Campbell adds salt to spur soup sales

CAMDEN, New Jersey Tue Jul 12, 2011 5:00pm EDT

Cream of Chicken Campbell's Condensed Soup is stocked on a shelf at a grocery store in Phoenix, Arizona, February 22, 2010. REUTERS/Joshua Lott

Cream of Chicken Campbell's Condensed Soup is stocked on a shelf at a grocery store in Phoenix, Arizona, February 22, 2010.

Credit: Reuters/Joshua Lott

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CAMDEN, New Jersey (Reuters) - Campbell Soup Co's (CPB.N) incoming CEO Denise Morrison is bringing back the salt as she tries to entice people to buy more soup.

The move to add salt and flavor in more than two dozen soups after a health-inspired low-sodium push failed to lift sales is one of several steps that Morrison -- who has run the company since March -- announced on Tuesday at an annual investor meeting at the company's headquarters in Camden, New Jersey.

Campbell is overhauling soup products, coming out with bread shaped like Goldfish crackers, and will be, in Morrison's words, "a beehive of activity" in fiscal 2012 as it tries to spur growth after several winters of weak soup sales that have weighed on the company's share price.

"For me it's about stabilizing it first and then planning growth beyond that," Morrison said in an interview about the U.S. soup business.

Shares of the world's largest soup maker closed up 1.3 percent on Tuesday as Wall Street looked past a weaker-than-expected 2012 earnings forecast, due to investments in marketing and innovation, to the longer-term benefits.

"We look for future results to benefit from an increased emphasis on bolstering sales with tasty soup products," said Standard & Poor's equity analyst Tom Graves.

Campbell is at a crossroads, as Morrison, its chief operating officer, prepares to take over as CEO on August 1, the first day of the company's fiscal 2012.

"This is not just the next chapter for Campbell. It's a new chapter in a new story," Morrison said.

Morrison presented her strategy to a gathering of analysts and investors, many of whom were already expecting big investments to spur growth in North America. Campbell has faced intense price competition in the region with General Mills Inc's (GIS.N) Progresso soup brand and other simple meals.

Dozens of new products will be introduced, from Campbell Slow Kettle soups and Prego alfredo pasta sauce to V8 energy shots and Pepperidge Farm Goldfish sandwich bread, Morrison said.

Campbell expects earnings per share to fall 4 to 6 percent next year, while sales should be flat to up 2 percent. It expects to return in 2013 to its annual long-term growth targets of 3 to 4 percent for sales and 5 to 7 percent for earnings per share.

Earnings before interest and taxes are expected to rise 4 percent to 6 percent annually on a long-term basis, compared with a previous goal of 5 percent to 6 percent, the company said. Morrison said the adjustment was meant to give the company room to continue investing beyond 2012.

"We view the news as neutral to mildly positive given market expectations for a rebase," JPMorgan analyst Terry Bivens wrote in a research note. "The proof, of course, will be in the pudding as the soup season progresses."

Campbell shares, which have fallen 5 percent over the past year, closed up 45 cents, or 1.3 percent, at $34.59 on the New York Stock Exchange.

PASS THE SALT

Morrison will succeed CEO Douglas Conant, who will step down after occupying the corner office at Campbell for more than a decade.

Before becoming COO in October, Morrison was head of the North American soup, sauces and beverage business. She helped spearhead the company's efforts in recent years to lower sodium in its soups -- a move that failed to pass consumers' taste test.

Campbell is now raising sodium levels in all 31 of its Select Harvest soups to 650 milligrams per serving, from about 480 milligrams. They originally ranged from 700 to 800 milligrams.

The company still offers a range of Healthy Request soups that have lower sodium, including some under the Select Harvest brand. But Morrison said the reduction in the overall Select Harvest soups was too much, and that now Campbell wants to give consumers more choices.

"Sodium reduction is important but we have to do other things, like taste and more culinary credentials," Morrison said.

The step-up in salt is part of 46 recipe changes Campbell plans for fiscal 2012. It also plans to introduce 27 new soup products, including Swanson Flavor Boost packets and unsalted broths, new Healthy Request soups and premium-priced Slow Kettle soups.

It plans to double the percentage of revenue derived from new products to 8 percent by 2015, up from 4 percent now.

Campbell North America President Sean Connolly said it would focus on improving taste and building its brand so that consumers would "use up" their soup, rather than on reducing sodium and price promotions that drive consumers to "stock up."

The company also plans to target younger consumers and Hispanics with new marketing in the United States, and has a list of priority emerging markets in Asia and Latin America, though it declined to offer details.

Gross margins should be flat next year, Campbell said, as price increases and productivity improvements should offset rising commodity costs.

For fiscal 2011, Campbell said sales will be comparable to those of 2010, with adjusted earnings up about 1 percent from the $2.47 per share it reported in 2010. It previously forecast earnings per share would fall 1 to 3 percent, with sales ranging from down 1 percent to up 1 percent

The new targets imply earnings per share of $2.49 to $2.50 for 2011, and $2.35 to $2.39 for 2012, according to Stifel Nicolaus analyst Christopher Growe.

Analysts on average were expecting $2.45 per share for 2011 and $2.49 per share for 2012, according to Thomson Reuters I/B/E/S.

(Additional reporting by Jessica Wohl and Brad Dorfman in Chicago; Editing by Richard Chang, Gary Hill)

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