Campbell reorganizes its portfolio, cuts costs to drive growth
“We are embarking now on watershed changes in the structure of our core enterprise … to unlock the value of our assets, eliminate key barriers to growth and drive the execution of our duel mandate,” which includes strengthening the core business and expanding into faster growing spaces, President and Chief Executive Officer Denise Morrison said at the Consumer Analyst Group of New York’s annual meeting.
She explained that the new structure will include three divisions based on broad product categories, rather than brands and geographies. The largest division, America’s Simple Meals and Beverages, will include iconic shelf-stable products, Plum Organics and beverage units in North and Latin America. The second largest will combine the company’s biscuit and snacking units and the smallest but fastest growing division will be the Packaged Fresh segment, including Bolthouse Farms and the retail refrigerated soup business.
“This reorganization will be a game-changing development” and “is the next logical step toward our goals of shifting our center of gravity for our business” away from the center to the more quickly growing perimeter of the grocery store, she said.
The company’s Packaged Fresh division perhaps holds the most potential. Since Campbell gained a foothold in the store perimeter with the acquisition of Bolthouse Farms, it has been exploring ways to expand beyond the brand’s fresh salad dressings and existing juices into packaged fresh foods for children, Morrison said.
“We know we can accelerate our growth in branded Packaged Fresh by building scale in the perimeter beyond the produce section, for example, with soups, sauces and sides in the deli section and with next generation products in other adjacent perimeter categories,” she said.
An early launch out of the gate for the division will be a new line of ultra-premium cold press organic beverages branded 1915, which will hit store shelves in the spring, Morrison announced.
To capitalize on the division’s full potential, Campbell has expanded production capability and warehouse capacity, she added, noting: “There will be more investment in the Packaged Fresh area.”
Center store still holds potential
Campbell also sees significant “areas of opportunity for appreciable growth” in the center store and its Simple Meals and Beverages segment “despite all the challenges afflicting shelf stable categories,” Morrison said.
For example, she noted, the “impressive growth trajectory of Plum Organics” and the success of Campbell’s new line of dinner sauces. Other innovation in this category will center on taste, quality and convenience, which will respond to consumer interest in food to promote health and wellness, she added.
This segment also will grow through promotion and efficient marketing investments, and through expanded distribution in growth channels, such as immediate consumption and club, Morrison said.
Cost-savings
The new structure also will provide substantial cost-savings in part by creating a “leaner and flatter management structure,” said Morrison, who suggested additional layoffs may occur as the company eliminates excess layers of management.
The changes also will streamline how resources and assets are allocated, resulting in cost-savings, she said.
The cost-cutting and restructuring come a week after Campbell lowered its outlook for the year ending in August. It now expects earnings per share to reach $2.32-$2.38 for fiscal 2015 rather than its previously anticipated range of $2.42-$2.50. Revenue also will flux up or down by about 1% to reach about $8.19 billion to $8.35 billion for the year, the company said.
