Deep Discounting Slows PL Soup Sales, Campbell Says

February 21, 2011
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Campbell Soup Company, the world’s largest soup maker, says aggressive promotions on canned soup failed to increase its soup dollar sales, while also negatively impacting rival private label brands. Others say the disappointing results announced in the company’s latest quarterly earnings call result from deep discounting by a rival brand, Progresso, owned by General Mills, which posted a 30 percent increase in sales volume.
Campbell reported earnings of $239 million, or 71 cents a share, in the quarter, down from $259 million, or 74 cents a share, a year earlier. Sales in the period, which ended Jan. 30, the second quarter of Campbell’s fiscal year, fell to $2.13 billion from $2.15 billion.
Based on its review of IRI Panel Data and Campbell internal estimates, B. Owens, Campbell chief administrative officer, CFO and SVP, says the overall soup category declined in dollar sales by 3.4 percent in the past 52 weeks. Campbell soup sales declined 4.1 percent and all other branded players declined 1.6 percent. Private label dollar sales declines were 3.2 percent, Campbell says.
At the same time, Owens points out, Campbell and other branded players actually increased volumes in the soup category, but the volume gains were not sufficient ultimately to translate into increased dollar sales.
“Trends in both dollars and volumes were stronger in the most recent 13 weeks according to the IRI data and Campbell estimates,” says Owens. “Category dollar sales rose 1.7 percent in the quarter and volume growth was 5.9 percent. Campbell benefited, showing growth in both dollars and volume for the quarter. Campbell's dollar share in wet soup for the past 52 weeks was 62.9 percent, down 50 basis points.”
 “The overall competitive environment remains challenging throughout the food industry, particularly in the U.S.,” Campbell CEO Douglas Conant, says. Campbell says it planned to ease up on promotions in the second half of its fiscal year and would instead focus on advertising and other strategies to strengthen its brand.

Another important category, beverages, performed well for the half, Campbell says. Sales rose five percent on solid volume gains partly offset by the impact of higher promotional spending. Sauce sales declined for the first six months, reflecting lower sales in Pace Mexican sauces, negatively impacted by private label activity. 

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