In an effort to accelerate the rate of innovation across Baking and Snacking portfolio, Campbell Soup Company (CPB) is going to build a 34,000 square-foot innovation center at its Pepperidge Farm facilities at an estimated cost of $30.0 million. Apart from this, the company will also upgrade its Pepperidge Farm headquarter.
The new facility will support the company for greater innovation of new products for both bakery and snacks in a much more convenient and cost-effective way. The new innovation facility will consist of a state-of-the–art pilot plant, cookery kitchens, scientific labs and meeting rooms. Moreover, the facility will be designed in an environment friendly way and will be equipped with techniques of harvesting daylight and conserving energy and water. Campbell is planning to execute the project in August 2011, subject to certain approval from the government, and finish it by the end of 2012.
Backing and snacking portfolio is the company’s second-largest revenue generator segment, which is innovated at its Pepperidge Farm and Arnott’s in Asia Pacific. After the completion of the project, Pepperidge Farm will have a total office area of approximately 115,000 square feet.
Apart from this, Campbell has recently divulged its new growth strategy, which will primarily focus on expanding the company’s three core categories of simple meals, baked snacks and healthy beverages. The company’s area of focus includes improvement in products and packaging and also expansion in international markets. Campbell is hopeful that the new strategy will yield higher sales growth and superior returns to shareholders.
The new strategic plan will involve investments, which will result in fiscal 2012 net sales growth to range between 0% and 2%, EBIT to fall in the range of 8% to 6% and EPS to decline in the range of 6% to 4%.
In the long term, Campbell looks forward to deliver annual sales growth of 3% to 4% with an adjusted EBIT growth of 4% to 6% and EPS rise of 5% to 7%
Prior to this, Campbell Soup underlined a series of initiatives to enhance its supply chain efficiency and reduce overhead costs. Under its new restructuring plan, the company will make new investments, and outsource and close some operations.
Campbellis expected to eliminate a total of approximately 770 positions across the organization by incurring total pre-tax costs of approximately $75.0 million. This represents about 4% of the company’s global workforce of 18,400. The company is planning to cut jobs by the end of July 2011. These initiatives are expected to generate annual pre-tax savings of approximately $60.0 million in fiscal 2012 and $70.0 million in fiscal 2014.
Campbell Soup is one of the world’s leading manufacturers of convenience food products. Furthermore, a strong portfolio of well-established brands, including Campbell’s, Erasco, Liebig, Pepperidge Farm, V8, Pace, Prego, Swanson and Arnott’s, offer a competitive edge to the company and strengths its well-established position in the market.
Nevertheless, Campbell Soup operates in a highly competitive food industry and experiences worldwide competition in all its principal products from such well-established rivals, such as General Mills Inc. (GIS), H. J. Heinz Company (HNZ) and Dole Foods Company Inc. (DOLE).
Currently, Campbell Soup has a Zacks #3 Rank, implying a short-term ‘Hold’ rating on the stock. The company retains a long-term ‘Neutral’ recommendation.
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