The Campbell’s Company has expressed confidence it can build a recovery in its snacks business through the back half of the US group’s financial year, including stabilising margins by the fourth quarter.
Volume/mix in snacks declined in Campbell’s second quarter at double the rate of the other side of its business, meals and beverages, which was also hit by shipping delays in January related to the US snow storms.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The salty snacks part of the division – namely potato crisps and pretzels with the likes of Kettle and Snack Factory – lost market share in the quarter ending 1 February amid intensifying competition. Campbell’s also said it faced “execution challenges” in the Pepperidge Farm fresh bakery component of the unit.
On a results follow-up call with management yesterday (11 March), analysts were particularly concerned by a 390 basis-point decline in the snacks division’s margin to 7%, a level one described as “alarming” and a “shock” by another.
“We’re actively addressing execution challenges within bakery, strengthening competitive positioning within salty, and delivering additional cost reductions across the company to support margins and continued brand investment,” CEO Mick Beekhuizen said in prepared remarks before the call.
Finance chief Todd Cunfer stepped in to address questions on the snacks margin during yesterday’s Q&A session, describing the drop as a “very poor performance”, with a quarter of it coming from bakery.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“Three quarters of it, quite frankly, is just when net [snacks] sales are down 6%, there’s a very large deleverage both in our plant network and also as we continue to invest in marketing and SG&A. When you’re down 6%, that math and margin is challenging,” he said.
Cunfer added there will be some “margin improvement in Q3 but nothing dramatic”, helped by efforts to stabilise bakery. However, he predicted another 4% decline in snacks for the second half.
“I think we’ll see a lot better performance in Q4 because we feel very strongly we will have the bakery performance stabilised much more greatly at that point. We do think we’ll stabilise margins. They will not be all the way to bright, but we do think the margin profile will get better as we end the year.”
Beekhuizen said a recovery in snacks is “taking longer than anticipated” but with momentum behind the Goldfish crackers brand.
He added “elevated competitive intensity in salty weighed on volume and margins”.
“Our focus now is on maintaining the momentum within Goldfish, improving our execution within fresh bakery, and increasing our competitive position within our salty portfolio,” Beekhuizen said.
He emphasised three priorities to boost Campbell’s competitiveness in salty snacks when drummed on his plans during the Q&A.
“Making sure that we improve our competitiveness from a pricing perspective”, was one, and a focus “on the daily blocking and tackling or the in-market execution, which is absolutely critical”, as another.
Thirdly, innovation, which, he said, will be centred on premium, better-for-you and “flavour exploration”.
Campbell’s is also extending its cost-savings programme by a further $100m, Cunfer said, adding to the 2028 target of $375m, of which $180m has already been achieved, including $20m in the second quarter.
Group organic sales fell 3% in the three months to 1 February and were down 5% on a reported basis at $2.56bn. Snack sales dropped 6% in organic terms to $914m, while meals and beverages decreased 2% to $1.65bn.
Storms that hit the US in January delayed shipments and along with supply chain costs shaved 1% off second-quarter net sales, Campbell’s said, as net income slid 16% and lost 13% for the year so far.
Adjusted EBIT was down 24% and while adjusted EPS decreased 31% to $0.51.
Consequently, the Cape Cod and Kettle crisps maker now expects a decline in adjusted EBIT for the year of 17% to 20%, compared to the December forecast of minus 9% to 13%.
Adjusted EPS is slated for a 23% to 26% decrease to $2.15 to $2.25. The prior estimate was for a 12% to 18% drop, or $2.40 to $2.55.
Campbell’s on cost impact from Middle East crisis
On the back of the second-quarter performance, the company lowered its outlook for organic sales, and both adjusted EBIT and adjusted EPS in fiscal 2026. No sales growth is now anticipated in the forecast across the group.
The guidance also does not factor in any potential disruption from the conflict in the Middle East, Cunfer said.
Discussing the possible impact, he said: “The good news is, right now, we are about 85% hedged on all commodities, including things like diesel for freight and resins and other plastics and aluminium that could obviously get impacted by what’s going on in the Middle East right now.
“There could be some impact to this year. It’s not going to be significant. If this continues for several months, if oil remains where it is as we start the fiscal year, obviously, things are different. This will start to have an impact on our business and everyone’s business if oil remains elevated, not just on freight but on other products that leverage oil in their products as well.”
Further out, he added: “If we’re sitting here three or four months and it’s still elevated, we’re going to have to address it either through pricing or really sharpen our pencils on getting more costs out of the system.”
