Despite a spate of tough times, it is not wise to bet against major CPG companies.
Not so good.
That was the results of The Campbell Soup Co.’s earnings released in mid-November. In fact, the Camden, N.J.-based company posted a 21% decrease in adjusted earnings for the quarter compared to the same time period in 2012. Net sales fell by about 2% over the same time span.
Company officials said that sales and profits were hit by a late Thanksgiving holiday and higher marketing expense, plus a recall of a product. They also mentioned that weakness in its core business also hit the bottom line.
All in all, not a very good financial report from one of the country’s largest and most powerful consumer packaged goods companies. It shows that even with products like its well-known soups, Pepperidge Farm, V8 beverages and Swanson, things can get pretty sticky when consumers’ tastes change faster than the products on the market.
But I am not quite ready to bet against Campbell’s and the other major CPG companies, some posting similar financial results recently, over the long haul. To the contrary, I actually believe that sometimes a jolt like this is just what is needed to get things back on the right track and to get corporate executives to see that they have to move further and faster to change—or at least alter—their business plans.
This trend started more than a decade ago, but seems to be picking up steam. Many consumers do not seem to have any interest anymore in products that come in a tin. They are also looking at the label a bit closer these days, studying such things as fat content, sodium and cholesterol.
So what should Campbell Soup and its CPG brethren do? The answer is to keep doing what they have been doing, only a little faster. Campbell purchased Bolthouse Farms, a cutting edge maker of juices, salad dressings and baby carrots, in 2009. This is a great move because it will eventually help re-work and re-vitalize the parent company with new products and new people with new ideas. A competitor, Kellogg, had the foresight to purchase Kashi in 2000 and then did the right thing: they left the company alone to develop its own products. At the same time Kellogg is also introducing alternatives to its cereal brands as more consumers look for convenience with breakfast.
And how should retailers react? While suppliers must move quickly to come up with options for consumers, retailers should show a bit of patience with their vendors. In the end, it will all play out right.
Seth Mendelson can be reached at 646-274-3507, or firstname.lastname@example.org.