Private Label Brands Eat Market Share of Soup Giant

By @ibtimesau on

Campbell Soup's (NYSE: CPB) share of the soup market is shrinking because of changing consumer food preference as more people opt for healthier fares.  This, in turn, has benefitted private-label brands whose sales are now eating into the soup giant's sales.

While Campbell reported $2 billion revenues, it was actually flat compared to the same quarter in 2013, prompting the New Jersey-based company to lower its full-year sales guidance to 3 per cent growth from its previous guidance of 4 to 5 per cent. The firm also lowered its earnings per share guidance to the lower end of its prior guidance of $2.53 per share, reports The Motley Fool.

One company benefitting from Campbell's loss is Hain Celestial (NASDAQ: HAIN), which was trading $87.65 on Monday, up by 26 cents or 0.30 per cent.

Hain, based in Lake Success, New York, is living up to the name of its city by riding on the global natural and organic food craze, resulting in its shares up by over 32 per cent in the past year and meeting and even exceeding its earnings estimates in all four quarters. In May, Hain purchased Rudi's Organic Baker, which provided the firm with more presence in the bread market.

Thus, it comes not as a surprise that in the past three months, 6 analysts gave Hain shares as "Strong Buy" recommendation, while 8 gave it a "Buy" recommendation.

Another soup company that is riding on the natural food craze is Soupman, Inc. (OTC: SOUP). The New York-based company unveiled three new flavours at the 2014 Food Marketing Institute Connect Show held on June 10-13 at the McCormick Place in Chicago.  These are the Chicken Gumbo, Crab Corn Chowder and Jam-ba LAYA, packed in eco-friendly cartons.

These three new flavours are made of natural, high-quality and fresh-tasting ingredients, in keeping true to the known tradition of Soupman's extraordinary formulations and flavours. It also reformulated its lentil soup by making it all natural and gluten-free to make it a new gold standard.

Soupman CEO Lloyd Sugarman said in a statement, "Currently, we are shelved alongside the industry leaders in the soup aisle in more than 3,000 supermarkets ... But we expect that number to increase when key buyers and other industry leaders sample our soups at FMI."

As for soup giant Campbell, the company tried to control its expenses by shuttering two facilities and cutting manpower by 700 workers. Campbell is also experiencing some difficulty in its new soup products despite increased promotional activity.

Since the 2008 global financial crisis, Campbell has been struggling financially, reflected in the drop of its profit to $680 million in 2012 from $736 million in 2009.

Nevertheless, industry experts believe the food industry in general enjoys having a good business model tat is stable because despite the hard times and the need for families to tighten belts, people have to eat.

Motley Fool concludes its analysis of the soup industry that as investors opt for healthier options, it would place continued downward pressure on Campbell's. But at the same time, "Investors looking to play the food industry will likely find better investments in companies with more exposure to faster growing markets, such as organics or emerging markets."

Hains, Soupman, Mondelez International and other soup makers that have responded to the changing consumer taste will surely drink to that.

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