Acquisitions have given Campbell a lift

Posted: July 28, 2014

The shift in Campbell Soup Co.'s approach to the food business was evident at the company's analyst day Monday at company headquarters in Camden.

At the annual event, Campbell announces sometimes bland plans for the coming year or - following particularly bad periods - restructurings designed to get the firm back on track.

But this year, executives seemed to have a more intense sense of urgency and conviction that Campbell - No. 6 on the Philly50 - must break out of tried and no-longer-true patterns that have sustained it but condemned the 145-year-old company to slow growth.

Some of the spark has come from acquisitions.

"If you look at the acquisition of Bolthouse Farms followed by Plum Organics followed by the divestiture of the European business, those three things taken together are pretty aggressive and certainly adventurous departures from what this company's M.O. has been in the past," said Jonathan Feeney, a food-industry analyst.

The purchase of Bolthouse Farms, a producer of fresh carrots, refrigerated juices, and salad dressings, for $1.55 billion in 2012 gave Campbell a bigger foothold in the perimeter of the supermarket, where sales are growing faster than in the aisles in the center of the store, where most Campbell's products have been sold.

Campbell executives are counting on Bolthouse, which has more than $800 million in annual revenue, to be a major platform for new products, such as the "Bolthouse Farms Kids" line of smoothies, fruit tubes, and Veggie Snackers, which will be in stores next month.

Along similar lines, Campbell bought Plum Organics last year for $249 million. Plum is a producer of organic baby food as well as food for toddlers and older children. Plum was expected to have about $90 million in revenue in the fiscal year ending Aug. 3, short of the company's $115 million target. A recall in November hurt sales.

An acquisition not highlighted by Feeney, who recently established his own research firm, Athlos Research, in Wayne, was the Kelsen Group, a Danish cookie-maker with 40 percent of its revenue from China, for $331 million.

Also in 2013, Campbell sold certain declining European businesses.

One upshot of all the dealmaking is that Campbell has accumulated a significant position in products for kids, Feeney said.

"That's a departure," he said. "They've got over a billion in sales there. That's pretty good, and the ability to get more, which is equally important."

While the acquisitions have significantly changed the revenue mix at Campbell, they still have to be translated into long-term growth. But that still might not be enough for Campbell to reach its goal of 3 percent to 4 percent annual revenue growth from current operations, not including acquisitions.

Ken Goldman, a J.P. Morgan analyst, said in a research note that Campbell's admission that it needed more acquisitions was not a bad thing.

"It indicates a leadership team working within a sensible framework for growth," Goldman said.



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