Campbell’s Said It Will Focus On The Familiar For Future Growth

The Campbell’s Soup Company is more focused and a “much stronger company” today than it was three years ago, said President and CEO Mark Clouse during the company’s Investor Day event Tuesday.

While highlighting the accelerated growth of its Meal & Beverage (+53%) and Snack (+47%) portfolios this year, Clouse emphasized the successful execution of Campbell’s turnaround strategy which was introduced during its last Investor Day in 2019, including diversifying its team and focusing the business on “familiar categories.”

What’s been turned around?

Since 2019, Campbell’s has worked to streamline its portfolio by divesting its Campbell Fresh and International businesses. The company now focuses solely on its North America business within two divisions – Snacks and Meal & Beverage – and 13 categories. Taking these divestments into account, Campbell’s net sales remained fairly stable compared to past results, reaching $8.5 billion during FY21.

“This focused brand powerhouse is well-positioned for advantaged growth and value creation,” said Clouse during a Webinar presentation. “We have iconic and differentiated brands that are important to customers and loved by consumers. Snacks account for nearly half of the company’s annual sales with growth driven by our power brands… Meals & Beverages account for the remainder of our annual sales, with a portfolio of fabric of the nation brands that play an important role in the lives of consumers.”

An integral part of that turnaround plan was accelerating the growth of its snack brands and stabilizing its Meal & Beverage business, which the company said have increased 5% and 6%, respectively, on a two-year CAGR basis.

Internally, the business has also been restructured with the addition of three women to its leadership team, including Valerie Oswalt, Executive Vice President and President of Snacks. The 13 members of Campbell’s Board of Directors now includes “a healthy balance of fresh eyes and diverse relevant perspectives” with four women and three “ethnically diverse” individuals, all of which have an average of 20 years of CPG experience, Clouse emphasized.

The last aspect of Campbell’s turnaround strategy is aimed at reducing debt, which it achieved by divesting its Fresh and International businesses, and fueling investment through its cost savings program, which is on track to deliver $850 million of cost savings through FY22.

How did COVID impact business?

The pandemic brought both new challenges and increased opportunities, said Clouse. Although pandemic-induced supply chain disruptions and labor constraints forced the company to dial back on innovation, changing consumer habits presented paths to potential growth across each of Campbell’s core categories.

“While these issues have been extremely challenging and this has been an absolutely horrible situation across the world, this period has also accelerated several important areas of our strategic agenda, and has overall strengthened the position and relevance of our brands…” Clouse said. “For some, it represented a rediscovery of old favorites, but it also introduced our brands to millions of new, and importantly, younger consumers. It was a once in a generation moment, especially for our soup business, and the work we’ve done prior to the pandemic better positioned us to meet this moment fully for consumers, customers, and the company.”

Clouse said the impact of lockdowns created a renewed interest in “quality and trusted” brands and noted the 46% increase in snacking and resurgence of at-home “quick scratch cooking” which its soup portfolio benefitted from, seeing a 4% category increase over the past two years.

What’s going on with snacks?

The U.S. snack market grew 4.4% in 2021 and is anticipated to continue on this upward trend by increasing 3% to 4% over the next 12 months. Over the past three years Campbell’s has looked inward, creating value within its existing business including innovating against consumer insights and investing in its high velocity “power” brands.

According to Oswalt, Campbell’s snacks are well positioned against upcoming snacking trends and the company will aim to create more efficient and effective supply chains over the next three years to allow for continued investment in its growth plans. Oswalt highlighted Campbell’s successful growth strategy with its Pretzel Crisps and Late July brands which grew 7% and 13% on a two-year CAGR basis, respectively.

“We like to say that we are on the right side of snacking,” Oswalt said. “Our goal is to ensure that our snacks are everyday premium or elevated. And while we are elevated, we are not exclusive. We want to be accessible whenever and wherever people need us within arm’s reach. Our breadth of elevated brands and their differentiation versus competition are the true power of our portfolio.”

Looking toward the next three fiscal years, Oswalt said its snack strategy will largely focus on geographical and channel expansion. Many of the company’s snacks are leaders in grocery, mass and club; however, Oswalt plans to expand its presence in c-stores which she said is an approximately $115 million opportunity.

On an operational level, the company has consolidated its Georgia operations into its Charlotte, North Carolina facility to create a Campbell Snacks “mega-site.” Additionally, it plans to streamline about 10% of its SKUs to increase capacity and improve efficiency and has reduced the significance of lower-margin partner brands within its portfolio.

What’s next for soup?

Following the “resurgence” and stabilization of its soup business, Chris Foley, Executive Vice President and President of Meals & Beverages, said Campbell’s goal is to transform growth in the center of the store to align with the preferences of younger consumers. Foley also noted the brand’s leadership in soup, sauces and plant-based beverages as a key component to its ability to execute against this plan.

The growth plan for the Meal & Beverage division is three-pronged: modernize and broaden the strength of its soup portfolio, grow its sauce sales to $1 billion and focus on plant-based innovation between its Pacific Foods and V8 lines. Currently, these three categories account for 90% of the company’s Meal & Beverages division and they have each seen significant growth over the past two years with net soup sales up 6%, sauces increasing 7% and plant-based beverages growing 9%.

Holding true to its roots, however, Campbell’s said its focus will primarily be on amplifying its soup brands through solo easy eating products and plant-based innovations.

“In terms of soup, the category is stronger, more relevant and healthier than it’s been in a long time,” Foley emphasized. “In-home soup occasions totaled 92 million each week, with 22 million of these soup occasions coming from millennial households. Younger users are discovering the versatility of soup and are more likely to eat soup in between meal occasions throughout the day. The soup category is more relevant because it’s simple, nutritional, delicious, and versatile, and we’re driving that messaging.”

What’s the long-term goal?

As emphasized by all three presenters, these recent moves are made with the intent of creating a focused company with a strong portfolio of modern, innovative and leading brands. Looking toward future innovations, Campbell’s said it will likely acquire or launch a “portfolio-adjacent,” premium-positioned sauce brand to complement Prego and announced three new flavors of Late July chips coming early next year: Nacho, Garden Ranch and Mexican Street Corn.

Clouse said in terms of future acquisitions, the company will be “strategic and disciplined,” emphasizing its use of “tuck-in” acquisitions as was the Pacific Foods deal as a model for future investments. However, he said the primary innovation driver will come from investment in its high velocity brands.

To continue modernizing, the 152-year-old company has amplified its marketing strategy through a variety of social media campaigns, with 65% of its advertising now taking place on digital and social platforms. The company is also driving sales in enterprise e-commerce platforms such as click and collect and third-party delivery services and has seen an 177% increase in sales since 2019 in this channel.

Campbell’s is expected to generate $4 billion in operating cash flow between 2022 and 2025 and plans to expand its enterprise cost savings program to $1 billion by the end of 2025.

“There is really no question that Campbell is stronger today than we were three years ago,” concluded Clouse. “The company is focused and committed to a growth and execution mindset. We’re delivering against our goals, and most importantly, we have a compelling and credible plan to continue to improve and deliver advantageous results as we unlock the full growth potential of this great company.”