The Campbell Soup Co. is focusing on the center of the retail store in North America, according to a new strategic plan released Aug. 30. The company plans to divest its Campbell International and Campbell Fresh business units. Proceeds from the divestitures will be used to reduce debt.
The announcement follows a strategic portfolio review the company initiated earlier this year. Poor financial performance and pressure from some investors prompted the review.
“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,” said Keith McLoughlin, interim president and chief executive officer. “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.”
Mr. McLoughlin set a timeline of completing the changes during fiscal 2019.
Brands that will remain a part of the company’s portfolio include Campbell’s Soup, Goldfish, Kettle Brand, Pepperidge Farm, Prego, V8 and others.
Campbell Soup has engaged Goldman Sachs and Centerview Partners to commence a process to divest its Campbell International and Campbell Fresh businesses. 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 the businesses totaled approximately $2.1 billion.
The reduced size of the company’s portfolio will allow management to achieve additional savings of approximately $150 million. Management plans to achieve the additional savings by streamlining its organizational structure, expanding its zero-based budgeting efforts and continuing to optimize its manufacturing network.
The savings are in addition to the company’s prior target of $500 million and the previously announced $295 million in target synergies and run-rate cost savings from Campbell Soup’s integration of Snyder’s-Lance. Combined, the programs will bring Campbell Soup’s total cost savings target to $945 million by the end of fiscal 2022.
“Our plan will build upon our existing strengths,” Mr. McLoughlin said. “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.”