|
Campbell stirs the pot
|
 |
August 13, 1999: 11:26 a.m. ET
Thrasher again running soup business, hoping to light a fire under profits
By Staff Writer Tom Johnson
|
NEW YORK (CNNfn) - Campbell Soup Co.'s longtime President and CEO Dale Morrison was in no mood to mince words at an analysts meeting in New York two weeks ago, particularly after posting earnings shortfalls two out of the last three quarters.
"You know we don't have a major announcement today, but what we're trying to do here is clear the air," Morrison said, according to those who attended the meeting.
With that, Morrison and several top Campbell Soup executives launched into a several-hour presentation designed to show why, despite a string of earnings disappointments, America's dominant producer of condensed soup is far from overcooked.
At the heart of that strategy is a gradual overhaul of its hallmark soup line, guided by an experienced company insider whose task is to recreate some of the earnings magic he helped perform earlier this decade.
"The company is very disappointed with themselves and I certainly think they can do better," said Patrick Schumann, an analyst with Edward Jones. "They just need to stop the bleeding."
More than a Band-Aid solution
The "bleeding" most analysts refer to is in Campbell's condensed soup product line. The problem isn't that the Camden, N.J.-based company is losing its 70 percent market share. Rather, it's just not expanding it. That has stifled earnings which, in turn, has kept Campbell's (CPB) stock price as condensed as one of its soups.
"The problem with Campbell is they have not shown the ability to grow their condensed food line," said Terry Bivens, an analyst with Bear Stearns. "The concern is that over time, you're going to have to do a makeover on the whole line."
Very quietly, the company took a step in that direction in late June, when as part of the consolidation of its North American soup operations into one division, it parted ways with Mark M. Leckie, a highly-regarded executive many analysts believed was beginning to infuse new life into Campbell's soup business.
Leckie was replaced by F. Martin Thrasher, an 11-year Campbell veteran. He generates less buzz among industry watchers, but is a known quantity on firm footing with the descendants of company founder John Dorrance.
The Dorrance heirs still control four board seats and slightly more than 50 percent of the company's stock, and they have squabbled periodically over whether to sell the company. But with Thrasher in place, they aren't looking to sell this time, according to a source close to the family.
"They are not going to sell this company," the source said. "That's ridiculous."
Thrasher oversaw Campbell's U.S. soup business during its boom years in the early- to mid-1990s before being placed in charge of the company's international grocery operations.
During that period the company's stock saw its biggest gains of the decade as well, a trend Campbell executives hope to duplicate during the early part of the next century.
F. Martin Thrasher has both the soup know-how and the Dorrance family trust.
Morrison reportedly took full responsibility for Leckie's departure at the analyst meeting in New York, saying it was a "tough call" but a necessary one.
"We took it as a negative that Mark was leaving and we still think it is," Schumann said. "Some of that was mitigated with Marty taking over, but I'd certainly rather have both executives in the company instead of just one."
Thrasher wasn't available to comment for this article, but analysts said he faces several immediate challenges. Not only are U.S. consumers dining out more, but many feel Campbell's soup line has grown stale, lacking the innovation that once separated it from it competition.
Campbell executives spent much of their meeting with analysts trying to dispel that notion, with mostly positive results.
The company is rolling out "ready to serve" soups in resealable plastic cans as well as "soup to go" products that can be popped into a microwave. The idea is to make soup a more convenient choice for consumers on the go -- a move company executives hope will help them take a bite out of the "simple meal" industry, which some estimate as a $38 billion a year business.
Campbell also is developing a new advertising campaign and pushing to get its products into more locations, even convenience stores -- a move one analyst compared to a "Coca-Cola strategy" of trying to get into as many places as possible.
" We don't see ourselves competing against another soup. We see ourselves competing in simple meals," said Jerry Buckley, a Campbell spokesman. "Innovation is very, very important to our program."
Boosting the bottom line
If the company can begin to generate some forward momentum in its soup line, Campbell officials are convinced the bottom line will turn around quickly.
That would be a welcome change for investors who suffered through two earnings warnings during Campbell's current fiscal year.
The company fell 20 cents short of analysts' original expectations during its fiscal second quarter after ending retail trade promotions to prevent price fluctuations in its trade spending, a move company officials said will save millions over time.
Profits rebounded during the third quarter despite a 5.1 percent drop in sales, but then the company once again announced in June that it's fiscal fourth quarter earnings would fall as much as a dime short of the 38 cents per share analysts expected, not including a one-time restructuring charge of $35 million to $45 million.
Buckley said that money is earmarked for marketing and general administrative expenses, although the company has laid off roughly 50 people at its Camden, N.J., headquarters.
Still, the company insists its fiscal 2000 earnings are on track, and while most analysts reduced their estimates by up to 10 cents following the last earnings announcement, they believe the earnings will start to increase again after a slow first quarter.
If they don't, some believe the company could have serious problems hanging on to its more talented employees. Executives weren't paid annual bonuses last year, something that likely won't be tolerated twice.
"As a result of the recent problems they've had, the company is probably more focused on turning it around, even if it's at the expense of top-line growth," said John M. O'Neil, an analyst with Prudential Securities. "I feel very confident in their ability to hit their profit target next year." 
|
|
|
|
|
|
Campbell Soup Co.
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
