Campbell’s: Q3 Sales Rise with ‘Quick Scratch Cooking’

In its third quarter earnings presentation yesterday, the Campbell’s Soup Company reported that organic net sales increased 17% year-over-year to $2.2 billion over the quarter. Looking ahead, CEO Mark Clouse outlined four trends expected to stick: “quick scratch cooking,” accelerated use of click-and-collect and home delivery, center store’s increased relevance and value.

Over the course of the quarter Clouse said the company welcomed “millions of new households,” including many younger shoppers.

As consumers stayed home, the company saw gains across meals and beverages. Notably, U.S. soup sales were up 35%, with double digit growth in condensed soups, ready-to-serve soups, and broth, including products from organic brand Pacific Foods. Clouse noted that efforts to improve the company’s soups in the past year have paid off.

“The foundational work was always an important step in our long-term plan to re-ignite soup, and it has proven to be even more so in the context of the current moment,” Clouse said in a pre-recorded presentation. “The quality improvements we made on our icon SKUs—Tomato, Chicken Noodle, Cream of Mushroom and Cream of Chicken—have served us extremely well in this environment.”

Moving forward, the company sees a significant opportunity in retaining new shoppers and will increase its marketing spend on recipe content to support their culinary pursuits. The soup category usually sees spikes in sales over the colder months, and then a tapering off over the summer, but Campbell’s hopes that recipe content can show consumers new ways to use its core line beyond the bowl. For example, in recent months the company has sponsored videos by the publication Bon Appetit about how to use its soups in meals from risotto to enchiladas.

“Consumers are building skill sets in quick scratch and simple lunches where our products play an incredibly important role,” Clouse said. “The goal here is to not miss an opportunity to drive equity and connection.”

However, Clouse noted, there have still been hurdles, with demand for its core heat-and-eat soups outpacing supply during the initial “pantry loading” phase in March, a situation he said is “improving but has not fully recovered,” and should normalize in Q4 or early 2021.

“With in-market consumption surges as high as 140%, we significantly depleted inventory in the initial stages of the pandemic,” he said. “Like everyone, we were and are operating in conditions unlike any we have ever experienced.”

As soups spiked, pasta, sauces, canned poultry and V8 beverages also saw gains as consumers stocked their pantries. Additionally, organic net sales for snacks increased 12% during the quarter, with snack brand Late July leading the pack with 38% growth. Clouse also noted signs of repeat purchasers for new snacks launched this year, including organic Late July chips and Veggie Goldfish crackers. The snacks business represents about half of Campbell’s annual sales and is expected to be a “primary driver of growth in the industry,” Clouse said, even as post pantry-loading demand slows down.

Although some stores may trim their assortment in order to streamline operations and respond to a recession-like environment, Campbell’s will continue to invest in innovation, even if products roll out more slowly, Clouse said, adding that “convenience and sipping” remain key product attributes. He also noted that the company’s focus on value should help it maintain relevance even as grocery budgets possibly shrink. Ultimately, the company will aim for what works best for retailers.

“We don’t want to push things that are going to create frustration or disappointment,” he said. “[There’s a] way to thread the needle a bit and try to do everything we can to retain while also not over-aggravating the situation.”