Commentary

Campbell CEO Clouse Aims To Improve Marketing, 2Q Results Beat Estimates

Thanks in part to two recent acquisitions, Campbell Soup yesterday released a promising second quarter earning report under its new leader, Mark Clouse.

“Net sales rose 24% to $2.71 billion, while organic sales were flat. In 2017, Campbell agreed to buy pretzels and Cape Cod chips maker Snyder’s-Lance Inc. for $4.87 billion, and organic soup maker Pacific Foods for $700 million,” Reuters’ Richa Naidu reports.

“Its U.S. snacks benefited from new items like Pepperidge Farm Farmhouse rolls and a new line of Goldfish called Epic Crunch,” write Annie Gasparro and Micah Maidenberg for the Wall Street Journal.

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“Campbell’s U.S. soup sales began showing signs of improvement last fall, after suffering from double-digit declines the prior year. Comparable sales were flat in the recent quarter ended Jan. 27, though retail consumption fell 5%. Mr. Clouse said that increasing the value proposition and improving marketing and innovation will help,” Gasparro and Maidenberg add.

“While we have made steady progress, there is much more work to be done to fully unlock the potential of our business. Since joining the team and immersing myself in Campbell’s business, I am confident in the plans in place to address our near-in challenges and opportunities, with the commitment to set a clear strategic roadmap for the future,” Clouse, a graduate of West Point and former CEO of Pinnacle Foods, said in a statement.

“Clouse was appointed CEO in December following a seven-month period of interim leadership for the company. The previous month, Campbell ended an acrimonious proxy fight with Dan Loeb’s Third Point that would give the activist hedge fund two seats on the company’s board in exchange for it withdrawing litigation against the soupmaker,” Peter Wells reminds us for Financial Times.

“The company last year launched a strategic review to retreat from a failed foray into fresh food, which resulted in its previous chief executive [Denise Morrison] stepping down, amid a broader effort to streamline its portfolio. This week, Campbell announced the sale of a division and refrigerated plant that are parts of its Campbell Fresh division. The company is still looking for a buyer of Arnott’s, a maker of legendary Australian biscuits,” Wells adds.

That division is Garden Fresh Gourmet, which the company sold Tuesday to hummus-maker Fountain of Health USA. Terms were not disclosed. 

“Still remaining in Campbell’s fresh foods portfolio is Bolthouse Farms, but the company said it hopes to shed the beverage brand by the end of its fiscal year in July as it works to restore its balance sheet after the costly acquisition of Snyder’s-Lance for $6.1 billion in 2018,” Carleton English and Josh Kosman write for the New York Post.

“Campbell is accepting final bids north of $500 million for Bolthouse, two sources told the Post. The company snagged Bolthouse for $1.5 billion in 2012, but the brand has since fallen out of favor.”

“I’ve noted before I thought dumping the fresh business was a logical move, and this quarter’s results make it easy to see why. But they also raise a key question: Who is going to want to take it off Clouse’s hands?” asksBloomberg’s Sarah Halzack, citing the continuing sales slump in the division.

“Clouse’s best hope for selling the remaining fresh brands is an appeal to the fact that they are, on paper, a great fit for changing consumer eating habits. Shoppers are gravitating toward fresh, refrigerated items that they perceive as healthier than shelf-stable ones. Clouse could make the case that Campbell simply isn’t the right steward for these assets, but someone else could be.”

The company’s shares were up more than 10% yesterday.

“‘I certainly don’t want to portray this as simple or an overnight fix,’ Clouse told analysts on a conference call. He said he was confident that Campbell has great brands that can be managed with discipline on the cost side and the ‘high-powered’ management team needed to get Campbell on a growth track,” Harold Brubaker writes for Philly.com. 

Seeking Alpha’s transcript of that earnings call can be read here.

“As to the company’s core soup business, which has struggled for many years, that’s going to take a ‘much more holistic and comprehensive approach,’ [Clouse] said, and promised to share more at an investor meeting in June. ‘We possess the best knowledge of the soup business in the industry,’ he said,” Brubaker reports.

Indeed, they do. It goes all the way back to a time when there were such things as newspapers and magazines and newsstands.

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