During the company’s investor day on December 14, executive vice president of snacks, Valerie Oswalt, outlined a three-point strategy to grow Campbell’s already large snack business so that brands operate at rates category or above.
These goals, if achieved, will build on the company’s strong snacking gains during the pandemic, including seven of its eight ‘power brands’ holding or increasing their share while increasing consumption of 12% on a two-year basis and bringing household penetration up to 85% in the past year, Oswalt said. It would also build on the nearly $ 300 million in value capture and synergies that Campbell has tapped across his snacking organization since acquiring Snyder’s Lance nearly three years ago, a- she added.
âI am proud of what we have accomplished in creating a strong and unified snack organization. However, our mission to unlock growth is not over. While we are pleased with our revenue growth and the value capture savings we have been able to achieve, we continue to have a margin opportunity relative to our industry peers â,Oswalt said.
To that end, she also presented a four-phase plan to improve the company’s margins by around 400 basis points or 17% by fiscal 2025 so that Campbell’s snack margins (currently around 13 %) are more in line with the industry average of 21%.
Recognizing that there are “structural differences and complexities in our portfolio” that could hinder these goals, Oswalt confidently explained that Campbell can achieve these goals. “By improving our fundamentals and creating a more efficient and effective supply chain”To invest in growth while improving margins.
“Three clear paths to relaunch growth” in snacks
To accelerate the growth of Campbell’s snacking business, Oswalt said the company will follow suit “Three clear paths to relaunch growth”,In particular by leveraging its âproven growth modelâ, basing innovations on consumer knowledge and expanding distribution across all channels.
Oswalt touted the strong foundation from which Campbell will grow its snack business, noting that all of its snack brands fall into the two fastest growing segments: Authorized Indulgence and True Indulgence.
âThe authorized indulgence represents about $ 32 billion worth of snacks, or about a quarter of total snacks, and is increasing at a compound annual growth rate of 4% over two years. These are the snacks that consumers find more acceptable because they offer something guilt-free or have additional benefits â,Oswalt said. Brands in this space include End of July, Goldfish, Lance, Snyder’s and Snack Factory’s Pretzel Chips.
The true indulgence category, which includes Campbell’s Kettle Brand and Cape Cod crisps and Pepperidge Farms cookies, is growing even faster at 10% and accounts for about 30% of the snack category at around $ 40 billion.
From this strong position, Campbell’s plans to further develop these brands by elevating their positioning, investing in marketing, expanding new consumers and new geographies, and innovating to strengthen fairness – a “Proven growth model”Oswalt said he helped Campbell grow the Kettle brand by 11% in two years and gain 1.7 points of market share in two years.
The second prong of Campbell’s growth strategy is to innovate based on consumer needs, which includes offering variations on familiar and more permissible indulgence options and expanding snacking opportunities.
Examples of ‘Familiar Returns’ include an upcoming launch in the New Year of Goldfish Mega Bites, which takes everything people love about Goldfish and adds more to “make a bigger, bolder, and more nerdy goldfish”with a melt-in-the-mouth texture.
Campbell will also be launching its first Milano chocolate cookie as an extension of the authorized indulgence, Oswalt said.
“We have increased the impact of chocolate while keeping it licensed with the real, simple, premium ingredients consumers have come to expect from Pepperidge Farm cookies.”she explained.
Campbell is also innovating in packaging to help keep products’ on hand ‘by offering more sizes designed to fit consumers’ lifestyles, such as larger pantry sizes, packaging. smaller more personalized and a raised packaging design like what it has. done so far to improve omnichannel sales.
The third prong of Campbell’s growth strategy is to increase the reach and penetration of its powerful brands in the Proximity Channel, where Oswalt says there is an additional revenue opportunity of $ 200 million.
âPowerful brands like Late July, Pepperidge Farm cookies, Kettle chips and Snyder’s of Hanover have a $ 100 million opportunity by closing our distribution gap to Goldfish. In addition, we have an opportunity of 115 million dollars by filling our development delay in convenience stores â,she says.
Close the margin gap
Campbell’s investment in growing its snack brands will not come at the expense of its margins – instead, Oswalt suggested that his growth acceleration plans would also help increase the company’s margins – aligning them further. on sector averages.
To do this, she has developed a four-phase plan that will follow the next three years.
In fiscal year 2022-2023, Oswalt said Campbell will strive to gain around 200 basis points by focusing on fundamentals, including offsetting inflation through pricing, improving the mix by orienting more towards consumer favorites and permanently cutting about 10% of SKUs to increase capacity and reduce complexity and improving plant performance.
Throughout fiscal 2025, Campbell aims to capture an additional 250 basis points by expanding its corporate savings program and improving manufacturing and site performance.
During fiscal years 2024 and 2025, Campbell will explore improvements in its route to market, including an independent contractor distribution model, ways to streamline complex logistics networks, and explore other longer-term opportunities. . Together this should capture 50 basis points.
Even as the company focuses on improving its margins, it will continue to invest in marketing, upgrades to its production and go-to-market technology and staff, Oswalt said, noting that this could cost around 100 basis points but will follow a payout. as you get closer.
In the end, Oswalt said: âAs we come out of this integration period and move into the next chapter, we know how to develop our brands and we know how to gain in snacking. We have a portfolio well positioned to meet consumers’ desire for high snack experiences a proven growth model, category dynamics, a margin roadmap to make improvements, winning innovation, a strong and committed team with exceptional snack industry experience and execution history. “