BRIEF
Campbell Soup CEO abruptly leaves, company plans strategic review of portfolio
Dive Brief:
- Campbell Soup said Friday morning that Denise Morrison, CEO since 2011, abruptly decided to retire. She will be replaced by Keith McLoughlin, who joined the company's board in 2016, as CEO on an interim basis.
- Anthony DiSilvestro, the company's CFO, said the maker of V8, Pepperidge Farm, Pop Secret and its iconic soups would conduct a strategic review of its portfolio in an effort "to improve our operating performance and create long-term shareholder value." He said the company plans to discuss the outcome of the review in late August when it reports fourth-quarter earnings.
- DiSilvestro also said that based on the company's third-quarter results, outlook for the year and a "difficult environment," the company is cutting its earnings guidance for its 2018 fiscal year. Campbell Soup now sees adjusted earnings per share, excluding the purchase of the Snyder’s-Lance acquisition, of down 3% to up 1% compared to an increase of between 2% and 4%.
Dive Insight:
Campbell Soup did not give a reason for Morrison’s sudden departure, but it’s possible that the company wanted a new executive to oversee its ever-growing portfolio and improve operations that have struggled in recent years. Investors have grown increasingly frustrated with the soup maker’s stock price, which has fallen 42% during the last year — from nearly $60 last May to below $35 on Friday. Reuters reported that Morrison would remain on Campbell Soup’s board.
McLoughlin, who is taking over the top job on an interim basis, is the former CEO of appliance maker Electrolux.
“Our company has clearly faced challenges, some of those are external factors that are impacting our industry and others stem from our execution” McLoughlin, 61, told analysts on the company’s earnings call. “As a board member and interim CEO, these results are unsatisfactory and disappointing.”
As part of its strategic view, McLoughlin said the company could ultimately decide to sell some of its brands.
“We must take a fresh look at our strategy, at our operations, and our portfolio and do so with urgency,” he said. “We will undergo a thorough and critical review of all aspects of our strategic and operating plans including the composition of our entire portfolio. … Everything is on the table. There are not sacred cows.”
During her tenure, Morrison has overhauled the company’s portfolio to minimize its dependence on processed foods by boosting its focus on fresher and organic products, and significantly increasing its dependence on snacking. While it appears to be better aligning itself with the marketplace, the moves have not been enough to stop a slide in sales and the company continues to be struggle to stabilize its soup business.
Campbell Soup on Friday posted a loss of $393 million on sales of $2.13 billion during its third quarter ended April 29, compared with a profit of $176 million a year ago. The loss was due largely to a $647 million charge for its Campbell Fresh division.
The company continued to struggle in its soup division. Excluding benefits from the acquisition of Pacific Foods, sales of U.S. soup decreased 1% due to declines in condensed soups, partly offset by gains in broth and ready-to-serve soups.
Since 2012, Campbell Soup has purchased Bolthouse Farms, Plum Organics, Garden Fresh Gourmet and Pacific Foods. But its biggest move came in March when the company spent $4.87 billion to acquire Snyder’s-Lance, the manufacturer of popular snack brands such as Pop Secret, Kettle, Cape Cod and Emerald. The purchase, the largest in the company’s nearly 150-year old history, lowered its dependence on soup to 27% of sales and increased its dependence on the all-important snacks segment to roughly 50%.
Big food manufacturers across the industry are grappling with rapidly shifting consumer trends as shoppers move away from processed foods toward items viewed as fresher and better for you. At the same time, consumers are snacking more than ever and increasingly looking for products that mesh with their on-the-go lifestyle. Despite efforts to overhaul their portfolio internally and through M&A, Campbell Soup and other companies have struggled to keep pace.
While it’s too soon to gauge the success of the Snyder’s-Lance deal, some analysts have speculated that Campbell Soup paid too much for the company. Campbell Soup also has faced challenges integrating some of its prior deals. Bolthouse has faced weather challenges and a recall, while Garden Fresh has struggled to generate consumer interest beyond its core audience in the Midwest.
Brittany Weissman, an analyst at Edward Jones, told Food Dive in February that the Snyder's-Lance would position Campbell Soup into faster-growing areas. Still, she expressed some concerns over the company’s recent deals.
"It just seems to be one challenge or hiccup after another and so that's led people to view it as, can they execute?" Weissman said. "There is a general frustration. People will very much will believe it when they see it."
It’s uncertain how Morrison’s departure will affect Campbell Soup’s ability to integrate Snyder’s-Lance, but the timing is less than ideal for such a large and potentially transformational investment. The company announced in April a sweeping restructuring designed to allow the food manufacturer to improve its focus on its core soup and snacks divisions, and increase its presence in health and well-being. It also promoted Luca Mignini to COO.
Mignini, who joined Campbell Soup in 2013, told Food Dive last month that he will focus initially on maintaining momentum in its snacks portfolio, integrating the Snyder’s-Lance and Pacific Foods deals, and working to stabilize its U.S. soup division, which remains a valuable part of the company, despite its recent struggles. He could be a possible successor to Morrison given his focus on snacks and soups, responsible for the lion’s share of sales at the company, and his position as COO.
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