Campbell Soup Healthy Profits
World’s Largest Soup Maker’s Stock Beats Wall Street Forecasts
May 25, 2007
Established in 1869, Campbell Soup Co. may benefit from a recent study by the British Medical Journal concluding that a low-sodium diet reduces the risk of cardiovascular diseases including heart attacks and stroke.
Most consumers ingest 3 times the daily quota of salt that the U.S. Institute of Medicine recommends, with 80% of dietary sodium added by food manufacturing plants and restaurant kitchens.
Showing great foresight, Campbell’s launched an assortment of lower-sodium soups just before average consumers are becoming more aware of the need to reduce their daily intake of salt.
Partly as a result of increased demand for low-sodium packaged foods around the world, Campbell’s sales for the first 9 months of 2007 rose 7% to US$6.3 billion.
Campbell’s Sales by Business Unit
The company’s International Soup & Sauces business unit had the strongest revenue growth, up 10% to $1.1 billion. This segment includes soup, sauces and beverages sold in Europe, Mexico, South America, Asia-Pacific plus Canadian retail operations. Revenue increases for this segment are also due to currency gains from Europe, as well as the introduction of new flavours of wet soups in France.
U.S. Soup, Sauces and Beverages, Campbell’s largest business unit, saw its sales increase 7% to $2.9 billion. V8 vegetable juice drinks and lower-sodium soups have been the company’s top performing products in 2007. Ready-to-serve soups including Campbell’s Chunky brands enjoyed double-digit increases as a result of accelerated advertising, as did Swanson’s broth sales. Typically sold in microwaveable bowls and cups, Campbell’s convenience soups show consistent sales growth. Campbell’s has also introduced gravity-fed shelf displays into 16,000 retail outlets in which soup cans automatically roll forward so that consumers always see the Campbell’s brand label at forefront of a shelf.
Led by double-digit growth in sales of Goldfish crackers, the company’s Baking and Snacking division grew its worldwide revenues by 5% to $1.4 billion. Increased consumer demand for whole grain breads were behind higher sales of Pepperidge Farm bakery products in the U.S. Arnotts biscuits and salty snacks continue to be popular in Australia.
Godiva Chocolatier products drove a 4% increase in global revenues to $917 million for Campbell’s Other Businesses segment. Godiva chocolates enjoyed double-digit gains in Asia, as Internet sales of Godiva chocolates.
Campbell’s International Sales
Revenues from operations outside the U.S. generated 30% of the company’s total revenues. Much of Campbell’s international sales come from Australia and the Asia-Pacific region (13% of total revenues) and Europe (9%). Around the globe, Campbell’s major sales push is to provide products that appeal to consumers’ interest in healthier convenience foods such as its lower-sodium soups.
According to Douglas R. Conant, Campbell’s president and chief executive officer, the company plans to continue its healthy sales growth by expanding its packaged convenience food brands into Russia and China.
Campbell’s Profit Growth
So far in 2007, some 80% of Campbell’s earnings are derived in the U.S. partly due to brand-name loyalty among American consumers.
Despite these increased expenses, Conant was so emboldened by Campbell’s strong performance that he raised the company’s earnings per share estimate to increase about 12% to 14% from last year.
Should profitability at Campbell’s global operations continue to improve, Campbell’s stock (CPB on NYSE) price of $39 should continue to move closer to its 52-week high of $42.65.
Sources For This Article
This article presents independent calculations and insights based on data drawn from source material on campbellsoup.com. This article focuses on Campbell's 2006 annual report and its Q3 2007 earnings release. As well, insights on dietary sodium were based on Bill Jeffery & Aileen Lo’s May 24, 2007 Toronto Star article "Salt a major health threat".
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