By Matt Andrejczak
Soup, which sustained a nation through the Great Depression, has
itself fallen on hard times in the "Great Recession."
Winter is supposed to be prime soup season. And one might expect
that to be even more the case with U.S. unemployment at 10% during
one of the snowiest East Coast winters on record.
Soup is a hot meal that's both cheap and quick. But trade data
highlight the balancing act name-brand food companies face in this
new era of American thriftiness. If it's not on sale, shoppers tend
to look elsewhere.
Shopping For Value
"Value is king these days," said food-retailing consultant Jim
Hertel of Willard Bishop in Barrington, Ill.
Exhibit A is Campbell Soup (CPB), which learned a hard lesson in
the timing of promotions.
Campbell's U.S. soup sales dropped 8% from November through
January, compared with the year-earlier comparable period,
punctuated by an 18% decline in ready-to-serve soups such as the
Chunky brand. Condensed-soup sales were unchanged, and broth sales
rose 1%.
"Campbell has not been that aggressive on promotions," said
food-industry consultant Rick Shea, who runs Minneapolis-based Shea
Marketing.
In a recent conference call with analysts, Campbell Chief
Executive Doug Conant downplayed the notion of changing consumer
tastes.
"We have had a hiccup in ready-to-serve soup, with a promotional
timing shift," he said on the call. "We see it being very relevant.
It's still the No. 2 item at lunch. It is still in the top 10 at
dinner."
Campbell's ready-to-serve soups sold via promotional discounts
fell 4.2% over the last three months and dropped 16.8% in January
alone, Citigroup said, citing figures from A.C. Nielsen, which
collects data from most food retailers.
In The Soup
As a retail category, soup has been a laggard. For the 12 weeks
ended Jan. 23, soup sales fell 6.7% and slid 3.3% for the 52-week
period, Citigroup said, again citing Nielsen data.
This isn't just hurting Campbell. General Mills (GIS), which
makes Progresso, and ConAgra (CAG), home to Healthy Choice, are
also under pressure.
General Mills' soup sales fell 12.6% in the three-month period
ended Jan. 23. ConAgra's soup sales fell 14.1%, according to
Nielsen data. Unlike Campbell, however, General Mills and ConAgra
are far less reliant on soup sales to drive overall profits.
Fortunately for these big-name companies, private-label soup
isn't stealing much market share.
Camden, N.J.-based Campbell, which claims 48% of the U.S. soup
market, has vowed to ramp up promotions in response to intense
price cutting in so-called simple meals. This should help lure
price-conscious consumers, who analysts believe are shifting to
other cheap and easy meals such as macaroni and cheese and frozen
pizza.
Deutsche Bank analyst Eric Katzman said in a Feb. 22 research
note that the ready-to-serve soup category is being "pitted more
directly against simple meals" than ever before. This could require
more spending to win back consumers, he added.
In addition, Campbell, which on Feb. 17 cut its fiscal 2010
sales forecast, is launching a new marketing campaign to highlight
the affordability of condensed soups.
Ketchup maker Heinz (HNZ), for one, is taking note.
Through its "consumer value program," the Pittsburgh company is
running more promotions and offering more coupons to support key
brands. It was recently used for its ketchup. Now it will include
other U.S. brands such as Smart Ones, Ore-Ida frozen potatoes and
frozen T.G.I. Friday's meals.
-By Matt Andrejczak; 415-439-6400; AskNewswires@dowjones.com