Campbell Soup Co raises prices while also boosting advertising, promotions to offset inflation without alienating consumers

By Elizabeth Crawford

- Last updated on GMT

Source: Getty/	Peter Muller
Source: Getty/ Peter Muller

Related tags Campbell soup company Soup Prices Inflation

Campbell Soup Co. is pushing through a fourth round of “very targeted” price increases – the largest in more than a year – to offset core inflation, which continues to rise and reached its highest point in more than year, executives revealed during the company’s first quarter earnings call yesterday.

During the company’s first quarter of 2023, ending Oct. 31, Campbell Soup Co. increased prices across both its snacks and meals & beverages divisions 16% after holding net pricing increases at 11% for the past two quarters and raising them 6% in the second quarter of last year and only 2% in the first quarter of last year for an overall rate of 7% for fiscal year 22.

These increases track, but remain steadily below, the core inflation rate that Campbell has navigated during the past five quarters. Aligning with the higher price increases in the first quarter of 2023, the core inflation rate for the period rose 18%. This is compared to 15% in the third and fourth quarters of last year and 9% and 6% in the second and first quarters, respectively.

Looking forward, CFO Mick Beekhuizen expects inflation to remain in the double-digits for at least another quarter before easing slightly in the new calendar year when he said he expects it drop into the high-single digits.

“The places were we saw deltas are really in the protein, resin areas and a little bit … in steel,”​ CFO Mark Clouse explained to investment analysts during the company’s first quarter earnings call Dec. 8. “So, part of what we’re reacting to is a little bit of the change in outlook for the cost relative to what we talked about for wave four pricing – and again, it’s a very targeted pricing action, in particular to certain areas where you might have experienced some of that pressure.”

The company plans to offset the remain difference in inflation through ongoing supply chain productivity improvements, cost savings initiatives, trade optimization and continued focus on discretionary spending across the organization, Beekhuizen said.

‘We are doing everything possible to support the brands and the categories we’re in’

Aware that consumers are starting to feel the pinch of higher food prices – although elasticities in the first quarter were lower than expected – Campbell also is budgeting for some additional promotional and advertising activities as it keeps a close eye on price gaps with competitors.

“We’re doing everything possible to support the brands and the categories we’re in, maintaining affordability for consumers in this tough environment,”​ Clouse said. “It’s certainly top of mind for both us the retailer as we work together. And so, we’re quite conscious of those dynamics and ensuring that we’re making the right strategic choices for the business in the long term.”

Shoppers shift towards Campbell’s categories

Clouse’s confidence in the decision to raise select prices again also is grounded in shifting shopping habits due to overall inflationary pressure – which for the most part is in the company’s favor as they transition into many of the categories in which the company plays.

“What’s been really impressive across our portfolio is that although we’re watching and seeing consumers change behavior in how they’re purchasing and which categories they’re migrating into this, this has been very, very helpful in the sense of getting the relevancy of our brands continuing to remain quite high,”​ Clouse said.

For example, Campbell reported that most of its key brands gained or held dollar share above fiscal 2020 levels with its iconic condensed soups gaining 4 percentage points over the past three years, Chunky up 1.6 percentage points and selected snacks up as well, including Pretzel Chips up 5.1 percentage points and Kettle Brand chips up 1.2 percentage points.

With that in mind, Clouse added: “I’m not seeing anything that would suggest that our pricing would be overly aggressive or necessarily conservative. And I think that’s the way we want to be and that’s were we ant to be balanced.”

Campbell raises guidance, keeps elasticities in mind

While the company has benefited from lower elasticities than expected, it is not carrying that expectation forward through the rest of the year – fully aware that pricing pressure across categories is increasing on consumers and prompting them to shift their shopping habits slowly.

Again though, many of these shifts will benefit Cambell, predict executives.

“Our consumer insights show that consumers continue to cut back on out-of-home eating and are migrating from more expensive grocery categories as they seek ways to ease the impact of inflation. Consumers are making changes to stretch their budget and following several years of becoming more confident and comfortable with cooking. They continue to turn to our categories and importantly our brands as evidenced by the continued growth of our Meals & Beverages business,”​ organic nets sales for which were up 15% in the quarter over the same time last year and dollar consumption was up 8%, Clouse said.

Given consumer trends remain in the company’s favor and its strong first quarter, during which organic net sales increased 15% to $2.6b, the company raised its guidance for the full-year so that it now expects net sales to increase 7-9% (up from a previous prediction of 4-6%) and earnings per share to increase 2-5% (up from a previous prediction 0-4%).

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