Campbell Soup Co. to counter “pockets of sharing pressure” with new products and marketing
To make up for these losses and secure its competitive position in the categories where it is growing, Campbell will bring promotions and marketing back to the fourth quarter and rely heavily on product innovation to demonstrate value even as it moves through a third. previously announced price wave in April, company executives said during Campbell’s third-quarter earnings call yesterday.
During the quarter, CEO Mark Clouse announced that organic net sales increased by 9%, largely due to inflation-linked prices now reflected on the shelves, but also due to a 4% increase in consumption. compared to the previous year across the company.
At the same time, he also acknowledged some short-term pressures on the market shares of certain brands where supply was limited or price increases were not closely followed by other players – creating declines in volume and what he expects a temporarily disproportionate price difference.
“Sharing Pressure Pockets”
For example, in the soup segment, Campbell saw its overall consumption increase 5% over the previous year and 14% three years ago, but Clouse acknowledged, “we have seen pockets of sharing pressure”where inflation and private label players have been slower to set prices.
This was most acute in condensed and ready-to-serve soups, whose share fell 2.2 points and 1.1 points respectively from a year earlier.
Most of the stock losses have been concentrated in the baby boomer cohort, which Clouse says tends to be more price sensitive.
While no loss is good, Clouse said he was happy to see most new consumers, including millennials who came to the brand early in the pandemic, staying engaged and retention. households remains strong.
He also explained that the decline in ready-to-serve business could also be attributed to the prioritization of core brands, such as Chunky, which gained 1.6 points of market share compared to a year ago. , and Well Yes.
To help recover in those areas and leverage momentum elsewhere in meals, soups and sauces, Clouse said Campbell will be rolling out a “a solid pipeline of new products“ in the category in 2023, including a range of quick scratch home meals that includes Campbell’s Flavorup! concentrated sauces that allow consumers to adjust the intensity and portion.
Prego will also expand its lineup in fiscal 2023 with Spicy Marinara and Creamy Vodka as consumers continue to eat at home to save money and seek value in the current inflationary environment, Clouse said, adding that young consumers in particular are looking for new specialty flavors. .
New products in soups include the recent launch of Chunky Spicy Chicken Noodle, which Clouse says is rapidly approaching the first quartile of all ready-to-serve soups and has strong track and repeat sales.
“We are also releasing a variety of Old Bay Season Clam Chowder in conjunction with the limited edition Old Bay Season Goldfish,”Clouse said.
Finally, he noted, “We’re also excited about Pacific Ready-to-Serve Soups and Chilies, which will be launched in the fourth quarter of fiscal 2022.”
He predicts that these innovations will be an important growth engine for the next fiscal year and will consolidate the company’s leadership in the field of organic soup by creating a “Great portfolio and full range of choices for all consumer cohorts and price points.”
Snacks remain resilient, but supply issues hurt some brands
Like soups, Campbell’s snacks business performed well in the quarter, with most brands gaining market share, but a few slipped amid “expected pressure” from a supply delay and the resumption of promotions during the quarter.
Overall, the segment saw net sales increase 8% and consumption improve 4%, with notable gains for Kettle Brand chips, up 17% year-on-year, and Cape Cod, in 10% year-over-year increase. But not all brands fare equally well. At the end of July, consumption fell 16% and Pepperidge Farm biscuits fell 2% year-on-year.
Clouse explained that these brands have suffered in part due to ongoing supply issues as well as some expected pressure – but for the most part, the savory snack category has seen little elasticity or trade due to price sensitivity, he said.
“In reality,”he added, “Private brands and value brands lost market share in the snacks category during the quarter.”
This could be partly due to innovation and marketing emphasizing the value and reliability of beloved brands, including Goldfish crackers, which Clouse says have gone from a favorite food of children to a top choice. for their teenage siblings and parents.
“During the quarter, consumption of goldfish increased by 8%”, with family versions and Mega Bites taking the #1 and #2 slots for fastest-turning cracker innovation in 2022, fueling an 11.4% year-over-year rate increase for the brand.
“Our strategy to expand our consumer base works as proof that more than half of shoppers are from childless households and that Mega Bites works well with older consumers,”Clouse said.
Additional buzz around limited-time offers, including Frank’s Red Hot and Jalapeno Popper Goldfish and Old Bay season Goldfish, which captured 1 billion impressions in 48 hours.
Building on these successes, Clouse said that in the fourth quarter, Campbell will reverse its promotional and marketing investments to strengthen the company’s competitiveness and combat the decline in the private label business, as well as to create a plan compelling for fiscal 2023 that balances challenges with maintaining momentum and business progress. long-term strategic plans.
He also has “contingency plans” in place if the elasticity starts to really ramp up, Clouse added.
With contingency plans in place and strong third quarter results, Campbell has raised its full year net sales guidance so organic net sales are now expected to grow 1-2% – a change from minus 1% to plus 1% that was reported in March. The company reaffirmed its expected adjusted earnings before interest and taxes and adjusted its EPS guidance.