Mmm, Mmm, Profit
It’s soup time, Millenials! At least, the Campbell Soup Company thinks so. The company announced a better profit than expected, and it seems to think it has a new market:
As part of its push to turn around its faltering soup business, Campbell plans to introduce dozens of new soups and sauces this fall aimed at attracting younger consumers, which it refers to as Millennials.
The sales increase in the latest quarter did not shed much light on how those efforts will fare, however, as Campbell attributed the growth in part to retailers running promotions and stocking up on inventories for its traditional condensed soups, such as chicken noodle and tomato. The company said inventory levels at the start of the quarter were lower than they were a year ago.
One downside of public companies these days (and for a while, but it’s heightened in a fluctuating market) is that you have to always show GROWTH as you do the blocking and tackling of running the business. The market is so hungry (pun intended) for growth options, it ends up hammering those companies who can’t claim that they’re rocketing to the profit moon.
So I would think that the Millenial comment was mostly a public green-lighting of a product line that was in plan, but it looked good enough on paper to try out on Wall Street. I get the Millenial direction, though. If the new meals could offer encouragement while using just a microwave and being packaged in environmentally-friendly components, then they may have a winner.
But I’d suspect that the promotions as well as the focus on gool ol’ Chicken Soup really does the trick. Campbell’s has made a long history out of being a staple in the kitchen, and I would think that the varying economy would enable them to fall back on that and encourage households to stock (pun intended) up on the basics. If you look at the real growth, it was in the condensed soup area. A sale on a familiar brand is an easy way to get people interested.
The bigger question is whether cutting margins and hoping that you can make it up in volume is a decent strategy. I actually think it is if there’s decades of history to back it up. While it’s never good to edge too close to the profit cliff, it’s not a bad idea to get a chunk (pun intended) of soup in the cabinets, which might encourage people to keep loading up as they start to deplete.
Either way, now I want soup for lunch…