Campbell Soup Co. sees more consumers switch to private label in condensed soup and broths
On a yearly basis (12 months ended July 31, 2022), net sales increased 1% to $8.6bn while volumes fell 6% compared to FY21.
While most of its key brands including Campbell’s, Campbell’s Chunky, and Pacific Foods, remained at or slightly above FY19 market share levels, the company’s soup portfolio (while still growing) has lost some share to private label brands in the past year as more consumers exhibited trade down behavior.
Soups: ‘Chunky continues to be a star’
In Wet Soup (excluding condensed soup and broth), Campbell holds a 57% category share as of FY22 and grew dollar consumption by 8% compared to its competitors, who grew at a rate of 12%.
Looking at Condensed Soup only, Campbell still holds the lion’s share of the market with an 83% share. But the company is growing at a slower rate of 9% compared to the rest of the category which grew by 12% in FY22 vs. the prior year.
Speaking on the Q4 2022 and FY22 earnings call on Thursday, Campbell CEO Mark Clouse said, “Although never happy with share loss in a category where we have a significant share leadership position, the strength of the category translates to compelling growth on a very important part of our portfolio.”
Addressing which consumers are trading down and why, Clouse said, “We have been very focused on which consumers are trading down within soup and they tend to be our baby boomer consumers, who historically are a bit more sensitive to price gaps and also very likely to trade back over time. The good news is most of our new millennial consumers in soup have been highly brand loyal.”
A few brands within its soup portfolio were able to defend and grow share, however.
“In the ready-to-serve business, Chunky continues to be a star, with dollar share up 1.3 points and consumption up 20.3% versus the prior year,” said Clouse, adding that compared to 2019, the brand has gained 1 million new buyers.
Because of the success of the Chunky products, Campbell will be revitalizing the brand for new generations and leveraging its partnerships with the NFL and EA Madden in the coming fiscal year.
“We are also expanding our new Chunky spicy lineup following the insight that nearly two-thirds of consumers agree that savory foods taste better with spice,” added Clouse.
For its Pacific Foods soup brand, the company is expanding its portfolio of organic ready-to-serve soups and plant-based chilis, which launched in Q4 2022.
Swanson broths: 'In fiscal 2023, we will be modernizing our packaging and improving our ingredients'
In broth, pressure from private label competitors has hit harder and as a result, Campbell is stepping up innovation for its Swanson brand to further differentiate it from private label offerings including an improved formulation.
“We have got a quality improvement that now tests superior to private label,” he said.
“In fiscal 2023, we will be modernizing our packaging and improving our ingredients to drive the taste superiority, quality, and value of our Swanson brand. We will also be launching Swanson Quick Cups, which is a convenient one cup serving a broth, which fits the majority of broth recipe usage occasions.”
Sauces and snacks
In sauces, Prego remained the #1 share leader in the Italian category for the 39th consecutive month delivering consumption growth of 12.4% compared to the prior year and repeat rates up 4% vs. three years ago.
Pace salsa regained momentum after material shortages earlier in the year, gaining 0.4% in dollar share, and growing consumption by 14.5% vs. last year.
Turning to snacks, Clouse highlighted the firm's strength in the salty snacks category which registered double-digit consumption growth across power brands Kettle, Cape Cod, Snack Factory Pretzel Crips, Snyder’s, and Pepperidge Farm Goldfish.
“We were the only major player who grew unit share in the fourth quarter as we have worked hard to keep price and promotion balanced as supply recovered,” said Clouse.
Fiscal year 2023, what’s in store?
With an action plan in place to continue strengthening many of its core brands through new product innovation and a recovering supply chain, Campbell is entering the fiscal 2023 year in an advantaged position, commented EVP and CFO Mick Beekhuizen.
“While we expect the current macro challenges to continue, our portfolio of brands is well positioned to meet consumer demand. Our previous pricing actions are now fully in place, with expected price elasticities in fiscal 2023 to be slightly above fiscal 2022 levels. We expect positive top-line growth for the year in both divisions, partly driven by an increase in our brand investments, supported by an improved supply chain."