Campbell to step up soup promotions

Posted by Nicole Eckersley on 23rd February 2010

Campbell Soup Co. plans to use promotions to revive sales of its ready-to-serve soups in the US after a quarter in which sales of the products slid 18%.The fall in ready-to-serve soup sales, particularly Campbell’s Chunky range, weighed on the company’s domestic soup revenues, which fell 8% during the three months to the end of January.

The company said it had managed to increase sales of condensed soup and broths on a volume basis but admitted a lack of promotional activity had held back ready-to-serve soup sales.

Speaking to analysts after Campbell published its half-year results, president and CEO Doug Conant said Campbell had invested less on promoting its ready-to-serve soup in the company’s fiscal second quarter.

However, the Campbell boss said there was a “step-up” in promotional spending among a “competitive set” of ten other categories. He declined to name the categories.

“Our promotional activity was stepped back in the second quarter and is anticipated to be stepping forward in the third or fourth quarters,” Conant said.

A succession of analysts questioned Conant on the performance of Campbell’s ready-to-serve business, prompting a bullish reaction from the executive.

“We expect to have an improved performance relative to the first half in US soup,” Conant said. “An 18% drop in a major category typically is due to some promotional timing changes. We just have to get back on the horse again,” Conant said. “We’re confident in our ability to compete in ready-to-serve.”

The economic downturn and weaker consumer spending has weighed on sales of ready-to-serve soups in the US.

However, Conant said Campbell remained committed to ready-to-serve soup “for the long haul” and had undertaken initiatives including making certain lines healthier.

Conant argued that those moves had had an effect on the timing of Campbell’s promotions and that the push to healthier options was key to achieving “long-term growth” in ready-to-serve soup. He also brushed off concerns over competition from other convenience foods.

“We’re built to compete with any simple meal. We just have to get the right formula for success as the market evolves. I have no concerns about our ability to compete,” Conant said.

“To pick one quarter that’s down 18% on ready-to-serve is premature, when we could be celebrating the fact that condensed soup is starting to show volume growth, which was a concern last year. We’ve demonstrated the ability of this category to grow and grow in a very healthy way for an extended period of time – and there is insufficient evidence that it won’t continue to grow.”

Conant, who last week announced a major push in condensed soup at Campbell, also insisted the category as a whole remained relevant to consumers in the US.

“We see soup as being highly relevant. Per capita declines that were pronounced in the Nineties have stablised. Soup is still the number two item at lunch; it’s still in the top ten at dinner. It’s still the higest unit volume in the entire centre of the store for simple meals. If we had concerns about soup, we probably would have to change our guidance – we don’t,” Conant said.

“If there’s something that I would challenge us for is that we were so focused on competitive within soup, that we didn’t adequately take into account the increased competitive activity beyond soup in the broader simple meals category. We made that mistake once. We won’t make it again.”
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