Campbell Soup Co. has said it is reviewing all aspects of its US soup business and expects further execution adjustments after the division dragged on group profits in the first nine-months of the year.
The US soup giant this morning (21 May) booked an 8.2% decline in profits during the first nine months of the year, as the company struggled with rising commodity costs, higher marketing and selling expenses and sluggish soup sales.
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In the firm’s US simple meals division, sales dropped 2% in the nine-month period, while US soup sales declined 3%.
President and CEO Denise Morrison told analysts said she was “not happy” with Campbell’s US soup performance in the period on the firm’s earnings call today.
“As we anticipated, our pull-back in trade spending and price realisation in a competitive arena [in US simple meals] had an impact on our sales of US soup.
“I am not happy with our US soup performance this quarter, I know we can do better,” Morrison said. “We continue to review all aspects of the US soup business and anticipate making further adjustments based on new insights. The US simple meals business is meeting our profit expectations but is not yet delivering top line growth.”
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By GlobalDataMorrison said Campbell has been working on “two paths” in order to realise top line growth in US soups. These, she said, include re-starting its innovation pipeline, which she conceded has been “woefully under average”.
She added: “The second is to ensure we leave no stone unturned as we look at the fundamentals of our base business. This goes all the way into product offerings, shelves and distribution channels. So we are, and will be, working on our operating plans as we speak, looking at our base business with a lot of detail to ensure we get the right balance of all these drivers of growth.”
In terms of brand building, Morrison also pointed to a focus on advertising and consumer promotion, adding: “Getting this right on our base business is foundational for our growth. The innovation agenda will accelerate our growth over time.”
Despite the sales decline in US soups, Morrison said Campbell has “hit the point of stabilisation” for growth in the division.
“We have just hit the point of stabilisation, I wouldn’t declare victory yet but we are largely where we expected to be year-to-date, despite the third quarter,” she told analysts. “We are about where we expected to be on a year-to-date basis. We are confident as we introduce new products we will start to pick up accelerations in our growth.”
In July last year, Campbell outlined the company’s new “strategic direction”, which the company said would focus on expanding in three “core categories” – simple meals, baked snacks and healthy beverages.
Morrison told analysts today that nine months into the transition, the company remains “confident and focused” on executing its strategic plan and improving its performance across the three categories.
“Before I became CEO last August, the leadership team examined the fundamentals of our entire company. We challenged the conventional thinking of our businesses and our strategies. The strategic framework we put in place at the beginning of this year is the foundation on which we build our growth plans. This was not a simple course correction. We are building business for the long term,” Morrison said.
