Those hoping that the tide had turned for Campbell Soup Co. would have been disappointed when the US food maker published its first-quarter results on Tuesday (23 November).

Campbell’s domestic soup business has struggled for almost a year, hit by competition from other soup makers and sellers of what Doug Conant, the company’s president and CEO, calls “simple meals”.

In the last quarter, Campbell increased its promotional activity and embarked on an advertising push – but still its sales of soup in the US failed to rise. In the three months to the end of October, sales fell 5%.

Conant blamed “aggressive” competition and said Campbell had decided not to go toe-to-toe with its competitors. “We chose not to match some of this promotional activity. In my view, it simply was – and is – not in the best long-term interests of the category,” Conant said.

Campbell’s first quarter coincided with the start of the key selling season for soup in the US and some of its competitors fought hard. According to Sanford Bernstein analyst Alexia Howard, the price of General Mills’ soups were over 22% lower in tracked channels in the most recent four weeks. As a consequence, Campbell’s lost 5.3 percentage points in market share.

Howard said General Mills’ promotional push was set to only last during the month of October and she suggested Campbell’s sales should improve. However, the outlook for the business remains uncertain – and Conant did little to dispel that uncertainty when he discussed the company’s results on Tuesday.

Conant said Campbell would move its investment away from trade promotions and more towards advertising. He said Campbell would look to launch more products in the months ahead. And he said he expected US soup prices to become more “rational” as Campbell’s financial year progressed.

However, Conant also admitted that there had been a “paradigm shift” in how consumers bought food and drink and said Campbell faced a “challenge” in adjusting to that change. He appeared to pin his hopes on innovation, which, as we all know, carries inherent risk.

Of greater concern, as one analyst suggested, was whether the soup business is going to continue to struggle during the downturn, no matter what brand-building moves soup makers pursue.

“Is the answer that we simply have to wait for the economy to turn [and] that soup is just innately going to struggle during a downturn?” JPMorgan analyst Terry Bivens asked Conant.

“That is a concern because we have a lot of pantry inventory. People are shopping the pantry. There is less incentive to go out and buy more soup and we do have to navigate through that paradigm,” Conant replied. “There is no evidence that we can’t navigate through it, other than we had a tough quarter where there was extraordinary price competition that we chose not to match. So, we’re going to have to see how this plays out.”

That last sentence, however, belies the uncertain outlook for Campbell’s US soup business. Like many if not all economists and food-industry watchers, no-one is quite sure when and how quickly consumer confidence will improve in the US. And, if the soup category does rely on improved consumer sentiment, then it is likely to be well into 2011 before Campbell sees its soup sales really come to the boil.

There were, as the Campbell chief said, “pockets of strength” within the company’s US soup business – Conant pointed to its Healthy Request line – and he was fulsome in his praise for the other planks for the business – healthy beverages and baked snacks.

“I feel great about the platforms we built in our healthy beverage portfolio and our baked snacks portfolio,” Conant said. “We arguably have the best performance in the world in baked snacks over the last five years and we have great innovation there. We arguably have the best performance in healthy beverages in the last five years, and particularly in vegetable-based beverages.”

So, there are positives for Conant and his successor Denise Morrison, who will move into the top job in July. However, the cloud hanging over Campbell’s US soup business resembles what residents in 1950s London would call the almost daily smog hanging over the capital – a pea-souper.