Higher-than-expected input costs, coupled with supply chain pressures, led to lower earnings at Campbell Soup Co. in the first half of fiscal 2015. But the company’s top executive said she believes a focus on fewer, bigger innovation platforms across Campbell’s portfolio may spark a rebound in the second half of the year.
“We believe this approach will have a more significant impact on the top line and reduce complexity in our supply chain,” Denise Morrison, president and chief executive officer, said during a Feb. 25 conference call with analysts. “In the back half, we will continue to ramp up our health and well-being platform across our business.”
That platform includes new Campbell’s Organic soup and the continued expansion of Healthy Request soups. Campbell also will increase the distribution of new V8 Veggie Blend juices for affordable mainstream juicing and V8 protein bars and shakes, which are expanding the brand into adult on-the-go nutrition.
In the packaged fresh category, Ms. Morrison said the company will launch 1915 by Bolthouse Farms. The new cold-pressed ultra-premium organic juice will debut this spring. The company also has plans to expand Bolthouse Farms Kids fresh beverages, veggie and fruit snack tubes, and carrot veggie snackers in the produce section, and will have spring flavor innovations in place for super premium fresh beverages, including a blueberry banana almond milk variety and new varieties of salad dressings.
A range of premium and convenience platforms is planned for the company’s Simple Meals category, including the expansion of the Dinner Sauces line with the addition of Grilling Sauces. Campbell also is preparing for the launch of Campbell’s Fresh Brewed Soup in K-Cups. The joint development project with Keurig Green Mountain first was announced in 2013. Prego and Pace ready meals in convenient, on-the-go microwavable pouches also are on tap for the second half of 2015, Ms. Morrison said.
The shift in Campbell’s approach to its innovation platform was a focal point of several analysts’ questions following Ms. Morrison’s prepared remarks. Asked about the strategic thinking behind the move, Ms. Morrison reflected on how far the company has come in recent years.
“Let me take you back three-and-a-half years, where we had no innovation pipeline on our soup and simple meals business, and our sustainable innovation was driving about 5% of sales from new products on a rolling (3%),” she said. “Fast forward to today where we have built a pretty robust innovation pipeline in that business and our sales from … new products introduced in the last three years now are about 11%. We would like to get them to between 13% to 15%. So, we still have more work to do, but we are totally in a different place. That said, we have been able to go back and look at, literally, the plethora of activity in that space. And what we have realized is, if we can cluster our innovation into fewer bigger platforms that have scale in the marketplace and can have a bigger impact, that would be a better program that we are now prepared to run.”
Ms. Morrison also was asked whether innovation would be focused on the center of the store or positioned within the perimeter. She said both, adding the important thing to keep in perspective with any innovation program is that there are going to be hits and misses.
“The trick is to figure out which ones are the winners and put your money and investment behind those and figure out which ones are not and pull them away,” she said. “I believe we have been running that kind of program.”
Net earnings attributable to Campbell Soup in the second quarter ended Feb. 1 were $207 million, or 66c per share, down 36% from $325 million, or 74c per share, in the same quarter a year ago. Sales were $2,234 million, down 2% from $2,281 million.
For the six months, net earnings were $441 million, or $1.40 per share, down 11% from $497 million, or $1.57 per share, in the same period a year ago. Sales increased 1% to $4,489 million from $4,446 million.