Campbell Soup Co reports 23% surge in snacks and biscuits division profits

By Vince Bamford

- Last updated on GMT

Overall company sales were down 1% in the quarter
Overall company sales were down 1% in the quarter

Related tags Gross margin Chief executive officer

Pepperidge Farm owner Campbell Soup Co has reported strong profit growth from its Global Biscuits and Snacks division.

Announcing its second-quarter financial results, the company reported a 23% increase in operating earnings from the division to $141m.

This was driven primarily by a higher gross margin percentage that had benefitted from higher price and improved productivity, while being partly offset by the negative impact of currency translation and higher marketing expenses.

And although sales in the global snacks and biscuits division fell 3% in the quarter to $682m, they rose 2% when the impact of currency translation was excluded.

Fresh bakery gains

Pepperidge Farm had made gains in fresh bakery, frozen products and cookies, said the company.  In Asia Pacific, excluding the negative impact of currency translation, Arnott’s sales gains in Australia from Tim Tam biscuits were partly offset by declines in Indonesia.

Our Global Biscuits and Snacks division stands out for delivering both organic sales growth and strong profit growth in the quarter​,” said Campbell’s president and chief executive officer Denise Morrison.

In the wider business, the gains from Global Biscuits and Snacks were offset by declines in the Americas Simple Meals and Beverages division, with overall company sales down 1% to $2.2bn.

Sales in Americas Simple Meals and Beverages fell 3% in the quarter to $1.2bn. US soup sales decreased 4%, while a drop in US beverage sales was driven by declines in V8 V-Fusion beverages.

Gross margin increase

Gross margin increased from 33.3% to 37.2%, primarily a result of improvements, higher selling prices, lower promotional spend and improved supply chain performance.

Adjusted EBIT, excluding items impacting comparability in the current year, increased 26% to $423m, which the company said reflected a higher adjusted gross margin percentage and the benefits from cost savings initiatives. 

The highlight of the quarter was our continued gross margin expansion, which reflects improvements in productivity, net price realization and improved supply chain execution​,” said Morrison, adding the business would be investing in all divisions in a bid to accelerate sales growth.

Over the last 12 months, we’ve implemented significant changes to the company, including aligning our enterprise structure with our strategy, creating clear portfolio roles for our divisions and undertaking our major cost savings initiative,” ​she said.

“I feel very good about the progress we’ve made, however, we are aware that we have more work to do​.”

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