CAMDEN, NJ. โ In a dynamic market where snack foods have long been a consumer favorite, Campbell Soup Co. faces the challenge of navigating recent pressures in the sector.
Despite these pressures, the company highlighted the resilience of its power brands, constituting two-thirds of the business, which continue to perform well in the face of changing consumer dynamics, in a Dec. 6 earnings call with investors.
Mark A. Clouse, chief executive officer, said the company is fueling its snacks growth with its direct-store delivery (DSD) initiatives.
Consumption data reflects a deceleration of volume trends across snack categories.
โThereโs a bit more bifurcation within snacking,โ Mr. Clouse clarified. โI think there are places where we are seeing great pressure, especially segments that are a bit more commoditized โฆ What you are seeing is a step-down on a couple of areas, both at the partner and contract brands.โ
Last year at this time, some of the power brands were growing at a robust 20%, Mr. Clouse said. Contextually, the two-year picture still indicates double-digit growth.
Campbell Soup’s DSD initiative will take center stage as the company streamlines its logistics and warehouse network. Mr. Clouse detailed the three key elements of this transformative initiative, emphasizing the creation of unified snacking DSD logistics.
The company will create one snacking DSD logistics and warehouse network to eliminate redundancies and simplify its processes. Next, the company plans to โmodernize and harmonizeโ its tools, using available technologies to facilitate retailer linkage and in-store insights. In its third prong in DSD, it will focus on routes โ including several pilot programs Mr. Clouse promised to reveal by the end of the second fiscal quarter.
In particular, the Lance and Late July brands continue to show growth in comparison to the wider portfolio. Mr. Clouse attributed the respective dynamics of the brands to consumer dynamics.
โLate July is a premium-added value brand,โ he said. โWeโre seeing (these) brands doing extremely well โฆ The factor that underpins this is a lot of the decline weโre experiencing, a significant outsized contribution, is coming from low-income households, which index on snacking only at about 20%.โ
As such, the low-income household demographic represents a larger portion of declines, as compared to mid- and higher-income households.
He acknowledged the need for vigilance and adaptability.
โI still feel very bullish,โ he said. โWeโre going to have to stay very vigilant on what consumers are looking for and making sure that weโre positioned well.โ
