Campbell Soup Vows to Hold Line on Marketing

Category Giant Sticks to Plans to Boost Budget by $100 Million

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Despite a weakening economy, Campbell Soup Co. is not backing off its plans to plow more money into innovation and marketing and cut back on heavy discounting.

The company, which is trying to reverse sluggish soup trends by putting a new focus on taste, on a quarterly earnings call Friday reaffirmed its plans to put an additional $100 million into marketing and innovation in fiscal year 2012, which began Aug. 1. "The recovery has not progressed at the pace or intensity consumers had hoped for," said CEO Denise Morrison. But "in this environment it is critical for us to deliver meaningful innovation focused on consumer needs and to differentiate our brands through effective marketing that emphasizes our products' tangible benefits and value relative to the competition."

Campbell, like other food marketers, had been engaging in heavy promotional activity, but found that discounting has failed to raise volume as planned. For the fiscal year ending July 31, Campbell sales across all of its businesses increased by just 1%, while its U.S. simple meals sales -- which include soup -- dropped by 6%, the company reported. Net income for the year dropped 5% to $805 million, and fourth-quarter net earnings fell to $100 million from $113 million.

While soup sales have sagged, the company's global snacking and baking division, which includes Pepperidge Farm, has surged, with sales up 9% for the year and 17% in the fourth quarter compared with a year ago, fueled in part by gains in the Goldfish brand snack crackers, the company said.

But the company's hopes for a full turnaround rest on its ability to lift its flagship soup business. To that end, Campbell plans to reformulate soups to focus on taste, moving away from the sodium-reduction strategy it had been pushing. At the same time, Campbell earlier this year began pulling back on heavy promotions, while also raising prices to deal with rising commodity inflation. The trick now is to convince consumers to pay more for soup, even as the economy struggles, as evidenced by today's weak jobs report.

"I think there will be consumers that will continue to shop the category for price and then there will be consumers that continue to shop the category for the benefits offered for the price paid," said Ms. Morrison, presiding over her first earnings call since taking over as CEO on Aug. 1. "And we intend through our marketing to communicate our value proposition to the consumer in a much bigger way. We believe that 's a healthier way to drive the usage of our brands."

The company plans to continue its "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. New executions of the campaign are in the works, including ads expected to debut Monday.

On the call, Ms. Morrison acknowledged that soup is competing more with other convenient meals, such as frozen foods, and that the company's advertising must account for this. "We're still in the throes of developing our advertising campaign for next year," she said. "But I do believe that everything we do now will be in the lens of a broader competitive set within simple meals and recognizing that the consumer does make those choices, and we want to compel them to choose Campbell's."

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