Organic net sales of snacks were down 3% versus prior year, but grew 3% compared to two years ago, Campbell president and CEO Mark Clouse told analysts on an earnings call.
“We expected a significant impact from supply constraints we experienced. Despite these constraints, end market consumption grew 1% over the prior year quarter and 8% on a two-year basis, reflecting the underlying strength of our brands, especially our power brands,” he said, noting these consist of Pepperidge Farm cookies, Goldfish crackers, Snyder’s of Hanover pretzels, Cape Cod, Kettle Brand, Late July snacks and Snack Factory pretzel crisps.
Clouse added, “We are encouraged to see repeat rates ahead of prior year on seven of eight power brands and ahead on a two-year basis on all power brands. Kettle Brand and Cape Cod each had a strong quarter with consumption growth of 26% and 20% [respectively] compared to two years ago.”
Goldfish also performed well – growing by 9% in the quarter – boosted by the launch of the ‘bigger, bolder, cheesier’ Goldfish Mega Bites, a family-sized pack and limited edition Star Wars-themed Mandalorian Cheddar Crackers.
“Since the launch in January, Mega Bites achieved the fastest distribution growth in recent history of Goldfish innovation launches. Early consumer repeat rates are promising as consumers who purchased once are already coming back to buy again,” said Clouse.
The company claimed its social media campaign was a runaway success, achieving over one billion earned media impressions in the first launch week alone.
A challenging quarter overall
The Camden, New Jersey-headquartered soup giant cited higher input costs and a labour shortage, too, dented its overall bottom line in the second quarter ended 30 January.
Net earnings of $212m was down 13% from $245m to $212m.
Net sales of $2.21bn were down 3% from $2.28bn for the same period a year earlier, but up 2% from 2020.
Organic net sales, excluding the impact from the sale of the Plum baby food and snacks business, fell 2% when compared with the previous year’s second quarter.
“Q2 was challenging as we expected, including industrywide constraints on labour and materials availability made even tougher by the winter omicron surge, as well as ongoing commodity and logistics inflation,” said Clouse.
“However, more recently, labour and service levels are improving as COVID cases decline, and we see greater impact from our aggressive hiring and training,” noting the company has recruited nearly 3,500 new hires in the past seven months.
Russia’s invasion of Ukraine will have no direct effect, as Campbell has no operations in either country, however, Clouse said it will ultimately feel “the macroeconomic impact of the conflict, and as we look at '22, we've got about 90% of our commodities covered, which leaves us about $150 million in cost that we're still navigating through,” he said.
“I also want to take a moment to express our concern for the people of Ukraine. Our sympathies and support go out to them during this crisis.”
Still resonating with the younger set
Net sales in Campbell’s Meals and Beverages business unit slipped 3% to $1.28bn, with gains in foodservice partially offsetting declines in US retail and in Canada.
“We had continued success with younger buyers … and brought in additional millennial and Gen Z buyers.”
Clouse hinted at another limited Goldfish release in early summer, including another ‘surprising one-of-a-kind’ flavour collaboration.
“I have to say it feels good to return to what we do best, building our brands.
“This is an important proof point as we pivot from supply recovery to now running the business in what we believe will be more predictable conditions as we come through the rest of the fiscal year and into fiscal 2023.”
Campbell’s management has re-affirmed its full-year forecast for FY22, betting on a second-half recovery, despite the predicted double-digit rise in core inflation.