Lessons learned during the roll-out of the Campbell’s Skillet Sauces line this past year have the Campbell Soup Co. optimistic it may be instrumental in building out a broader dinner sauce segment in 2014, said Denise Morrison, president and chief executive officer.
In a May 20 conference call with analysts to discuss third-quarter financial results, Ms. Morrison acknowledged that while it is more difficult to create new market segments, Campbell’s Skillet Sauces are a “break-through” concept with a “high potential for reward.”
“With this product, we’re working with our customers to create an entirely new category of unique, convenient and versatile dinner sauces,” Ms. Morrison said. “Because this is a new idea, retailers across the country have shelved the product in many different locations in the store, and those locations did not create the scale necessary to capture the attention of shoppers. Additionally, the resets in these various sections occurred at different times of the year, so with some retailers we had a later start than we had planned.
“We now have a clearer understanding of the best way to shelve our new dinner sauces, and this will be a major thrust for us in fiscal 2014.”
Despite some of the initial challenges in getting shelf space, Ms. Morrison said the good news is consumer repeat was “very strong.”
“Those who try it, buy it again,” she said. “Next year we will expand this platform with the launch of Campbell’s Slow Cooker Sauces, which address another large dinner behavior.”
The success of the Skillet Sauces was just one factor helping drive performance in Campbell’s U.S. Simple Meals platform during the third quarter, Ms. Morrison said, noting that Campbell’s Go soup performed well as part of the fast-growing premium shelf-stable soup category.
“The rate of repeat on Campbell’s Go soup continues to be strong,” she said. “Our challenge with this product is to build trial, which was impacted by the timing of our marketing efforts. Since we’ve turned on our marketing, which has been largely digital, we’ve seen improvements in sales in this line.”
Two areas of Campbell’s business that did not meet expectations during the third quarter were U.S. Beverages and North America Foodservice.
In U.S. Beverages, Ms. Morrison said Campbell’s struggles were in the premium segment of the shelf stable juice category.
“Our core V8 100% vegetable juice business is down, and over the past few years, new players have entered with other fruit and vegetable blends that compete with our V8 V-Fusion line,” she said. “Our innovation in this space has had mixed results.”
Ms. Morrison said she’s optimistic Campbell’s can turn its performance around by taking a page from its U.S. Soup playbook and focusing on two things: Laser-like attention to the basics and a focus on expansion in faster-growing spaces in the category.
“V8 is a very strong brand with unsurpassed credentials in health and wellness,” she said. “Over time, I believe we can reverse the declining trends in our shelf-stable beverage business.”
Meanwhile, the loss of a major restaurant customer and structural changes in the sector has hurt results in the company’s North America Foodservice business. But, like with the U.S. Beverages business, Ms. Morrison believes Campbell is well positioned to reverse course.
“We believe we have significant opportunity to grow with national restaurant chains, especially Q.S.R.s, and to expand our retail fresh perimeter soup business,” she said. “We’ve invested in a new manufacturing line to increase our capacity to make fresh soup, which will enable our expansion in this space. We are also taking a close look at the business model for our core food service business.
“Core food service is becoming more complex, more expensive and more commoditized. Industry consolidation and restaurant cost pressures have reduced profitability for manufacturers, and, as you’d expect, we are focused on keeping our costs down. We’re moving aggressively to improve the performance of North America Foodservice in the short term while laying the foundation for longer term growth.”
