Q4 2024 Earnings Summary
- Campbell's Meals & Beverages division is showing strong momentum, with organic sales up 1% and a 2% gain in volume, even without the contribution from Sovos Brands. This growth is driven by the recovery in soup volume and the continued success of their sauce business, including Rao's, which was up 25% in the fourth quarter.
- The company is confident in its ability to navigate potential economic downturns due to its strong portfolio of brands that are well-suited to in-home consumption trends. Even in a tougher environment, Campbell's expects to be in a positive position, given that their brands play a significant role in categories where consumers are pulling back from eating meals away from home.
- Despite competitive pressures in the Snacks division, particularly from new entrants in the salty snacks category, Campbell's is addressing these challenges through increased innovation and marketing investment. The company believes its well-positioned brands and robust innovation pipeline will enable it to defend its market share and drive growth in the elevated snacking segments.
- Increased competitive pressure in the Snacks division from new entrants is impacting Campbell's market share, particularly in key categories like salty snacks. Mark Clouse acknowledged they faced pressure from new entrants in pretzels, kettle chips, and better-for-you tortilla chips, which contributed to Snacks' 3% decline for the quarter.
- Uncertainty regarding the pace of industry recovery, with recovery taking longer than expected and consumer confidence remaining fragile. Mark Clouse admitted that while they are not seeing significant negative indicators, the recovery "has been a little bit longer runway... than I would have liked", and the consumer is "still fragile".
- Reliance on competitor supply issues for growth in the broth business may pose a risk as those issues resolve. Campbell experienced robust share gains in Swanson broth as a major private label supplier was experiencing supply constraints, which may not be sustainable as the competitor recovers.
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Snacks Competition
Q: How will you counter new entrants in Snacks?
A: We face pressure from new entrants in salty snacks, particularly in pretzels, kettle chips, and better-for-you tortillas. Our brands like Snyder's of Hanover, Snack Factory, and Goldfish in pretzels, and Kettle and Cape Cod in chips, are well-positioned to defend. We'll increase innovation and marketing support, ensuring promotional frequency and price gaps remain reasonable. We're confident in our ability to address this challenge as we enter fiscal '25. -
Meals & Beverages Growth
Q: What drives the growth in Meals & Beverages, and is it sustainable?
A: Organic sales in Meals & Beverages rose 1%, with a 2% volume gain, showing momentum even without Sovos in the base. Growth is driven by consumers eating more at home, which fits well with our brands. Soup volumes are up without sacrificing margins. Our sauce business is performing well, with Rao's brand up 25% in the fourth quarter. We expect high single-digit growth for Rao's in '25 and mid-single-digit growth longer term. -
Positioning in Recession
Q: How are you positioned if a recession occurs?
A: While we don't expect a radical recovery, our diversified portfolio is well-suited for challenging times. If the environment worsens, we don't anticipate a dramatic step-down since we're cycling more muted baselines. Our brands benefit from consumers eating more at home, and snacks have historically been resilient in downturns. Our plan doesn't assume outsized recovery; we describe the consumer as slightly positive but still fragile. -
Marketing Investment
Q: Where will you focus your increased marketing spend in 2025?
A: We'll balance value-centric messaging with building brand equity and innovation. In premium products like Rao's, we'll highlight value through quality and convenience. We'll invest more in marketing to support innovation, particularly in snacks where we face new competition. Driving equity and news behind our brands will be key to winning in elevated segments. -
Guidance Clarification
Q: How does the 53rd week affect your organic sales guidance?
A: The benefit of the 53rd week is not included in our organic net sales growth. We'll report it separately, but it has been removed from the organic growth calculation. We don't anticipate a significant drop-off in the second quarter; factors like the holiday season and new innovation launches will benefit sales.