CAMDEN, N.J. — Earnings and sales for the Campbell Soup Co. were flat during the third quarter of fiscal 2015 as the company continued to realign its product mix in an effort to improve its performance. Most notable for the company is U.S. soup sales fell 10% during the quarter with condensed soup sales down 4%, ready-to-serve soups down 18% and broth sales down 13%.
“Consumption and market share remained relatively stable,” said Denise Morrison, president and chief executive officer, about the U.S. soup business, during a conference call with securities analysts on May 22. “The gap between consumption and sales performance was primarily due to significant unfavorable inventory movements by retailers. Our analysis suggests that this was largely a result of our reduction in trade spending and merchandising as compared to the prior-year quarter.
“Within our soup portfolio, we are encouraged by the performance of our premium offerings. Slow Kettle continues to perform well, and our new Campbell Organic soups achieved solid distribution gains. Soups for easy cooking are below expectation. Looking ahead, we will begin shipping Campbell’s fresh brewed soup in K-Cups in the fourth quarter.”
Company-wide net income for the quarter totaled $182 million, equal to 59c per share on the common stock, and flat compared with the same period of the previous year when the company earned $184 million, or 59c per share.
Sales for the quarter were $1,900 million compared with $1,970 million the year before.
Sales within the company’s U.S. Simple Meals business unit fell 6% during the quarter and the result was partially due to the weak soup performance, which is a part of the division. Segment operating earnings fell 16% to $147 million.
Both of Campbell’s international business units, Global Baking and Snacking and International Simple Meals and Beverages experiences sales declines during the quarter of 2% and 6%, respectively. Both divisions experienced positive operating earnings during the quarter due to improved gross margins, but were impacted negatively by currency translations.
Within U.S. Beverages, sales fell 2% during the quarter to $187 million. A decline in sales of the company’s V8-Fusion brand was partly offset by gains in V8 Splash beverages, according to the company. Lower marketing expenses led to a 17% improvement in operating earnings.
Sales decreased 1% in the Bolthouse and Foodservice business unit due to volume declines in carrots and natural ingredients. Segment operating earnings increased 35% to $31 million due to higher gross margins in refrigerated beverages and salad dressings.
As she has in the past, Ms. Morrison discussed how the marketplace’s “new normal” is affecting the industry as a whole.
“…This is a tumultuous time in the food industry,” she said. “We all recognize that the consumer landscape has changed dramatically, driven by a number of seismic shifts: the Great Recession’s impact on consumer purchasing behavior; global demographic changes; profound shifts in consumer preferences relative to food; and the disruptive impact of digital technologies.
“All of these are contributing to mounting consumer demand for greater transparency about where and how their food is made. These shifts are converging to create a new normal for the food business. They produced a persistently challenging environment, with significant volume pressure on mainstream food products, particularly center store categories.
“As a consequence of this new normal, industry participants have initiated a series of strategic actions, including spinoffs, consolidation, acquisitions of small purpose-driven brands, and aggressive cost-cutting measures. The broad adoption of zero-based budgeting has set a new bar for cost management in the industry; and the recent consolidation only intensifies the situation, placing even greater focus on cost management.“Campbell is focused on creating shareholder value by strengthening our core business and expanding into faster growing spaces. Areas of emphasis include health and well-being, particularly fresh and organic foods, and biscuits and snacks in both developed and developing markets, with a focus on Asia and Latin America.”