Soup Sales Dip, Snack Sales Surge: Campbell's Uneven Quarter
Snack revenue is up 12%. Soup and Meal Revenue is down 2%.
People are buying less soup, but a smart acquisition five years ago has Campbell's treading water in a tough environment. For the third quarter of 2023, Campbell's boosted sales by 5%, compared to $2.2 billion in the prior year. Things could have been much worse without the 2018 acquisition of Snyder's-Lance. The company jumped head-first into the savory snack category with a $6.1 billion acquisition.
Last quarter, net sales for the company's snack division increased by 12%, with sales of their eight power brands rising by an astounding 16%. Five of those brands were acquired in the deal. "It continues to kind of support what I would describe as the overall thesis of the Snyder's-Lance acquisition, CEO Mark Clouse told investors. "We imagined a world where we could take some really, really unique and differentiated brands, infuse our marketing and innovation muscle from Pepperidge Farm and drive those results."
The Snyder's-Lance acquisition was the centerpiece of a strategy that saw the company pivot from fresh food into the center store. The idea was that we're going to make shelf-stable, better-for-you options.
2017 it acquired organic broth and soup brand Pacific Foods for $688m
2018 acquired Synder's Lance for $6.1 billion. This included major snacking brands Synder's-Lance, Kettle, and Snack Factory.
2019 – Sold off its Cambell Fresh operating segment for about $550 million. This transaction included its refrigerated soup and premium salad dressing brands.
Soup could be doing better.
Despite the overall positive performance, Campbell's experienced a 2% decrease in net sales for their Meals and Beverages segment, which includes their flagship soup brand.
The soup category faces increased competition and needs help to maintain volume.
Part of this is explained by past retailer behavior. Retailers spent the last few quarters buying extra, replenishing their warehouses after Campbell's supply chain woes limited supply.
They will continue positioning cooking and condensed soups as value solutions while positioning Chunky and Pacific towards the premium market.
A sauce acquisition is on the table.
The company still sees sauces as a promising growth area in the Meals & Beverage business.
Campbell's has strong mainstream brands like Prego and Pace, but need something in the premium segments of the market.
They are open to strategic M&A opportunities and tuck-in acquisitions; while also considering the potential contributions from Pacific.
They said it:
CEO Mark Clouse on Snacking
And in fact, if you look at those Snyder's-Lance brands from kind of 4 years ago pre-COVID to now Kettle and Cape are up 4 share points. Snack Factory, right, which is in the deli, our Pretzel Crisps business is up 5. Goldfish even on the Pepperidge side, up 1. And Lance sandwich crackers are up 6 points of share.
So an evidence of the thesis of what we can do with these brands, I really feel like we're demonstrating now exactly what that proposition was. I think, in fairness, what we've been waiting to see a little bit is the translation of all of the synergy that we've driven from the acquisition and the benefit of scale for Snyder's-Lance as the ability to step up our margins.
And so I think when you look at us year-to-date, where we're up about 150 basis points, that's probably a better indicator of how we're expecting the year to finish. And if you think about us being a little bit stuck at 13 the last couple of years, although I'll just point out that, that was also in a period where there was a lot of external pressure at the same time.
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