US food major Campbell Soup Co. said it is expecting volumes to improve this year as consumer confidence brightens.

The US food major also expects to see a benefit from its $2.7bn acquisition of Rao's sauces maker Sovos Brands, a deal which has been held up by an antitrust review but which is expected to be completed next week.

Reporting its second-quarter results yesterday (6 March), soup, sauces and snacks giant Campbell revealed volumes had declined 2% year-on-year.

But speaking on a post-results call with analysts, CEO Mark Clouse said: “We once again delivered on our commitments with sequential improvement in volume trends and year-over-year operating margin expansion in both divisions. While it is true that category trends have slowed over the last year, I’m encouraged by a variety of stabilising consumer indicators, like consumer sentiment, household penetration, and average categories purchased.”

He added: “We are eagerly anticipating the closing of the Sovos Brands acquisition in the coming week, adding the best volume-driven growth story in food to our portfolio.”

Last week, Sovos announced it had surpassed $1bn in annual net sales, a 16% increase versus the prior year.

“Sovos Brands' portfolio will strengthen the [meals and beverages] division for years to come,” Clouse said.

The Campbell chief also indicated the company's volume numbers would improve year on year as it lapped more significant declines from the previous fiscal year.

“This is not some massive hockey stick, right?,” he said. “It’s a pretty steady drumbeat of more modest improvement as we go through the back half of the year. We are lapping in the first half of the year, [sales] growth rates that were closer to 13%, 14%. And, in the back half, we’re going to be lapping 5%.

“On volume, just to give you a little bit of that delta, in the first half of ‘23, we were cycling about 1.5% of vol-mix decline. We move into the back half, we’re going to be lapping about a 6% vol-mix decline, so both on the net sales and the vol-mix, the comps are going to get significantly easier.”

Price rises ease

Campbell revealed yesterday that its prices rose 1% in the quarter in what CFO Carrie Anderson described as its “smallest and most focused pricing round”.

She added: “During the second half of the fiscal year, we do not expect net pricing to be a material driver of net sales growth, reflecting our continued balanced and disciplined promotional activity.

“We continue to deploy a range of other levers to mitigate remaining inflation, including supply chain productivity improvements and broader margin-enhancing initiatives. We expect these other levers to contribute to margin performance in the second half of the year as inflation remains moderate and volume trends continue to sequentially improve.”

New Jersey-based Campbell, which revealed Goldfish crackers had crossed $1bn in net sales, making it the second billion-dollar brand in its portfolio after its “iconic red and white soup”, recorded net sales of $2.5bn for the quarter, down 1% year-on-year, while adjusted EBIT was up 1% at $364m.

It has affirmed its full-year outlook – net sales of -0.5% to 1.5% and adjusted EBIT of 3% to 5% - but is tracking the lower end of its full-year net sales forecast range, as it remains cautious on a recovery in consumer spending in the second half.

Clouse said: “We are also continuing to see economic pressure impacting select categories and certain consumer demographics. While we expect these trends to improve over time, we’re certainly not there yet.”

However, he added: “Consumer sentiments improving, household penetration in many of the categories have kind of turned the corner. We’re seeing improvement, albeit still fewer trips to the supermarket, we're seeing a little bit of a step back up in the number of categories purchased, the number of servings purchased. All of those, to me, provide pretty compelling evidence that we will see the turn.”

Quizzed by an analyst about the possibility of splitting the business in the future, Clouse said: “We’ll always look and evaluate. But, right now, I feel like all roads lead through executing and delivering on this vision that we have for both of the divisions.”

Commenting on the results, Robert Moskow, an analyst with TD Cowen, said: “Uncertainties about the pace of category recovery and consumer sentiment continue. However, we thought management laid out a decent argument for value creation from the Sovos Brands acquisition, margin expansion in snacks and even a split-up down the road if it creates value.”