sales, the Campbell Soup Co. this year accelerated innovation and increased promotional activity. The company launched eight new products in January, including pub-inspired Chunky, Healthy Request and a line of Latin-inspired condensed soups.“However, all of this activity did not generate the incremental sales that we had expected,” said Denise Morrison, president and chief executive officer, during a May 19 conference call with financial analysts to discuss third-quarter results. “Overall, dollar consumption in the U.S. Soup category has declined marginally year to date, and our share has remained relatively stable. I can assure you that we are examining the same questions that you are, and we are formulating the most effective responses for next season.”
Lapping a strong prior-year quarter, Campbell posted declines in ready-to-eat and condensed soups offset by gains broths and cooking soups.
“The common thread with these products is that consumers are combining them with fresh ingredients to prepare home-cooked meals,” Ms. Morrison noted.
Citing I.R.I. data, Campbell said sales in measured channels for its wet soup decreased 1.1% in the 52 weeks ended April 27, while the category as a whole declined 0.6%. Campbell’s dollar share during the period dropped 0.3 percentage points.
“There’s been some share gains by some of the niche brands, and I think if you look as to why that is, there are some pockets of growth within the category around things like organic and health and wellness attributes, and obviously we’re looking at those things,” Ms. Morrison said. “We've got a pretty robust plan for soup for next year and some exciting things going on…”
Innovation has helped sustain segment performance, with good performance from the recently added pub-inspired Chunky soups and “phenomenal” results from more broth varieties. The products introduced in January are meeting expectations, Ms. Morrison said.
“Our goal remains to increase our competitiveness and profitably grow our core business,” Ms. Morrison said.
Net income in the third quarter at Campbell Soup was $184 million, equal to 58c per share on the common stock, up 2% from $181 million, or 57c per share, in the same period a year ago. Net sales for the third quarter were $1,970 million, up narrowly from $1,962 million.
Net sales for the U.S. Simple Meals segment rose 7% to $672 million during the quarter, reflecting favorable volume, mix and price offset by increased promotional spending. U.S. Soup sales remained comparable to a strong year-ago quarter, as double-digit growth in broth offset declines in condensed and ready-to-serve soups.
U.S. Sauces sales increased 25% from the year-ago quarter, reflecting the acquisition of Plum Organics and gains in Prego pasta sauces, new Campbell’s dinner sauces and Pace Mexican sauces.
“I feel that our Simple Meals business remained competitive in the third quarter, despite falling short of our top-line expectations in soup,” Ms. Morrison said.
Sales in the Global Baking and Snacking segment decreased 1% to $564 million during the quarter, as increased promotional spending and currency dragged down positive volume and mix and the acquisition of Kelsen Group. Sales of Pepperidge Farm products declined, with decreases in cookies and adult cracker varieties that were partly offset by gains in Goldfish snack crackers.
“We have reformulated and relaunched our adult savory crackers as Pepperidge Farm cracker chips and expect better performance going forward,” Ms. Morrison said.
For the U.S. Beverages segment, sales dropped 4% to $190 million.
“We were encouraged by the third-quarter performance of our V8 Red 100% vegetable juice, which has now delivered sales growth for four consecutive months,” Ms. Morrison said. “Our V8 energy drinks continued their strong growth trajectory. But V8 V-Fusion and V8 Splash declined.”
Bolthouse and Foodservice sales increased 4% to $358 million, driven by favorable volume and mix, with double-digit gains in premium refrigerated beverages and salad dressings and an increase in North America food service sales.
“Bolthouse Farms is launching its spring innovation suite of 47 new products, ranging from new stone fruit and root vegetable juices to delicious Greek yogurt salad dressings,” Ms. Morrison said. “We made a decision this year to make our first investments in Bolthouse Farms advertising, and we’re pleased with the market share, volume trends and brand awareness.”
For the first nine months of fiscal 2014, income increased 11% to $681 million, or $2.16 per share, from $616 million, or $1.94 per share. Net sales rose 1% to $6,416 million from $6,329 million.
The company has lowered its guidance for full-year sales growth to approximately 3%, based on a disappointing year-to-date performance.
