US food firm Campbell Soup Co. has said it can find international M&A opportunities to gain access to markets that will be benefit the business in the long term.
Campbell’s CFO, Craig Owens, told analysts on the firm’s third-quarter earnings call yesterday (20 May) it is looking to enter markets that are “faster growing” than its core markets. He said the company has “a pipeline” for M&A it has been working on since Denise Morrison was appointed CEO.
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“You haven’t seen us make an international acquisition yet, and that’s largely a result of the fact that we’re going to be pretty disciplined as we look at these things. Some of them take time because they’re family-owned businesses, and it’s a matter of building relationships and waiting for the moment when the family is ready to exit and sell. So we keep working at it, we continue to be disciplined. We think we’ll eventually land some good opportunities, but obviously not going to comment on any specific situation.”
Owens said there were “a huge number” of targets out there but added they are also “hotly contested”.
Morrison, meanwhile, added that, in addition to M&A, Campbell would also be pursuing partnership deals “where they make sense”.
“For example, our partnerships in Mexico with Jumex and La Costeña to do a distribution and manufacturing agreement for the beverage business, soup and simple meal businesses is pretty exciting for us. So we’ll continue to look for those opportunities as well.”
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By GlobalDataWells Fargo Securities analyst John Baumgartner suggested there was little in the way of global baking and snacking targets. He questioned whether Campbell might, therefore, look at joint ventures in this category or lean on the Indonesian business more to drive a larger footprint in snacking in China.
Owens said this was “absolutely” something Campbell is considering. “If you look at Indonesia, Malaysia, Mexico … We’ve been very active. You saw us announce a deal for our soup and beverage business to really restructure the way we’re coming at it in Mexico and broaden our distribution depth very significantly in that market on beverages.
“Likewise, we have been investing pretty heavily in our Indonesian business and been seeing a really robust growth rate in that business because of that investment. We’re also looking at export models and the possibility and ability to move some of that product. We already have some export out of the Indonesian business but looking at whether we can expand that in south-east Asia. So all of those things are on the table. I don’t want to overstate them in terms of their size because they’re still pretty small. But we’re looking at all of those avenues.”
Campbell yesterday lifted its full-year forecast for earnings after seeing higher sales boost profits in its third quarter.
In the three months to 28 April, the US food group reported earnings growth of 2.3% to US$181m, and sales growth of 15% to $2.09bn.
Morrison told analysts that, across the portfolio, Campbell is investing for long-term growth in “faster-growing spaces”, from premium soups, beverages and baked snacks, to simple meals that resonate well with consumer groups that represent “strategic growth opportunities” for the company, like “millennials” and Hispanics.
“We’re also investing in faster-growing markets like Mexico and Indonesia,” she added. “We have said that our overarching goal is to position Campbell for sustainable, profitable net sales growth by executing against a dual mandate: To strengthen our core business and to invest for long-term growth in faster-growing categories, adjacencies and geographies. We believe that we’re making good progress in advancing our plan and in our efforts to change the growth trajectory of this company.”
