The Campbell soup can has long been an icon of American life and business. Thanks to artist Andy Warhol, it has even graced the walls of museums.
But today, canned soup is no longer such a hot commodity. Americans have not only changed the way they eat -- 15 percent of all breakfasts are eaten in the car and more than half of all lunches are not eaten at home -- but they also have many more choices of convenient, easy-to-prepare food.
The soup can doesn't look so good anymore -- which helps explain why Campbell Soup Co. yesterday announced a reorganization of its soup business, along with a warning that the company's profits for its current quarter will be lower than expected.
The nation's largest soupmaker said it is combining its U.S. division with its Canadian counterpart -- which has posted healthier sales increases in recent years -- to help it "exploit untapped opportunities for business-building initiatives."
In particular, industry experts expect the company to continue to tap into what it calls the ready-to-serve soups, where consumers just need to open, heat and eat.
Campbell said it will also initiate cost-cutting programs that will lead to an after-tax charge of between $35 million and $45 million for the quarter that ends July 31.
Excluding the extra charge, Campbell said its earnings would be about 8 cents to 10 cents less per share than the average 38 cents expected by financial analysts. Campbell stock closed yesterday at $42.12 1/2, down 31 1/4 cents a share.
The profit warning, the second in less than a year, "was not that much of a surprise, although worse than expected," said Jeffrey Kanter, senior food analyst at Prudential Securities Inc. However, he added, "the biggest surprise" was the resignation of Mark M. Leckie, president of Campbell's U.S. Grocery division, who had joined the company less than two years ago to oversee new product development. "He was one of the more progressive thinkers, and the fact that he's no longer at the company is a big loss," Kanter said.
Ironically, the profit warning comes as soup sales are at their best in years, with the company experiencing 3 percent growth this year -- largely a result of sales increases in ready-to-serve soups such as its Chunky, Simply Home and Swanson broth lines. Its sales of condensed soups, however, are down slightly and have been declining about 1 percent a year for five years.
Campbell's current problem stems in part from supermarkets' decision to reduce inventories. While consumers are buying more soup, grocers are not restocking as quickly, which hurts Campbell's profits. Campbell said it expects shipments to return to normal shortly.
Even then, Campbell will have to work hard to keep soup sales growing, said Terry Bivens, a financial analyst with Bear Stearns & Co. "It's a little bit out of step with the modern consumer. Soup is not as relevant, as easy to prepare and as user-friendly as a lot of other foods out there," he said. Within 10 years, Bivens predicted, the soup can will be largely replaced by a plastic container.
In fact, Campbell is just getting ready to roll out nationally two newly packaged soups: "Soup to Go," a single serving in a microwaveable bowl; and "Ready-To-Serve" tomato soup, in a 32-ounce plastic jar.
Campbell's also is putting more emphasis on what it calls its "away from home" division, trying to boost sales of soups in restaurants and college and hospital cafeterias. "Down the road we're looking at kiosks, shopping malls, airports," said Campbell spokesman Jerry S. Buckley. "We recognize people are eating on the run, and we want to bring soup to where people are."
In Profile: Campbell Soup
Business: Makes and markets convenience food products worldwide; accounts for about 80 percent of all soup sold in the United States.
Brands: Campbell's, Franco-American, Godiva, Pepperidge Farm, Prego, Swanson and V8
Most popular soups: tomato, chicken noodle and cream of mushroom
Based: Camden, N.J.
Origins: Began in 1869 as a canning and preserving business; by 1899, chemist John Dorrance developed a way to can condensed soups.
1998 sales: $6.7 billion
1998 net income: $660 million
Yesterday's closing stock price: $42.12A, down 31Dcents
Ticker symbol: CPB on the NYSE
Web address: www.campbellsoups.com
SOURCES: Hoover's, Bloomberg News