NEW JERSEY: The Campbell Soup Company is planning to heighten its focus on brand building and move away from promotions, which have not delivered the desired sales results.
The food group reported a 1% fall in revenues during the last quarter, to $2.1bn (€1.5bn; £1.3bn).
Its marketing and selling budget reached $291m in this period, measured against $301m a year earlier, a consequence of "reduced levels of advertising" and "savings initiatives".
Adspend behind soup and sauces fell in the US, partly offset by greater support regarding beverages, like V8, and Pepperidge Farm foods.
By contrast, promotions secured more substantial resources, although Craig Owens, Campbell's chief financial officer, argued this failed to "yield the anticipated volume lifts" for its soup range.
"Our increased promotional spending drove a two point decline in sales, accounting for the overall decline in organic sales, as volume mix and pricing were comparable to a year ago," he said on a conference call.
Owens also revealed trade expenditure hit margins, slipping from 40.5% to 39.4% year on year, reflecting a disappointing return on investment in the last six months.
"We haven't got the kind of lifts that would have paid for the kind of promotional activity that we've done across the first half of the year," Owens continued.
Specifically discussing the prior quarter, Owens suggested a combination of forces proved challenging.
"US soup sales were negatively impacted by our increased promotional spending and also by movements in customer inventories.
"While our sales were down, I should point out that we achieved strong externally measured consumer takeaway volume in the second quarter."
Quoting IRI panel data and internal statistics, the firm estimated soup category value sales dropped by 3.4% in the last 52 weeks.
Campebell's was off 4.1%, while rival national brands fell by 1.6% and private label by 3.2%, demonstrating the broad nature of the slump.
"Campbell and other branded players had increased volumes in the soup category," Owens added.
"While the volume performance has been positive, the gains were not sufficient ultimately to translate into dollar gains."
The last quarter generated a slight improvement, but a sector-wide volume gain of 5.9% only equated to a 1.7% revenue increase.
Among Campbell's more innovative methods of engaging shoppers is an umbrella ad campaign covering ready-to-serve and condensed soups.
"Our market research would indicate that our new portfolio advertising campaign is effective and that consumers report a positive impact," said Owens.
Based on such success, the company intends to refocus its future communications approach.
"Looking ahead, we'll begin to shift our marketing mix from trade to brand building activities, including this advertising and additional consumer spending," said Owens.
"This shift is designed to improve our price realisation while building our brand equity.
"We recognise that the shift will negatively impact volumes in the short term, but we feel it is the right move toward improved category health."
Data sourced from Seeking Alpha; additional content by Warc staff