Campbell Soup Company (NYSE: CPB) has a new special sauce
Few brands are as iconic as Campbell Soup Company (NYSE: CPB). Just ask Andy Warhol, the American visual artist who made the company’s red and white cans so famous in the 1960s that they’re still on show and instantly recognizable in some of the most important museums in the world. Consumer tastes have been changing, however, and the company is now looking to an exclusive special sauce it hopes has the right ingredients to jumpstart growth.
Campbell’s in March completed the $2.7 billion acquisition of Sovos Brands, a holding firm best known for its Rao’s Homemade line of sauces that originated from an old school Italian restaurant in New York City that’s still considered one of the hardest reservations to get in the country. The growing business also includes premium pastas and frozen pizzas that can give Campbell’s a fresher look and also benefit from its vast supply chain infrastructure. It’s a win-win combination that CEO Mark Clouse says will soon result in a one-billion dollar brand.
“I could not be more happy with how the Rao’s integration’s going,” Clouse said in a recent earnings call, adding that the brand had been exceeding its expectations for household penetration and growth among younger consumers. The company updated its 2024 full-year guidance to reflect the momentum and said it’s expecting net sales growth in the range of 3% to 4%. Campbell’s is rolling the Sovos Brands portfolio into a business unit it’s calling “Distinctive Brands,” and Clouse promised more details will emerge at an upcoming meeting with investors in September.
Despite its favored spot in museums and grandma’s cupboard, Campbell’s is moving to modernize its offerings in a market that increasingly values novelty and premium products over the mass produced conformity that became a fixture of Warhol’s pop art movement. It’s also confronting rising pressure from a segment of increasingly cost-conscious customers, with its shares declining 2.3% over the past year even though it pays a dividend of more than 3%. While not performing as badly as some competitors such as Kraft Heinz (NASDAQ: KHC)—which declined 11% over the same period—the stagnant stock price suggests investors still haven’t been completely sold on the saucy lift Campbell’s thinks it can get from Rao’s.
Warhol famously said he first chose to paint the Campbell’s soup cans because he “used to have the same lunch every day, for twenty years.” Modern diners seem to be a little more fickle, and even the most recognizable brands will need to adapt to survive.
