Campbell Soup Co (CPB.N) cut its full-year sales forecast as the introduction of new soup flavors and increased promotions failed to stir enough consumers to switch from the lower-priced and healthier options at rivals.
Campbell's shares fell as much as 7 percent on Monday after the world's largest soup maker also reported weaker-than-expected revenue for the third-quarter ended April 27.
Winter is usually a good time for soup sales - Campbell's sales of soup rose 14 percent in the third quarter of 2013 - but that did not happen in the latest quarter. U.S. soup sales were flat compared with the same quarter last year.
Campbell, which also makes Pepperidge Farm bakery products,
Prego pasta sauces and V8 vegetable juices, launched eight new soup flavors in January and, in the latest quarter, increased the frequency of offers to try to win back consumers and protect its market share.
"Despite an increase in the frequency of our promotional activity in the third quarter, we did not realize the anticipated lifts in a challenging consumer environment," Chief Executive Denise Morrison said in a statement.
Campbell said it expects sales from continuing operations to increase about 3 percent in the year ending July compared with its previous forecast of a 4-5 percent rise.
The company's share of the U.S. soup market has fallen to 47 percent in 2013 from 57 percent a decade ago due to stiff competition from both lower-priced private-label products and smaller rivals offering healthier options and high-quality soup products, according to data from Euromonitor.
Under Morrison, Campbell has spent millions of dollars to reinvent its marketing and packaging and is also trying to build the loyalty of the often fickle younger consumers, who tend to be more price-conscious and less brand-loyal than older cohorts.
But still smaller niche soup companies such as Pacific of Oregon, Harris Foods Co and Amy's Kitchen Inc continued to gain ground, according to Euromonitor.
Campbell does not break out its soup sales by value but company reports show sales have fallen in 13 of the last 19 quarters - although they rose in every quarter of 2013.
Soup sales are expected to make up about a third of the company's sales in 2014, down from 40 percent in 2012, largely due to the sale of its European soup business, Morrison had told Reuters in October last year. <ID:L1N0IB0T3>
The company's problems also went beyond soup in the latest quarter. Sales of Pepperidge Farm products also fell, the company said without providing figures.
Total sales rose 0.4 percent to $1.97 billion, but fell short of the average analyst estimate of $2.0 billion, according to Thomson Reuters I/B/E/S.
Net income attributable to Campbell rose 1.7 percent to $184 million. Excluding items, the company's profit of 62 cents per share beat the average analysts' estimate of 59 cents.
The company also said full-year adjusted earnings would be at the low end of its forecast of $2.53-$2.58 per share.
Campbell's shares were down 2.5 percent at $44.01 in late afternoon trading. They fell to a low of $41.94 earlier on the New York Stock Exchange.
(Additional reporting by Maria Ajit Thomas in Bangalore; Editing by Savio D'Souza)