Campbell Soup Co. will trim its marketing budget in the next 12 months, putting new emphasis on distribution, merchandising and product innovations as the company seeks to revive its sluggish U.S. soups business, executives said Tuesday.
Chief Financial Officer Craig Owens characterized the marketing cutbacks as "pretty modest." Still, the move appears to be a change in course from fiscal 2012, when marketing got a chunk of $100 million of new investment the marketer plowed into brand-building, research and development and innovation for its U.S. soup and simple meals business. That investment, which applied to the year ending July 31, came as the company sought to move away from heavy discounting, which executives had said failed to lift sales volume as planned. But on Tuesday, CEO Denise Morrison told Wall Street analysts that "we over-corrected in the transition from trade spend to advertising and it didn't work. As a result, the increase spending did not generate anticipated consumption lift."
Campbell, the nation's 76th-largest advertiser, spent $504.9 million on advertising in calendar year 2011, according to the Ad Age DataCenter. On Tuesday, the company said 2012 sales would end up on the lower end of projections with growth of between 0% to 2%. Meanwhile, executives projected that 2013 sales would fall below the long-term target of 3% to 4% net sales growth.
While Campbell operates in a range of businesses, from beverages to global snacks, its overall performance has been dragged down by its core U.S. soups business, whose sales fell 3% in the quarter ending April 29 compared with the year-ago-quarter. In search of a turnaround, the company in the past year has sought to put more emphasis on taste and new products and less on sodium reduction. Also, under the leadership of Ms. Morrison, who took the helm about a year ago, Campbell has gotten more aggressive in seeking growth from its non-soup businesses. For instance, last month the company announced plans to acquire carrot and premium juice marketer Bolthouse Farms in a $1.55 million deal expected to close later this year.
On Tuesday, Ms. Morrison described the soup and simple meals business as "a powerful, valuable engine" that the company knows how to fix. But she added that "by itself, it cannot take us where we want to go." She described her vision for a "new Campbell" with growth coming from a baked snacks business with "huge upside," a "large and growing" beverage franchise, including V8, and new opportunities to expand into packaged fresh foods with the Bolthouse acquisition.
Even so, all eyes are still on the $2.7 billion North American soups and simple meals business, which the company has sought to revive with new products aimed at younger consumers. This year, about 50 new items will it shelves, including the previously announced Campbell's Go! Soup brand of microwavable pouches and Campbell Skillet Sauces. At the same time, the company is seeking to revive its $522 million Chunky brand with new varieties and a revival of its "Mama's Boys" campaign that this year will feature NFL star Victor Cruz as the brand seeks to recapture its "manly position," the company said.
The core Chunky brand has 19% share of the ready-to-serve wet soup category, but sales fell 14% in the year ending June 10, according to SymphonyIRI, which excludes Walmart.
"For a few years we lost sight of what our target consumer was really looking for, placing too much emphasis on things like lean meat protein and not focusing enough on taste and hardy ingredients," said Mark Alexander, president-Campbell North America, a longtime Campbell employee who took control of the division in January. Recently Chunky had been folded into the umbrella "It's Amazing What Soup Can Do" campaign, a joint effort by Omnicom Group's BBDO, New York, and WPP's Y&R, New York, which plugs its entire soup lineup.
While that effort is expected to continue, new products such as Campbell's Go! Soup will get dedicated advertising by Y&R. BBDO will handle the Skillet campaign. Indeed, executives said new products would get increased marketing, while they would cutting back on other marketing initiatives.
Also, Mr. Alexander said Campbell was taking a "more holistic marketing approach" that is "not just about trade promotion and advertising." He said the company would push "all the drivers of demand," including "compelling product positioning," while "executing respective merchandising and pricing strategies and bringing sufficient innovation and new news into the marketplace."