Campbell's plans to improve total category performance for its soup business include a focus on premium products.

CAMDEN, N.J. — Expanding into higher-growth categories propelled full-year earnings for the Campbell Soup Co., but the company remains pained at the core. With the acquisitions of Bolthouse Farms, Plum Organics and Kelsen Group, Campbell has begun recomposing its portfolio and edging further into the fast-growing packaged fresh category. However, sales of soups, simple meals and other center-of-the-store businesses continue to disappoint.

“We were encouraged by the performance of the businesses we acquired in the last two fiscal years as part of our strategy to reshape Campbell’s growth trajectory, but we were not satisfied with the performance of our core business, and our organic sales results for the year reflected the extremely difficult market conditions which are impacting the food business,” said Denise Morrison, president and chief executive officer, during a Sept. 8 call with financial analysts to discuss fiscal-year earnings.

Delivering the biggest blow to Campbell’s core categories may be the impact of the reduction in government nutritional assistance benefits, which affects 12% of the company’s shopper base and translates to a 1% decline in sales.

“I would say, being the finance guy, that weak wallet has a very significant impact,” said Anthony DiSilvestro, chief financial officer. “We’re talking about our core category performance and probably something that we can affect the least, and it’s certainly impacting some of our center-store categories. And unlike the innovation thing, we’re doing a lot about innovation, those things are more in our control. We understand where the consumer is going, we can bring new products. Denise talked about dinner sauces, we have a new line of V8 juices that is more healthy, we have new varieties of Swanson and Chunky and Homestyle and Prego, all of those things address where the consumer taste is evolving. The hardest one for us to get at obviously is that weak wallet, and the impact on our core categories.”

Looking ahead

Goals for the year ahead include strengthening the U.S. soups and Pepperidge Farm businesses, revitalizing the U.S. beverage platform, and driving continued growth in Bolthouse, Plum Organics and Kelsen.

To improve performance in soups and bring new users to the category, Campbell is bundling products into broader platforms.

“We intend to expand in the premium soup segment, strengthen ready-to-serve soups and grow our No. 1 position in condensed soups and broth,” Ms. Morrison said.

In premium soups, the company plans to extend its Slow Kettle line and launch its first organic soups.

“We’re putting premium soup sections in stores, so that we know that the consumer for these particular products is younger and more affluent, so that gives us the range in value all the way from condensed soup all the way up to a premium soup and shelf-stable and then also in chilled,” Ms. Morrison said. “And so focusing on the premium soup platform, we believe, is a faster growing space for us within the soup category. The second thing we’re doing is, Swanson broth is giving us an expansion to a flavor-infused platform, which is offering consumers creative homemade soup and meal solutions based on the insight of ‘why I cook.’ And within some of the brands, we have platforms like Pub-Inspired Chunky or building out our Campbell’s Homestyle and Healthy Request soups.”

Initiatives to improve the Pepperidge Farm business also include increased innovation, particularly in the back half of the year.

Additionally, Campbell aims to revitalize its shelf-stable beverage business in the United States by leveraging capabilities in vegetable nutrition through the V8 brand and capitalizing on the juicing trend by providing affordable options for consumers.

Building out the dinner sauce segment with a new line of oven sauces and extending the V8 brand into the adult on-the-go nutrition category with the introduction of protein bars and shakes also figure into the company’s plans.

“Our sauces strategy is to continue to build the Pace brand,” Ms. Morrison said. “We have on the docket for FY15 some innovation and brand-building programs, but most of the contribution from sauces will come from the growth in Prego, where we’re continuing to expand our white sauces, and also, the innovation in our Campbell’s dinner sauces, where we’ve introduced skillet and slow cooker sauces, and this year we’re introducing oven sauces, and that platform continues to build. We now have the majority of retailers giving us an extra four-foot section in the store as a destination for those particular sauces, so it’s a very strong and profitable business for us.”

Embracing change

On future acquisitions, the company said it continues to carefully evaluate targets, particularly in the categories of global baking and snacking, packaged fresh, and health and wellness in North America.

“Those are three areas that we believe are faster growing spaces for us based on the strategy that we’ve laid out,” Ms. Morrison said. “And we do have the financial flexibility to make a meaningful acquisition, but like I said, we’re being very disciplined about it.”

Fiscal earnings in the year ended Aug. 3 advanced to $807 million, equal to $2.61 on the common stock, up 80% from $449 million, or $1.46 per share, in the year before.

Net sales for the year increased 2.7% to $8,268 million from $8,052 million.

Milestones achieved during the year include completing the acquisition of the Kelsen Group and the divesture of the European simple meals business, driving growth and distribution in Bolthouse Farms, building digital and e-commerce capabilities, managing costs, and forming a distribution network for single-serve beverages for immediate consumption in the United States.

“While remaining true to our core beliefs, we have opened our minds to new ways of thinking about our business,” Ms. Morrison said. “To win in the long term, food companies will have to embrace change and lead change, and we are doing this at Campbell.”

For the fourth quarter, Campbell earned $135 million, equal to 44c per share on the common stock, which compared with a loss of $160 million in the prior-year period. The results reflect improvements to supply chain efficiency and restructuring charges. Excluding items affecting comparability, adjusted earnings from continuing operations increased 14%.

Net sales for the quarter rose 7.5% to $1,852 million from $1,723 million.