Campbell Soup Co. is abandoning its plan to freshen up its portfolio with refrigerated soups, carrots and fresh juices with a divesture of its Campbell Fresh and Campbell International businesses.
Campbell has tapped Goldman Sachs and Centerview Partners to sell its Campbell Fresh division, which includes Bolthouse Farms, Garden Fresh Gourmet and its refrigerated soup business—fiscal 2018 sales for which totaled about $2.1 billion—and its Campbell International unit, which consists of Arnott’s and the Kelsen Group, along with manufacturing operations in Indonesia and Malaysia and its businesses in Hong Kong and Japan. The Camden, N.J.-based company said proceeds from the divestitures—which were made based on results of a corporate operational review that began in May following weak sales and reportedly rocky integration of snack maker Snyder’s-Lance—will be used to significantly reduce debt while also leaving the door open for a full sale.
Describing fiscal 2018 “as a challenging year for Campbell,” which included the abrupt departure of its longtime CEO Denise Morrison in May, interim CEO Keith McLoughlin said the “results and our outlook for fiscal 2019 reinforce the need for the significant actions ... as part of our comprehensive, board-led strategy and portfolio review. We believe these actions will put us on a path to create sustainable shareholder value.”
Campbell’s board of directors considered a full slate of strategic options, McLoughlin said, “including optimizing the portfolio, divesting businesses, splitting the company and pursuing a sale,” and decided that “the best path forward to drive shareholder value is to focus the company on two core businesses in the North American market with a proven consumer packaged goods business model. Importantly, the board remains open and committed to evaluating all strategic options to enhance value in the future." McLoughlin noted that the divestures will enable Campbell’s to have “a more focused portfolio” and allow it to increase its cost-savings target by $150 million, which he said will be achieved by streamlining its organizational structure, expanding its zero-based budgeting and ongoing optimization of its manufacturing network.
In turn, Campbell’s divestitures of its noncore businesses will enable it to closely focus on its two distinct businesses in its core North American market: Campbell Snacks and Campbell Meals and Beverages, with the proceeds funneled to significantly reduce debt and increase its cost savings target to $945 million by 2022.
“Our plan will build upon our existing strengths,” McLoughlin said. “Our new leadership team will concentrate on significantly improving operational discipline through a rigorous management model that aligns the enterprise from strategy through execution. We are moving forward with a sense of urgency to complete these changes in fiscal 2019, setting the foundation for sustainable, profitable growth in fiscal 2020 and beyond.”
Additionally, McLoughlin said Campbell’s board and new management team “are committed to deleveraging the company, retaining our investment grade credit rating and maintaining our dividend. We will pursue further actions in addition to those announced today to optimize our portfolio and performance.”
Going forward, Campbell’s new management team will leverage consumer insights and trends to drive relevance by focusing on health, snacking and convenience with two differentiated portfolio roles.