CAMDEN, NEW JERSEY, U.S. — Volume gains and productivity improvements contributed to an earnings gain within the Global Baking and Snacking division of the Campbell Soup Co. in the first quarter of fiscal 2015. Earnings for first quarter ended Nov. 2 totaled $90 million, up 15% from $78 million in the same quarter a year ago.
Sales increased 3% to $627 million from $609 million.
“Within Global Baking and Snacking, a significant improvement in our core business was our performance in Australian biscuits,” Denise Morrison, president and chief executive officer of Campbell Soup, said during a Nov. 25 conference call with analysts. “We are moving in the right direction to stabilize the business in Australia where we drove Arnott’s sales and earnings. Our team grew consumption and share in total biscuits by strengthening planning and execution with our retail partners, increasing marketing and promotion behind core brands, and driving innovation, including new Tim Tam varieties and light and crispy Arnott’s Shapes.
“I was also pleased with the continued strong growth in our Indonesia business, which expanded beyond sweet biscuits into savory crackers with the introduction of Arnott’s Shapes.”
Morrison was not as upbeat about the company’s Pepperidge Farm business, which, along with U.S. Beverages, was identified as an underperformer during the quarter.
“Pepperidge Farm’s performance in the quarter was mixed,” Morrison said. “I was pleased with our growth in cookies driven by Milano and Crispy Pepperidge Farm varieties. We also drove strong results in fresh bakery, which continued to outperform the market with consumption and share gains. Fresh bakery benefited from our focus on seasonal offerings and quality improvements.”
Morrison said the main challenge in the Pepperidge business is to restore growth in crackers. In looking at the total cracker category over the past two years, dollar consumption growth trends have slowed in the category and were flat to declining in the first quarter, she said. She pointed to several crucial drivers in the category deceleration.
“First, we are seeing a shift in consumer snacking preferences,” Morrison said. “About half of cracker consumers are buying crackers and other snacks less frequently, and when they do they are shifting in some cases to snacks that are better for you or on the opposite end of the spectrum, more indulgent snacks.
“Second, approximately three quarters of the losses in the total category have been in sandwich crackers where we don’t compete.
“Third, total advertising in the category has declined more than 20% in the last year impacting velocities as price and distribution held.
“Finally, there has been a decline in the number of new products introduced in the category resulting in less excitement from innovation in the cracker aisle. In this environment some major brands have continued to outpace the category. One of those brands is Goldfish, which has consistently outperformed the category over the last three years. In the first quarter despite growing consumption and share and outperforming the category, Goldfish sales declined due in part to cycling the distribution build of the launch of Goldfish Puffs. We are not satisfied with this performance given the brand’s steady track record of growth over many years. We continue to expect Goldfish sales to be up for the year behind strong holiday programs, increased advertising and consumer promotion and improved in-store merchandising. Going forward, we are increasing advertising by about 20% with a quarter of our spend in digital media. Our plans include increased innovation, including new flavors of Goldfish and Goldfish Puffs.”