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Sales Woes Force Out Campbell's CEO -- WSJ

19 May 2018 6:32 am

Denise Morrison departs as turnaround sputters; some brands may be on the block
By Annie Gasparro 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 19, 2018).

Campbell Soup Co. chief Denise Morrison stepped down on Friday and the company said it might sell some brands, after a bet on fresher foods under her leadership failed to revive sales.

Campbell's U.S. soup sales -- its core business -- fell in all but one year of Ms. Morrison's seven-year tenure. Efforts to enter the faster-growing fresh-food business, through the acquisition of Bolthouse Farms juice for instance, hit their own hurdles.

Campbell's shares fell 12% on Friday as the company also reported worse-than-expected earnings and lowered its guidance for the year.

Like other American packaged-food mainstays, Campbell has been under intense pressure to satisfy customers seeking healthier and more convenient foods.

Decades ago companies like Campbell, Kellogg Co. and General Mills Inc. introduced consistent and in many cases long-lasting products that routinely filled American pantries. Beyond soup, Campbell makes Pepperidge Farm cookies, V8 juices, SpaghettiOs and more. But those traditional suppliers are now squeezed on one end by higher-end, often fresher brands and on the other by cheaper store labels that grocers have added aggressively in recent years.

Campbell said Ms. Morrison, 64 years old, will be succeeded for now by board member Keith McLoughlin while the company undertakes a review of its product portfolio, which could involve selling some brands and distributing resources differently among others.

"We must take a fresh look...with urgency," Mr. McLoughlin said on a conference call to discuss earnings for the company's latest quarter. Ms. Morrison wasn't on the call.

"Everything is on the table," Mr. McLoughlin said. "There are no sacred cows."

Some analysts think Kraft Heinz Co., which was formed in a roughly $49 billion merger in 2015, could try to acquire Campbell. To succeed, the suitors would have to win over Campbell's insider shareholders, including the Campbell Trust and Mary Alice Dorrance Malone, a board member and heiress to the company's founders. Together those groups own about 42% of Campbell's shares, according to Factset.

Ms. Morrison is the 15th CEO to leave a major packaged-food or meat company since the start of 2016, said JP Morgan analyst Ken Goldman. Last year, Kellogg, General Mills, Mondelez International Inc. and Hershey Co. all got new chiefs. Shares in the sector are down 16% this year, while the overall S&P 500 is up 1.6%.

The failure of big food makers to anticipate consumer demand for simpler, recognizable ingredients and fresher foods has left them playing catch-up to newer, smaller rivals.

"Our company has clearly faced challenges," said Mr. McLoughlin, 61, who has been on Campbell's board since 2016. "Some of those are external factors that are impacting the entire industry and others stem from our execution."

Ms. Morrison was acutely aware of what she often called a "seismic shift" in the way people are eating. She was determined to win over millennials and transform Campbell into a broader "health and well being" company.

Ms. Morrison diversified the business through acquisitions that she hoped would counteract sales declines for its soup, Swanson broth and Prego pasta sauce. In 2012 Campbell bought Bolthouse Farms, which sells baby carrots and refrigerated juices. A year later, kids' food brand Plum Organics was added. Then, Garden Fresh Gourmet salsa, and last year Pacific Foods organic soups.

Campbell in December said it would acquire snack maker Snyder's-Lance Inc. for $6.1 billion, including debt, its biggest deal ever. Ms. Morrison boasted at the time that the deal meant Campbell's product line covered everything "from soup to nuts."

Analysts saw it as a break from her plan to focus on fresher foods.

Ms. Morrison has said it was hard to push a traditional, century-old company to take risks like the Bolthouse Farms purchase. But that deal didn't pay off as she hoped. Fresh foods have proved hard to source and manage when weather affects produce harvests.

Campbell, which is based in Camden, N.J., had to recall some beverages from stores due to food-safety issues. The expansion into the fresh business hurt profit margins, while the company's core brands, including U.S. soup, continued to falter.

Over the years, Ms. Morrison introduced organic versions of classic Campbell's soups and a new line of soups called Well Yes that are made with trendy ingredients like quinoa. Lately, she had talked about introducing sippable soups to try to make people think of soup as an on-the-go snack.

Last year, Campbell's soup business was dealt a major setback when the company couldn't reach an agreement with Walmart Inc. over promotional pricing.

Walmart typically generates about 20% of Campbell's overall sales, so losing shelf space for soup there hurt Campbell's sales for months. In its just-ended fiscal third quarter, Campbell's U.S. soup sales fell 1%.

Bernstein analyst Alexia Howard said the continued missteps in execution had left investors wondering if Ms. Morrison would be replaced.

Campbell finance chief Anthony DiSilvestro said its fresh business has been hit by low crop yields in carrots, lower manufacturing yields and higher costs for transportation and logistics.

"The return to profitability has proven certainly more challenging than we anticipated," he said on the company's conference call. "We're going to do a deeper dive in the fourth quarter...and figure out what we're going to do."

Ms. Morrison's departure further slims the ranks of women running big U.S. companies. Women now run 23 S&P 500 companies, or 4.6% of the total, according to Catalyst, a research group.

Recently Margo Georgiadis left Mattel Inc. after a year in the job. Ms. Georgiadis, who had been hired from Alphabet Inc.'s Google unit, had been unable to reverse a sales slump at the toy maker. Other high-profile women to exit CEO posts in the last year include Irene Rosenfeld, who stepped down from the helm at Mondelez in November, and Avon Products Inc.'s Sheri McCoy, who left in February.

Meg Whitman stepped down late last year as chief of Hewlett Packard Enterprise Co. after a six-year run, and Staples Inc. replaced Shira Goodman as its CEO earlier this year.

--Vanessa Fuhrmans contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

May 19, 2018 02:32 ET (06:32 GMT)

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