing well with older consumers,” Clouse said.
Additional buzz around limited time offerings, including Frank’s Red Hot and Jalapeno Popper Goldfish and Old Bay season Goldfish, which captured 1 billion impressions within 48 hours.
Building on these successes, Clouse said that in the fourth quarter Campbell will return promotional and marketing investment to strengthen the company’s competitiveness and combat private label trade down as well as create a compelling fiscal 2023 plan that balances challenges with maintaining momentum and progress on the company’s long-term strategic plans.
It also has in place “contingency plans” if elasticity begins to really accelerate, Clouse added.
With contingency plans in place and strong results in the third quarter, Campbell raised its full year guidance for net sales so that organic net sales are now expected to be up 1-2% -- a change from minus 1% to plus 1% that was reported in March. The company reaffirmed its expected adjusted earnings before interest and taxes and adjusted its EPS guidance.