The trend toward eating more fresh foods is kicking Campbell Soup right in the can.
The company on Tuesday said its quarterly profit fell 30 per cent as U.S. sales of soups and its V8 beverage declined. A recall of its recently acquired Plum Organics baby products also hurt results.
Its shares fell nearly seven per cent in early trading Wednesday, after the Camden, N.J. company cut its earnings for the year.
Campbell Soup has boosted its marketing expenses by 14 per cent in an effort to grow beyond canned products. It launched a campaign for its Bolthouse Farms brand and looked to expand its healthy beverages sales this quarter.
Its traditional soup line is being promoted with a “simple meals” campaign as people increasingly reach for fresh foods, including produce and fresh meats.
Soup sales down
Sales of Campbell Soups fell six per cent in the U.S. in the quarter and international sales were down 13 per cent. A late Thanksgiving this year meant fewer orders fell within the quarter, the company said.
To better connect with Millennials who tend to shun canned products, Campbell introduced soups in bright, new plastic pouches and dinner sauces in black packages meant to conjure the blackboard menus at cafes. But the company is still facing competition from the growing prepared foods sections in supermarkets and other outlets that offer fresh, hot soups.
In a call with analysts, chief financial officer Craig Owens declined to specify what percentage of its soup sales come from such new products.
"It's still pretty small. It's not a very significant portion of our soup sales," he said.
CEO Denise Morrison also cited the "proliferation of specialty beverages and packaged fresh juices" for putting its V8 beverage category under pressure. Like its soups, V8 drinks are shelf-stable and don't have to be refrigerated until they are opened. Morrison said she doesn't expect the beverages to be a growth driver this year.
Bought Bolthouse Farms, Plum Organics
As the company works to refresh its core offerings, Morrison is also expanding into new areas. Its recent acquisitions of Bolthouse Farms juices and Plum Organics baby food were intended to give the company a foothold in the faster-growing category known as "fresh packaged goods." But Campbell has already stumbled and earlier this month recalled some Plum Organics products because they were spoiling unexpectedly.
Sales for the global baking and snack division increased six per cent, after Campbell bought Denmark's Kelsen Group, maker of butter cookies. Campbell, which also makes Pepperidge Farm, said it plans a national launch of Goldfish-branded macaroni and cheese this quarter.
Campbell Soup Co. earned $172 million, or 54 cents per share, for the period ended Oct. 27. That's down from $245 million, or 78 cents per share, a year earlier.
Below analysts' expectations
Excluding one-time costs, it earned 66 cents per share. That was 20 cents shy of analyst expectations, according to FactSet.
Revenue dipped 2 per cent to $2.17 billion, also short of the $2.29 billion Wall Street expected.
Campbell Soup now expects adjusted 2014 earnings to increase between 2 per cent and 4 per cent, or $2.53 to $2.58 per share. Revenue is forecast to rise by 4 per cent to 5 per cent. Its prior guidance called for adjusted earnings growth of 3 per cent to 5 per cent.
Analysts expect full-year earnings of $2.59 per share on revenue of $8.48 billion.
Shares of Campbell Soup fell more than 6 per cent or $2.61 to $39.20 on Tuesday. Over the past year, its stock is up more than 13 per cent.