Campbell reports sales decline despite solid performance by Arnott’s and Australian soup division

Posted by Daniel Palmer on 24th February 2009

Campbell Soup Company, the owner of Arnott’s biscuits and world’s largest soup maker, has joined the growing list of global food manufacturers realising volume declines.

The American-based manufacturer saw sales fall 4 per cent for the second quarter due to the negative impacts of volume and mix (-3%), currency fluctuations (-5%), divestitures (-2%) and increased promotional spend (-3%). These factors were partially offset by price and sales allowances, which provided a 9% boost.

Douglas Conant, Campbell’s President and Chief Executive Officer, reported that sales for their soups had been strong as consumers looked for convenient meal options from supermarkets. “For the first half, we delivered strong sales growth in our key value-oriented businesses, including US soup and sauces. US soup sales increased 8 per cent with growth in all formats: condensed, ready-to-serve and broth. As planned, we invested in our US soup portfolio and supported three major new product introductions,” he advised. “Beyond soup, other parts of our portfolio, such as beverages and premium breads, continued to grow but at slower rates during these difficult economic times. Overall, the categories in which we compete are growing, and our businesses are performing well within those categories.”

“We remain encouraged by the successful launches of ‘Campbell’s Select Harvest’ and ‘Campbell’s’ ‘V8’ ready-to-serve soups and ‘Swanson’ stock. ‘Prego’ and ‘Pace’ sauces also benefited from consumers eating more meals at home,” he added. “Overall, we are pleased with our performance in the quarter, especially considering that currency negatively impacted results and major retailers significantly reduced inventory levels. While these inventory reductions have impacted our US soup, sauces and beverages businesses, encouragingly consumer takeaway has outpaced sales growth.”

On a currency-neutral basis, the company now expects to deliver sales growth of between 3 and 4 per cent for the year; with adjusted earnings before interest and tax growth slightly below its long-term growth target of between 5 and 6 per cent, as the impact of one less week, higher marketing spending and increased investment spending in Russia and China take their toll.

The company reported significant growth in Arnott’s, although the biscuit brand’s sales declined due to the divestiture of certain salty snack foods brands in May 2008 and the unfavourable impact of currency. Excluding these factors, sales increased due to growth in all three segments: savoury, chocolate and sweet.

In their International Soups, Sauces and bevergaes division, their Asia Pacific sales rise was primarily due to gains in the Australian soup business and Malaysia.
Mr Conant remained bullish about the future as the value-oriented section of their portfolio is anticipated to spur growth. “Campbell remains well positioned during this economic downturn due to the focussed and value-oriented nature of our portfolio, the relative vitality of the categories in which we compete and our position within those categories. Despite broad economic challenges, we are optimistic about the second half of the year,” he concluded.