campbellsHQ.jpg Campbell Soup Co.

Campbell's outlook dims after fallout with ‘key retail partner’

Promo loss to trigger soup sales decline

Campbell Soup Co. on Thursday said its soup sales would likely decline more than expected in the coming year after revealing it was unable to come to an agreement on a promotional program with a large food retailer.

Campbell’s declined to identify the retailer or provide specific reasons they were unable to come to an agreement, but CEO Denise Morrison framed the issue in terms of a retail environment that was “changing dramatically amid intense competitive activity.” She emphasized the issue was limited to soup and would primarily affect sales in Campbell’s current and coming quarters with the specific customer, but would likely trigger an overall soup sales decline in its new fiscal year. Last month, Campbell’s officials said they were forecasting flat sales for soup in fiscal 2018.

“Our negotiations with customers for soup season involve joint business planning with plans for spending and merchandising linked to a sales goal,” Morrison said during a conference call reviewing financial results for the fourth quarter on Thursday. “And what we seek are win-win-win solutions, win for the consumer, win for the customer and win for Campbell’s. And in this particular situation, we were not able to achieve that negotiation.”

Campbell’s Simple Meals and Beverages division, which includes shelf-stable soups, beverages and Prego brand, accounts for about half of the company’s sales.

The retail world has been upended by the aggressive growth of discounters and a subsequent flight to private brands that has been difficult on branded goods companies like Campbell’s, which is already scrambling to recraft its portfolio behind brands that meet changing consumer tastes for fresh, healthier and snack items, while aggressively cutting costs.

Bumps along that transformation led to an uneven performance in the quarter, with net sales weaker than expected at negative 1% for the period, which ended July 30. Fiscal 2018 sales guidance of -2% to flat was also lower than analysts anticipated.

For the fiscal year, Campbell’s saw flat sales but 35% earnings growth to its Global Biscuits and Snacks division. Its C-Fresh division, which includes brands like Bolthouse Farms, saw sales rise by 1% but losses of $8 million. Sales fell by 3% at soup and beverage business but operating earnings improved by 4%. Total sales for the year totaled $7.9 billion.

In addition to anticipated declines in soup sales in fiscal 2018, Campbell’s said its V8 beverage business would also likely see continued sales decline in the coming year, citing consumer concern over sugar and calories that has hurt the entire shelf-stable beverage business, particularly V8’s Fusion and Splash lines.

“We have a clear strategy to improve performance of the V8 brand with continued focus on V8 Vegetable Juice, the revitalization of V8 Blends with new benefits focused messaging on the front of the label, and steady growth of V8 Plus Energy,” Morrison said Thursday. “While our performance will improve, we do not expect this business to return to growth in fiscal 2018.”

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish