The US producer faced challenges in its Americas Simple Meals and Beverages (including its US soups) and Campbell’s Fresh businesses, resulting in a “difficult quarter for the company,” according to Morrison.
The Camden, New Jersey-based company posted a 2% organic sales decrease, while adjusted EBIT decreased 4% to $402m.
Solid performance from snacks
Morrison said she was “not satisfied with our performance,” but noted, “We are acting with urgency to transform Campbell… I am confident the steps we are taking will gain traction and lead to improved performance.”
She said the company’s incorporation of snack producer Snyder’s-Lance will begin to pay dividends.
Late last year, Campbell acquired Snyder's-Lance – maker of Snyder’s of Hanover pretzels, Cape Cod and Kettle potato chips and Pop Secret popcorn – for $4.9bn, the biggest purchase Campbell’s 149-year history.
“Snacking is a category we know extremely well, and the acquisition complements Pepperidge Farm, which has been one of our best long-term performing businesses,” she said.
Gains in Pepperidge Farm (cookies and crackers) and by Kelsen in China helped boost up Campbell’s Global Biscuits and Snacks division, which posted a 4% sales rise for Q2 2018 to $726m.
“Outside the US, Kelsen delivered solid performance in China… This quarter we had a strong sell-in for Chinese New Year and our distributors delivered well executed, merchandizing programs leading up to the holiday,” said Morrison.
Changing face
She noted Campbell will look different once the company completes the transaction of Snyder’s-Lance, expected by the end of the first calendar quarter.
“The addition of Snyder's-Lance will have a transformational impact on Campbell, adding $2.2bn in annual net sales. As a result, snacking will represent approximately 46% of our total company net sales,” Morrison told analysts.
“We're confident the Snyder’s-Lance acquisition will deliver significant shareholder value.”
For the three months ending January 28, 2018, Campbell Soup posted a net income of $285m (or $0.95 per share), up from $101m (or $0.33 per share) a year ago.
Sales ticked up to $2.18bn versus $2.17bn the previous year, beating analysts’ expectations of $1.26bn.
The reported quarter benefited from a $124m gain related to the overhaul of the US tax code.
March into health
To further capitalize on the demand for healthier products, Campbell’s plans to introduce a spate of NPDs – especially in beverages – in March that will deliver functional benefits at affordable price points.
Along with other big conglomerates, the company has felt the effects as consumers continue to shun products high in sugar in favor of more natural ingredients.
“Our competitive advantage in V8 [beverage] is that we are vegetable-based. It’s where we’ve had the combination of fruit and vegetable, which is higher in sugar, that we’ve been affected,” said Morrison, noting the company has seen a same shift in its Fresh business.
Consumers are also opting for fresher options with less salt, putting pressure on the $4.5bn US canned soup market – which has been flat since 2012 – according to Jared Koerten, an analyst at Euromonitor.
However, Koerten does not expect Campbell to abandon the soup business, but will continue to “become a more on-the-go snack company."