Weather Cools Campbell's Soup Sales

by , Feb 20, 2007, 5:00 AM
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Because of the warm weather in the first half of the winter, Campbell Soup had a peculiar second quarter as far as sales of its soups were concerned.

The company on Friday reported that sales had slipped 1%, with condensed soup sales flat, ready-to-serve sales--including the usually strong Chunky brand--down and broth sales up.

The Camden-based company said sales were $2.52 billion--up 4.3% from the second quarter of fiscal 2006, when sales were $2.16 billion.

Company officials said the better measure of soup sales is the first six months of its fiscal year, rather than merely the second quarter. Ready-to-serve sales were up 4% over that period. Marcia Mogelonsky, a researcher at Mintel, found the results unsurprising.

"The condensed soups didn't do well because Campbell's Select Gold Label soups are doing better," she said. "People get a bit bored ... Select Gold Label are great flavors--butternut squash and things like that. Plus, they're convenient. Campbell's made even more convenient soup than their convenient soup."

The cooking soups, like double-strength beef bouillon, did well, Mogelonsky said, "because you can throw them into anything." During the quarter, sales were up markedly in the company's Pepperidge Farm line of baked goods and its U.S. beverages division, which includes V-8 juices.

Sales of Pepperidge Farm cookies and crackers also increased, driven by double-digit growth of Goldfish crackers, which benefited from strong sales of 100-calorie packs, expanded distribution of single-serve packages, and higher levels of advertising.

"The 100-calorie packs are convenient," said Mogelonsky. "You throw them in your kids' lunches, in your purse. "

"Of course Campbell's is doing well," she said. "We hear that everybody wants 'sustainable,' 'fair trade' and all that, but when you come right down to it, people want to eat food that tastes good and is not bad for them. Campbell's Soup is a healthy product. Their reduced-sodium soup has really grown. They're staying current with what people want."

Campbell President/CEO Douglas R. Conant said Campbell was happy with performance of its high-end Campbell's Select Gold Label soups and its new lower-sodium products.

He told analysts that the low-sodium soups are helping increase overall soup sales. But Conant said that even if overall soup sales were not increasing, the move to low-sodium would help the company because those products have higher prices and higher profit margins.

"We're getting consumers to trade up to higher quality, which are higher-priced items," said Conant. "These are long-term builds. We're trying to influence consumer behavior for the long term. People will take to low-sodium just as they did to aseptically packaged soups with the broth."

The company also said its advertising strategy has become more efficient with a shift to fewer national TV spots, more print advertisements, fewer 30-second television commercials and more 15-second ads.

"Our actual media delivery is comparable to last year even though media dollars are down," he said. "We're comfortable with that. We're anticipating a significant marketing spend in the second half. There is pressure on the category, and we will drive the category to higher ground. Marketing spending is an import ingredient. Strong marketing, 20 to 22% of list sales, is the range to make the proposition work for the brand, and we cling to that philosophy."

In other quarterly reports, Hormel Foods, maker of Spam and Jennie-O Turkey, said first-quarter profit rose 8.7% despite a big increase in grain prices.

Hormel has been aiming to boost its lineup of so-called value-added food, so in addition to selling plain turkey it sells turkey burgers and rotisserie turkey, for which it can charge higher prices. It said this would help offset grain prices, which it expects will keep rising.

"By adding value, you add convenience for the consumer, you can then charge a bit more and make a better profit," said Mogelonsky. "Convenience tops everything for the consumer."

Jennie-O Turkey Store profits dipped 25% to $30 million, despite sales that rose 4%. The drop in profits knocked Jennie-O out of its spot as Hormel's most profitable division. Hormel blamed the decline on higher costs for grain for feeding turkeys.

Refrigerated foods profits rose 8% to $41.9 million. J.M. Smucker, the largest U.S. producer of jams and jellies, on Friday reported that profit rose 29% in its third quarter, due to higher sales and market share gains for key brands like Smucker's, Jif and Crisco.

Sales fell to $523 million from $536 million a year ago. But excluding sales from businesses it no longer owns from the comparison, revenue rose 6%.

In October, Smucker added to its baking products with the acquisition of the White Lily brand from C.H. Guenther & Son Inc., parent of The White Lily Foods Co. White Lily branded products include flours, cornmeal, muffin mixes, grits and frozen biscuits.

In addition to its products with the Smucker's brand, the company sells peanut butter, shortening and cooking oils, ice cream toppings and various other foods. Its brands also include Pillsbury and Hungry Jack.

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