Campbell Soup’s Q4 Earnings Disappoint: Consumer Preferences to Blame

Close-Up of a Sealed Campbell's Soup Can on Red Background
iStock.com/VelhoJunior

Campbell Soup Company Latest Victim of Changing Tastes

Campbell Soup Company recently announced its fourth-quarter and full-year results, which gravely disappointed investors. Campbell stock faced a sell-off following the earnings release.

Campbell Soup shared that net sales fell by one percent through the latest quarter, compared to the same quarter a year ago. Likewise, net sales for the full fiscal-year 2017 also witnessed a drop of one percent compared to the previous full fiscal year.

In addition, the canned soup and snacks manufacturer lowered its sales and earnings guidance for the 2018 fiscal year, indicating that sales, and consequently earnings, could further drop in the coming quarters.

CEO Denise Morrison said that achieving sales growth has become increasingly challenging in the evolving retail industry, as it trends toward digital retail. Morrison also blamed dipping sales on shifting consumer tastes.

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“The operating environment for the packaged foods industry remains challenging due to shifting demographics, changing consumer preferences for food, the adoption of new shopping behaviors and the dynamic retailer landscape,” said Morrison.

The company reported softer-than-expected sales of biscuits and snacks. Likewise, sales of packaged meals and beverages also failed to impress. Meanwhile, items in its “Campbell Fresh” division saw better sales.

Campbell’s sales stats line up with the general market trends that are now obvious in the American consumer market. The younger generation of American Millennials—a primary target market for snacks and packaged meals—is shifting toward healthier food options, compared to the preceding generation.

Millennials, who are touted as the “avocado toast” generation, may not make as much money as their Baby Boomer parents did, yet Millennials are choosing to buy fresh and/or organic foods, and preferring to cook at home—or otherwise grabbing on-the-go salad bowls and healthier snacks.

The trend is starting to hurt packaged food companies across the board. Earlier this month, we saw multinational packaged foods company TreeHouse Foods Inc. shutting down factories and laying off hundreds of workers as it struggled with declining sales.

Likewise, nearly all big food processing companies that directly or indirectly compete with Campbell—like Kellogg Company, Conagra Brands Inc, and Archer Daniels Midland Company—have all announced either job cuts or factory closures in recent months, as part of cost-cutting moves to prevent their bottom-line numbers from slipping.

We hate to say it, but this could be just the beginning. For these packaged foods companies, the worst may be yet to come.

Source

Campbell Reports Fourth-Quarter and Full-Year Results,” Campbell Soup Company, August 31, 2017.

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