• by Thom Forbes  @tforbes, September 2, 2016

Getting into organic fresh produce seemed like a no-brainer for CEO Diane Morrison and her team at Campbell Soup as shoppers — particularly Millennials — eschewed the middle aisles for healthier fare. But, as Morrison admitted yesterday, you’ve got to execute. 

The company “reported a smaller-than-expected quarterly adjusted profit due to a product recall as well as higher costs and lower sales of carrots, issues that the company expects will dent sales for the rest of the year,” Reuters’ Sruthi Ramakrishnan reports. 

“Campbell Fresh operating profit plunged 62% in the quarter and sales fell 5%, hurt by a recall of protein drinks in June, higher carrot costs and lower sales of carrots and carrot ingredients — all in the Bolthouse Farms unit.”

Morrison described the problems as “short-term executional issues” from the get-go during a 4Q 2016 earnings call transcribed by Seeking Alpha. Variations on the theme of executing better cropped up continually during the session. 

“I expect far more from the Campbell Fresh business. It’s clear that we have several immediate challenges in Campbell Fresh, and we are addressing them,” she said.

“The company let go of several senior managers in the division and is reorganizing it, though it kept leader Jeff Dunn in place,” reports Annie Gasparro for the Wall Street Journal. “‘Some of these issues are part and parcel to running a fresh food business,’ Morrison said, adding, ‘We can do better there.’”

Morrison said, “Bolthouse management made some production decisions that led to the harvesting of smaller-than-normal carrots. That caused dissatisfied customers to bolt for other suppliers,” reports Harold Brubaker for Philly.com.

“On the beverage side of Bolthouse Farms, a recall in June of 3.8 million bottles of Bolthouse Farms Protein Plus drinks, because they could potentially spoil, hurt results,” Brubaker continues. “Fixing the problem has forced changes in production that have reduced the amount of beverages that can be made.” The line shuts down every 24 hours for maintenance now instead of 72, as it had.

Campbell’s profit will be $3 to $3.09 a share in the fiscal year through July 2017, it said in it statement. Analysts estimated $3.15, on average, Bloomberg’s Craig Giammona reports.

“Shares tumbled as much as 5.7% after the company posted [the] disappointing forecast,” Giammona writes — “as low as $57.24 in New York for the biggest intraday decline since May 20. Campbell had gained 16% this year through Wednesday.”

So where’s some of the good news that has been fueling that optimism until yesterday?

“…The food giant was able to point to continued strong sales of another orange-colored product — the ever-smiling Goldfish produced by its Connecticut subsidiary Pepperidge Farm,” writes Alexander Soule for The Hour of Norwalk, which happens to host the division’s headquarters and product development lab.

“The maker of Goldfish, Milano and Tim Tam cookies’ results are lumped into a snacks category that includes Arnott’s biscuits and Kelsen Danish cookies, which combined to have easily the best performance of major divisions on the Campbell Soup shelf, with operating earnings up 5% to $81 million and sales up 1% to $622 million,” Soule reports.

At the end of the day, “Morrison defended Campbell’s strategy to expand into more of the refrigerated section of the grocery store, and mentioned getting into dairy,” The WSJ’s Gasparro writes. “She said Campbell’s refrigerated salad dressings, fresh soups and protein drinks are a valuable toehold in the growing market for foods that connote health-and-wellness.”

“I remain confident in our C-Fresh strategy,” Morrison said, lest there be any doubt about where Campbell’s will be sowing its seeds going forward. “We have strong popular brands that are on trend with the changing nature of consumers' eating habits. We're well positioned in the produce and deli section of stores with an eye on expansion into other categories such as dairy. We have a robust innovation pipeline, and we're enhancing our approach to long-term innovation. Strategy was not the issue. Our problem was execution.”

It’s like burning a pot of good-for-you soup.