Campbell Soup Cites Ad Spend, Weather For Slow Sales

by Aaron Baar, Nov 20, 2007, 5:00 AM

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Marketing costs and a warmer fall weighed on Campbell Soup Co.'s first-quarter earnings, with the company posting a 7% net loss for the period and net earnings of $270 million. Earnings per share were down $0.02, to $0.70.

"We remain confident in our products and plans for all of our businesses, including U.S. soup," said company CEO Douglas Conant in a report of the earnings. "As we head into the key consumption period for soup, I fully expect that our U.S. soup business will deliver better performance as the year progresses."

Much of the loss was attributed to earnings from businesses that had been shut down or sold over the past year. Factoring those businesses out, the company said earnings on continuing businesses increased by $1 million when compared with the same period a year ago. Overall sales increased 7%, to nearly $2.3 billion.

In the U.S., soups, sauces and beverage sales were up 4% to nearly $1.1 billion. Condensed and ready-to-serve soups were each down 2%, while sales of Swanson broths and Campbell's Select and Chunky brands were up--thanks to increased promotion and advertising, according to the company.

For the period, the company increased its marketing and selling expenses 10%, to $348 million. While the company said increased advertising and promotions boosted the sales of brands such as Campbell's Select, Chunky and Swanson's broths, company executives admitted during a webcast that they still needed to tweak their marketing programs.

Marcia Mogelonsky, a senior research analyst at Mintel International in Chicago, tells Marketing Daily that while marketing and weather costs may have played a factor in the company's lackluster first-quarter earnings, the company needs to innovate in its core soups business to really boost sales. While the company had a smart product in its microwavable ready-to-eat soups, innovations since then have been few, she says.

"They innovate themselves and then they grind to a halt," Mogelonsky says. "The major reason people have stopped buying [Campbell's] products is because they're bored."

"What we've found is, advertising and [promotions] alone are insufficient to change awareness levels with consumers," Conant said. "We can increase our marketing expenses, but we have to follow through in retail channels."

Despite the disappointing quarterly earnings, company executives said they still expect to make previously released guidance of 3-4% sales growth over the year, fueled in part by increased advertising and promotions, Conant said.

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