The chief executive of Campbell Soup Co. has warned that the US soup category will remain “extremely competitive” over the next three months.

Campbell president and CEO Doug Conant said competition in the US soup sector would be “potentially comparable” to the levels seen in the company’s first quarter – which ended on 31 October – when the group’s domestic soup sales slid again.

The company has suffered from falling soup sales in the US in recent months and, during the first quarter of its current fiscal year, sales fell 5%.

Speaking to analysts after Campbell published a drop in first-quarter revenues and earnings, Conant said Campbell moves to “step up” its promotions in the US soup category and launch a marketing campaign had not boosted sales as expected.

“We saw pockets of strength, most notably our condensed cooking soups and our Healthy Request soup varieties, both of which delivered sales and volumes in the quarter,” Conant said yesterday (23 November). “However, our promotions did not deliver the planned volume increases in our ready-to-serve soups or our condensed eating soups.”

Conant pointed to “the difficult consumer environment” and the “extraordinary competitive activity” within the US soup category for Campbell’s falling domestic soup sales. He noted some “very aggressive” moves from competitors to push down the price of their ready-to-serve soups to the price of condensed soups.

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“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.

Nevertheless, Conant said Campbell would maintain a “strong promotional programme” in its second quarter to “protect” the company’s “leadership position”.

However, he said Campbell would “adjust” its plans as the company moved into the second half of its fiscal year to move more towards advertising and away from promotions amid concerns over commodity costs.

Conant admitted the level of Campbell’s innovation in its soup business had fallen behind the amount generated from its baked snacks and healthy beverages divisions. He said Campbell had focused on “renovating” its soups – for example, cutting the amount of salt – said the business would “step up” its investment in developing new soup products.

The Campbell chief, who is set to step down next summer, said the company still had a “great leadership position” in the US soup category and was “incredibly relevant to today’s consumer”.

However, he added: “Our challenge is to deal with a paradigm shift going on, where consumers are re-thinking how they purchase food and beverage products. The increased competitive activity that was accelerated by some of the competition hasn’t helped the category. When you innovate, the category benefits and we win. We didn’t have adequate innovation to attract consumers in a compelling way to the category this year. Price alone is just not enough.”

Nevertheless, Conant was coy about Campbell’s innovation plans and said the company would reveal more details at the annual CAGNY investor event in Florida next February. “In terms of innovation, we have the capacity and we have the funds necessary to step up our game. There’s nothing that we can’t match corporately.”

Conant was hopeful that US soup prices would become more “rational over time” and hinted that Campbell could see prices improve in the second half of its financial year.

“What we learned in the first quarter is that price competition per se does not necessarily help the category. I expect the category over time will become a little more rational and we will see more brand building and a moderated level of price competition,” Conant said. “We expect our trade promotion spending to come down and we expect to start to bring more innovation to the category. We think that’s a better model for the category …. but we have to see how the game is played by other simple meals and by soup. What I can tell you is we will find our way through this.”

He added: “We have enough evidence that we can do better on the price realisation front in the back half,” Conant said. “We’re working with our retailers who are also looking to bring some profitability back into the category. It’s informed judgement that we can do better but we have to wait and see. We’re dealing with a relatively small part of our earnings pool that is an issue for us. Clearly, it’s important but we believe we have enough buoyancy in the rest of the portfolio that we can navigate this.”

Campbell’s shares were down 2.4% at $34 at the close of trading in New York yesterday.