Speaking on the firm’s Q3 earnings call, Clouse cited four trends he believed would continue to shape the food landscape for the immediate future:
#1: “What we call quick scratch cooking, simple ingredients assembled for a great tasting meal will continue. We expect this will be sustained due to a slow return to away-from-home occasions, growing cooking skills, and a continued desire for low-cost meal solutions…
#2: “We expect consumer online activities both in terms of home delivery and click & collect to accelerate…
#3: “The relevance of certain center-store categories like soup will likely increase and require more in-store inventory, with perhaps a more limited assortment to optimize shelf sets for in-store and online click & collect demand.
#4: “Value will continue to play an important role as we anticipate the impact COVID will have on the economy…
‘Consumers have gravitated to our brands because of the comfort they bring’
All four trends “line up very well with our portfolio and position us well for the immediate future,” said Clouse, who said Campbell Soup had experienced a rise in demand across its portfolio in the latest quarter (ending April 26) “as consumers sought food that delivered quality, value and comfort, all attributes that match our brands very well.”
He added: “Consumers have gravitated to our brands because of the comfort they bring. Think of tomato soup paired with grilled cheese or family spaghetti night with Prego pasta sauce or the fun of sharing SpaghettiOs with your kids. All of them have seen significant consumption gains during the crisis.”
Pandemic has driven significant increase in new customers and strong repeat purchase rates
Critically, said Clouse, Campbell Soup had attracted new consumers during the pandemic, giving it access to “millions of buyers who had not purchased our brands in the prior 52 weeks… As you might imagine, many of the households are younger and represent significant incremental growth for our brands.”
Campbell's soup's household penetration increased nearly 10 percentage points versus the same quarter last year, he said: “Perhaps most exciting is the repeat rates we are seeing for these new households and the positive engagement with consumers we are experiencing in social and digital platforms.”
The focus now is on retaining these new customers by increasing marketing investments with a focus on helpful recipe ideas targeting younger households such as how to make risotto with tomato soup, he added, noting that while the figures reflected some early pantry loading, “We did see strong consumer pull-through driven by increased usage and new eating patterns.”
Lunchtime: ‘I think people will maintain a level of remote working’
While arguably a big chunk of the growth in soups reflects the fact that millions of Americans have spent the last few weeks eating lunch at home, the extra business won’t disappear overnight as people return to work, said Clouse.
“I think there will be a slower migration to away from home. I think they will maintain a level of remote working, where lunches, maybe virtual schooling in some cases, where our products will continue to be highly relevant, and that, that behavior I think will continue.”
As household budgets tighten, meanwhile, “Our products, historically speaking, have been highly relevant in those moments of recession or economic pressure,” he noted.
Q3, 2020 results
For the third quarter, earnings before interest and tax rose 11% to $273m, while net sales increased 15% to $2.238bn, driven by strong gains in US soup (+35%), Prego pasta sauces, V8 beverages, Campbell’s pasta, Pace Mexican sauces and Swanson canned poultry, as well as gains in Canada, offsetting declines in the foodservice business (which represents 5% of total revenue).
Net sales of snacks rose 9%, reflecting gains in fresh bakery products, Goldfish crackers, and Pepperidge Farm cookies, as well as Kettle Brand and Cape Cod potato chips, Pop Secret popcorn, Snyder’s of Hanover pretzels, Lance sandwich crackers, Late July snacks, and Snack Factory Pretzel Crisps.
