Tuesday, November 25, 2008


Judging by Dayna Neumann’s pantry, Campbell Soup Co. may turn the U.S. downturn into rising sales, just as it did during the past two contractions.

The Neumann family in Louisville, Ky., is bracing “for a rough road ahead,” the 32-year-old working mother said. After her 30-year-old husband, Nick, substituted $1.75 Campbell’s Chunky soup for restaurant lunches in September, she started buying as many as 15 cans at a time.

The recession will make 2009 “the year of condensed soup, driven by the backdrop of severe economic pressure on the consumer,” Mitchell Pinheiro, a Philadelphia analyst at Janney Montgomery Scott, wrote last week.

The appeal of a cheap meal is turning the world’s largest soup maker into an outperformer in hard times. Campbell shares led the 12-company Standard & Poor’s Packaged Foods Index over the past three months.

Campbell is “acknowledged as a way to weather a recession,” said Edgar Roesch, a Soleil Securities Corp. analyst in New York.

The Camden, N.J., soup maker has survived 28 recessions, two world wars and the Great Depression over its 139-year existence. “Historically, Campbell’s soup sales have done well during tough economic times as consumers look for value,” said spokesman Anthony Sanzio.

Campbell’s U.S. soup sales accelerated 6 percent in the 12 months that ended in July 2001, a period that included part of a recession running from March through November of that year, according to the National Bureau of Economic Research in Cambridge, Mass.

Soup sales rose 7 percent in the year ending in July 1990 and 5 percent in the next 12 months, overlapping the contraction from July 1990 through March 1991.

On Monday, Campbell reported U.S. soup sales increased 12 percent in the latest quarter. But the company also said those higher soup sales were watered down by commodity-hedging losses in its first quarter, ending Nov. 2, resulting in a 3.7 percent decline in profits even as more cash-strapped consumers reached for its brands.

Net income fell to $260 million (71 cents a share) while sales climbed 3 percent to $2.25 billion, missing analysts’ estimates of $2.31 billion.

Campbell shares fell $2.75, or 7.6 percent, to close at $33.52 Monday in New York Stock Exchange composite trading.

Terry Bivens, a JPMorgan Chase & Co. analyst in New York, just raised his 12-month target price to $44.50 on Nov. 17.

Mr. Pinheiro recommended buying the shares last week, citing condensed soup as the company’s “most profitable business.”

“There will not be a recession in eating,” said Harry Balzer, who has studied U.S. eating habits for more than 30 years for NPD Group, a market research firm based in Port Washington, N.Y. “There will only be winners and losers.”

Rising home foreclosures and unemployment that pushed consumer confidence to its lowest level in October triggered “a shift to value,” Mr. Balzer said.

Fifty-seven percent of households are serving leftovers for dinner, according to Mr. Balzer, versus an historic mean of 55 percent. U.S. workers took an average of 42 homemade meals to work in the 12 months through February, the most since 1995, he said.

The current downturn will give an advantage to food companies that help consumers “moderate food costs without cooking more,” Mr. Balzer said.

Campbell controls about 70 percent of the $5 billion-a-year U.S. soup market and has been offering two-cans-for-$1 deals recently to maintain the lead.

Jo-Lynne Shane in Philadelphia stopped making chicken marsala and other costly dishes after her husband, Paul, 39, urged her to spend less on groceries. The 36-year-old homemaker, who contributes to the Silicon Valley Moms blog that offers how-to-spend-less advice, serves Campbell’s Chicken & Stars soup to her three children and makes casseroles with Cream of Mushroom.

“My husband was bugging me to cut back,” Mrs. Shane said. “He said he could even stand tuna casserole once a month.”

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