With inflationary pressures still packing a punch to consumers’ wallets, shoppers have sought out value but maintained their snack purchase habits - which has boosted Campell’s bottom line.
Net sales advanced 12% on an adjusted basis to $2.49 billion in the quarter ending Jan. 29., largely on the strength of the Camden, NJ-based firm’s snack category.
CEO Mark Clouse cited snacks as the “star” of Campbell’s portfolio, with segment sales rising 15% in Q2 to $1.08 billion.
“This performance in snacks marks a significant step in our journey, as we continue to emerge, as a truly differentiated and best-in-class snacks portfolio,” the exec said during a March 8 earnings call with analysts.
Further, the second quarter represents “a pivotal moment in the validation of the strategy on snacking for us as a company.”
The firm highlighted its power brands of Goldfish crackers and Pepperidge Farm cookies as standouts, noting that their higher product prices and volume contributed to the increased sales growth.
Approaching $1 billion in annual sales, Goldfish had success in the quarter with its limited time offer strategy, “with consumers twice as likely to purchase LTOs alongside other Goldfish items,” Campbell’s said.
Clouse explained that margins improved for snacks at a time when the firm increased its marketing and selling spend by 19%.
Meanwhile, every snack brand saw dollar, volume and unit growth in the quarter, “showing the power of our portfolio and the relevance of consumer snacking behavior even in this current economic environment,” he said.
Campell’s also recorded share growth in the cookie/cracker and salty snacks categories that was the highest “among all major branded players.”
“This continues to highlight how unique our snack brands are and why we see such a bright future for this portfolio,” Clouse said.
Consumers turn to soups for value
In the Meals and Beverages division, Campbell’s saw volume declines, but those were attributed to a surge in sales during the same period in 2022 from the Covid-19 Omicron variant and winter storms. Still, sales advanced 10% to $1.41 billion in the second fiscal quarter.
US soup sales were up 7% in Q2, attributed to sales increases in ready-to-serve soups and condensed soups.
“Consumers continue to seek out our brands as they look for ways to stretch their food budgets and turn to value driven meals that taste great and are easy to prepare,” Clouse said.
The firm expects that inflation will continue during the full year. The exec noted that 80% of meals are being prepared at home, about 4% higher than before Covid, giving Campbell’s an opening to capture more of that market.
“I will say what’s different than Covid now though is that focus on those in-home meals revolve around both value and time to prepare,” he said. Campbell’s is well positioned to take advantage of that, he explained, pegging the “magic numbers” for preparing lunch and dinner at 10 and 20 minutes, respectively.
“That’s where our categories really land well, as well as being a great value,” Clouse said.
Chunky, Pacific see gains
Chunky was up 8% in the quarter and experienced its sixth consecutive quarter with dollar share growth, the firm said.
The brand’s new Spicy innovation is resonating with consumers and its limited edition of Chunky Ghost Pepper “built significant buzz.”
Chunky is crucial for the firm’s strategy “of really winning that lunchtime occasion with a superior product,” Clouse said. “Chunky is living into and doing it among younger consumers, which is, again, where Chunky has been incredibly successful.”
Citing data from IRI, Campbell’s noted that Pacific Foods was the fastest growing wet soup on a dollar basis during the quarter.
The brand gained share and momentum, especially among millennials.
“Pacific is extremely well-positioned across a variety of categories as a premium organic and healthy brand with offerings in broth, ready-to-serve soups and beverages,” Clouse said.
Firm issues updated guidance
During the call, Clouse also introduced Carrie Anderson, the firm’s new chief financial officer. She will be taking over for current CFO Mick Beekhuizen.
The company upped its outlook for the year, projecting net sales will advance to 8.5% to 10%, ahead of its previous guidance of 7% to 9%. Revenue is similarly estimated to increase, with a projected adjusted EPS of $2.95 to $3.
“Our higher expectation for revenue reflects the strength of our brands with price elasticities remaining favorable to historical norms as well as stronger supply chain execution and sustained marketing investment to fuel demand and support innovation,” Anderson said.
Campbell’s execs also offered an update on the firm’s headquarters consolidation efforts.
In January, Campbell’s announced it would close its snack division headquarters in Charlotte, NC and Norwalk, CT, and instead consolidate its workforce in Camden, NJ.
The move to a single headquarters “will drive cost savings, while increasing our connectivity, collaboration and career opportunities for our people leading to even stronger performance,” Clouse said during the earnings call.
Moreover, that savings will be reinvested into the business, specifically to help increase snacks division margins, he added.