V8 advertising not “fresh” enough
Steve’s breakdown: Tropicana Farmstand fruit and vegetable juices are digging into V8s profits because they seem more fresh. We know Y&R has had this account for a while but maybe it’s time for a new approach. Try Doug Brand, Senior Brand Manager, V8
CAMDEN, NJ: Campbell Soup reported third-quarter results that beat Wall Street expectations as a colder winter and better ads helped boost soup sales, offsetting a decline in its V8 drinks.
The Camden-based company, which also makes Prego sauces and Pepperidge Farm cookies, has been trying to reinvigorate its namesake business with new flavors and packaging targeted at people in their 20s and 30s. The push comes as Campbell faces more competition from supermarkets that are offering fresh, hot soups in their take-out sections. Smaller players have been popping up on store shelves as well.
During the period, Campbell said sales for its U.S. Soup business rose 14 percent from a year ago, reflecting gains in all three categories: condensed soups, ready-to-serve soups and broths.
“Colder weather clearly helped soup sales,” CEO Denise Morrison said in a conference call with analysts, noting that the previous year’s winter was one of the warmest on record. But she added that “stronger execution,” including better promotions and NFL-themed ads featuring Victor Cruz of the New York Giants, also played a role.
New products, such as the Skillet dinner sauces that come in pouches, represented a tiny fraction of sales, with the company still working on getting more consistent distribution in stores.
Even as it works on improving the image of its soups, however, Campbell’s U.S. beverage business is also being plagued by a trend toward fresher foods. Sales in the unit, which includes its shelf-stable V8 juices, fell 5 percent during the period.
Craig Owens, the company’s chief financial officer, noted that the shelf-stable juice category has been “very weak.”
As with soups, the problem is that shelf-stable products that are sold in the center aisles of supermarkets don’t have the image of freshness. Campbell is also seeing more competition for that business.
Earlier this year, for example, PepsiCo Inc. introduced its Tropicana Farmstand fruit and vegetable juices that are sold in the refrigerated sections of grocery stores. The company has noted that Farmstand’s potential is far greater than V8 V-Fusion drinks because of that positioning as a fresher product.
During the call with analysts, Morrison expressed confidence that Campbell would be able to reverse declines in its beverage business by taking “a page from the playbook” it used for its soup business.
To diversify its stable of canned soups and jarred sauces, Campbell also recently purchased Bolthouse Farms, which makes premium juices, salad dressings and bagged carrots. That acquisition also contributed significantly to the increase in sales during the period.
For the quarter, the company said it earned $181 million, or 57 cents per share. That’s up from $177 million, or 55 cents per share, a year ago.
Revenue rose 15 percent to $2.09 billion.
Not including one-time restructuring charges, Campbell earned 62 cents per share.
Analysts on average expected a profit of 56 cents per share on revenue of $2.04 billion, according to FactSet.
The company now expects sales to grow at the high end of its 10 to 12 percent range. Adjusted earnings per share are expected to exceed the previous range of 3 percent to 5 percent.
Shares of Campbell Soup Co. fell $1.85, or 3.88 percent, to $45.78 in Monday trading.
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