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Campbell Soup CEO on how auto insurance inflation is influencing the snack business
Inflation-hit consumers are downsizing from more expensive bags of pretzels and chips.
Campbell’s Soup (CEC) surprised some on Wall Street this week when it reported volumes in its snacks division — which ranges from Snyder’s Lance pretzels to Cape Cod chips and Goldfish crackers — fell 1% in the most recent quarter.
Volumes fell 2% in the previous quarter.
“I think what you saw this quarter was a bit of normalization of this growth line [for snacks] and some increasing or growing pressure as it relates to the broader economy,” said Campbell Soup CEO Marcos Clouse counted Yahoo Finance (video above).
Clouse believes there is nothing “structurally” wrong with the company’s snack food business, which saw demand stabilize after Memorial Day.
But he acknowledges that a sticky inflationary environment is making consumers more cautious in supermarket aisles, although he stopped short of calling snacks a new “luxury.”
“If you’re a middle- or low-income family right now, you’re still dealing with high interest rates, higher rents, you’ve probably just taken a hit on your car insurance,” Clouse added.
Campbell isn’t the only one feeling pressure on snacks, once seen as immune to consumer spending cuts.
PepsiCo (PEP) recorded volumes in its Frito-Lay business in North America 2% drop in the first quarter. Owner of Slim Jim, Conagra Brands (Image: Disclosure)CAG) scored a Volume drop of 0.8% in the quarter.
“Snack categories, especially savory snacks, have seen slow readings. [sales tracker] data, as it was one of the last categories to feel [consumer] elasticities”, explained the BofA packaged food analyst Bryan Spillane in a customer note.
“As we approach summer (biggest snacking season) and promotional/merchandising activities potentially unlock incremental demand, snacking volumes may see some relief.”
The Earnings Recap
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Liquid sales: +6% year over year to $2.4 billion
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Gross Margin: 31.2% against 30.9% a year ago
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Adjusted EPS: +10% year over year to $0.75
What caught our attention the most
Wall Street weighs in
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“Better-than-expected EPS guidance incorporating Sovos and better-than-feared organic sales review should support modest outperformance for the stock, in our view.” – Stifel, Matthew Smith (Hold rating, $45 price target)
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“Core business challenges keep us on the sidelines.” – Jefferies, Rob Dickerson (Rating held, $44 price target)
The story continues
Against a mixed economic backdrop, CEOs are bracing for a contentious presidential election season that could weigh on what consumers buy, from soup to new cars. Ford (FORD) CEO Jim Farley assesses electoral risk in the latest episode of “Opening bid“podcast. Listen below.
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Brian Sozzi is the executive editor of Yahoo Finance. He is also the host of “Opening bid“podcast. Follow Sozzi on Twitter/X @BrianSozzi and so on LinkedIn. Tips on business, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to participate in Yahoo Finance Live? Email Brian Sozzi.
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