Campbell Soup Company: Snacks Lead Q3 Growth as Soup Remains Flat

The Campbell Soup Company reported Q3 FY2023 earnings in line with its expectations as net sales grew 5%, according to the company’s earnings report this morning.

Reported earnings before interest and taxes (EBIT) fell by 14% to $254 million and adjusted EBIT was down 2% to $313 million. Reported earnings per share (EPS) was down 15% to $0.53, while adjusted EPS slid 3% to $0.68.

“Our third-quarter results were in line with our expectations and were driven by in-market momentum, continued best-in-class supply chain execution and favorable inflation-driven net price realization, all despite the anticipated challenging comparison from the prior year’s retailer inventory rebuild,” said Campbell’s president and CEO Mark Clouse in a statement. “Our year-to-date results and execution give us continued confidence in our ability to deliver our full-year guidance, with adjusted EPS currently tracking to the upper end of our guidance range.”

On an earnings call, Clouse said Campbell’s has returned to its pre-pandemic inventory service levels of mid- to high-90s as its supply chain has improved and no more major supply volatility is anticipated in the foreseeable future.

In Meals & Beverages, Campbell’s faced volume/mix pressure as it cycled last year’s retailer inventory rebuild, Clouse said, as organic net sales declined by -1% while in-market dollar consumption was up 2%.

“Once we cycle the tough prior year comparisons, we expect volume trends to improve sequentially,” he said. “We have made considerable progress in creating sustainable momentum and relevance across the Meals & Beverages business over the last several years and remain confident in the continued growth potential of our iconic brands.”

Soup dollar consumption was flat over the prior year due to inflation-driven pricing actions. On a net sales basis, the soup portfolio declined -11%, Clouse said, “primarily reflecting the disproportionate impact of cycling the inventory recovery from a year ago.”

“Strategically, we continue to believe strongly in our ability to grow the soup business and are pleased with the progress we’ve made in leading the renewed relevance of the category over the last four years,” he added. “For example, the improved relevance of condensed soup, especially cooking, where we have supported the growth of in-home meals. Importantly, this has attracted new younger consumers to Campbell’s.”

Meanwhile, Campbell’s has mounted a “complete restage” of its Chunky Soup line, which Clouse said “has been fundamentally transformed from a product purchased primarily on deep discount promotion to a great everyday value with a compelling position that focuses on protein and quick in-home lunches.” The line has seen increased sales from younger consumers, he noted.

The company’s Snacks division was the quarter’s strongest performer, improving on margins as well as increasing market share as net sales grew 12%. Clouse noted that marketing efforts and innovation have helped drive sales, particularly with the Goldfish brand which is “on pace to approach” $1 billion in annual revenue.

The success of LTOs such as Frank’s RedHot and Old Bay flavored Goldfish has now inspired similar innovations for other brands, such as Kettle Brand. Campbell’s is also preparing to launch innovations for Late July in the coming months.

“As we continue to build momentum across the portfolio, we’ll step up investment behind this innovation and brand building, which will continue in the fourth quarter,” he said.