Campbell Soup to sell international and fresh food businesses

Campbell Soup Company is to sell its international businesses and fresh refrigerated-foods unit, following a several month-long strategic review and pressure from hedge fund investors to sell the whole company.

Speculation has been mounting over whether or not the long-established US snacks and soup company will be put up for sale amid a drawn-out period of falling sales.

It is not clear if the plan will appease activist investor Dan Loeb, whose Third Point hedge fund announced a 5.65 percent stake on August 9 and immediately pressed for a sale of the entire company to a competitor as “the only justifiable outcome,” according to Reuters

Campbell has engaged Goldman Sachs and Centerview Partners to commence a process to divest its Campbell International and Campbell Fresh businesses in a manner that maximises value.

  • Campbell International consists of Arnott’s and the Kelsen Group, along with the company’s manufacturing operations in Indonesia and Malaysia and its businesses in Hong Kong and Japan.
  • Campbell Fresh includes Bolthouse Farms, Garden Fresh Gourmet and the company’s refrigerated soup business.
  • Fiscal 2018 net sales of these businesses totaled approximately $2.1-billion. 

Campbell’s interim President and CEO Keith McLoughlin said: “Campbell’s Board of Directors considered a full slate of strategic options, including optimizing the portfolio, divesting businesses, splitting the company, and pursuing a sale.

“The Board concluded that, at this time, the best path forward to drive shareholder value is to focus the company on two core businesses in the North American market with a proven consumer packaged goods business model.

“Importantly, the Board remains open and committed to evaluating all strategic options to enhance value in the future.

“Our plan will build upon our existing strengths. Our new leadership team will concentrate on significantly improving operational discipline through a rigorous management model that aligns the enterprise from strategy through execution.

“We are moving forward with a sense of urgency to complete these changes in fiscal 2019, setting the foundation for sustainable, profitable growth in fiscal 2020 and beyond.”

The soup company also says that as part of the review, it is raising its overall cost savings target to $945-million by fiscal 2022. 

Building a focused North American company

Campbell says it will continue to provide consumers with “great tasting, high-quality real food.”

Across the portfolio, the company’s brands will leverage consumer insights and trends to drive relevance, including health and well-being, snacking and convenience.

Each of Campbell’s brands will be managed within a focused and disciplined framework of two differentiated portfolio roles:

Drive Profitable Growth – These powerful and exciting brands will be managed to grow disproportionately relative to the categories in which they compete.

These include leading brands such as Cape Cod, Goldfish, Kettle Brand, Lance, Late July, Pace, Pacific, Pepperidge Farm Farmhouse and Milano cookies, Prego and Snyder’s of Hanover.

Investments in innovation and consumer engagement will enable these brands to leverage evolving consumer tastes and trends.

Maximize Margin & Cash Flow – These at-scale brands will be managed to generate consistent profit and cash flow. These include leading brands such as Campbell’s Soup, Pepperidge Farm fresh bakery, SpaghettiOs and V8.

These brands will be managed with disciplined focus and aligned investments to support their strong market positions, to optimize operating margins and cash flow and to fulfill their equally important role in Campbell’s portfolio.

Campbell has been grappling with waning demand for its classic soup as consumers opt for healthier options. The company’s shares have fallen 20 percent over the past year, according to CNBC

In May, CEO Denise Morrison retired immediately after the company reported flat sales. This came as shares in Campbell Soup – which late last year acquired the Snyder’s-Lance snack company in a $4.87-billion deal said to be the soup company’s largest ever in its 148-year history – were down 11 percent at $34.85 in early trading.

Morrison not wrong

Despite Campbell’s decision to rid itself of the fresh business — which was operating at a loss — Morrison was not wrong in her core hypothesis: The way consumers are eating has changed and continues to evolve.

The company’s decision instead should be viewed as an indication of how hard it is to get fresh food right.

“I think it’s pretty clear that consumers are looking for fresher foods,” Credit Suisse analyst Robert Moskow says, “but from a traditional packaged food perspective, these big companies have had a lot trouble figuring out how to capitalise on it.”

In fresh food, the products are more commoditised, there are few well-known brands, the supply chains are more complex, and the margins are lower than packaged goods.

Source:, Reuters, Bloomberg

Related reading:

Campbell Soup CEO retires abruptly after three-year slump

Campbell, Hershey bet that salty snacks will reignite sales

Campbell’s new acquisition represents overall industry M&A trend

Taking Campbell’s on a fresh food buying spree

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