Shop Talk
Retailers, consumers and prices
Campbell Soup CEO blasts rival Progresso
*Corrects blog post from Tuesday to show General Mills’ “World Recipes” soups are ”ready-to-serve” not “ready-to-drink”.
It is not every day that CEOs truly speak their minds about their rivals in public, so we thought we would share.
During Campbell Soup Co’s annual meeting yesterday with analysts and investors, CEO Douglas Conant fielded a question from an analyst about the company’s marketing messaging. The analyst said rival Progresso Soup owner General Mills Inc had recently said it felt that the entire soup category was over-emphasizing the message of convenience and health in its marketing and under-emphasizing taste.
Being the category leader, of course Conant took it to heart.
“This Progresso thing is a joke, I’m sorry,” Conant said. “If there was such an opportunity to talk about taste, why aren’t they talking about it? Why aren’t they growing? Why aren’t they performing? They haven’t innovated, they haven’t carried a convincing message. They’ve lost share, they’ve lost their way, they’re not relevant with the retailer in a significant way in the category. They ought to follow some of their own advice.”
He said the biggest innovation he’s seen from General Mills is in the area of fiber, noting it “might have worked for cereal. It didn’t particularly work well for soup.”
“They’re a small share player in a big pond,” Conant said.
Check Out Line: Beware the ides of rising costs for food companies
Check out fears of rising costs for U.S. food companies.
Rising commodity costs and promotional discounts are pressuring profit margins for food companies and analysts said more may be on the horizon.
General Mills, whose brands include Cheerios, Green Giant and Haagen-Dasz, said on Tuesday that the gross margin in its most recent quarter was flat, excluding higher ad costs and other items.
On Thursday, General Mills said it expects pricing and promotions to look the same over the next six months as they have the prior half year. It also sees some players in the sector moderating their promotional activity as commodity costs rise and sees raising list prices in some categories after that.
The company’s comments were seen as a harbinger of things to come, especially since its 2011 earnings forecast missed Wall Street estimates.
“I think ‘canary in the coal mine’ is a good way to think about it,” Janney Capital Markets analyst Jonathan Feeney said. “This is the first company to talk since Wal-Mart’s rollbacks.”
Earlier this year, Wal-Mart introduced discounts, which it calls rollbacks, on thousands of items, leading other stores and brands to cut prices.
Check Out Line: General Mills’ new Cheerios a hit, but private label bites
Check out the power of new products to get shoppers going.
General Mills reported some pretty good results for its third quarter as shoppers gobbled up its new chocolate Cheerios cereal and the company got a boost from lower commodity costs.
But the sailing wasn’t entirely smooth. Sure, General Mills boosted advertising and media spending by 33 percent. Despite that effort to raise consumer awareness and its choco Cheerios hit, overall sales volume was flat.
Apparently, the economy and unemployment are still painful to most consumers, many of whom seem to still prefer cheaper private label items to branded foods.
Still, General Mills, which also makes Yoplait yogurt and Progresso soup, beat Wall Street’s forecast with a stronger than expected profit, and it even raised it profit outlook.
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Check Out Line: More dark clouds in retailing
Check out more bad news in the retail sector.
U.S. retail sales slumped for the second straight month, coming in weaker than analysts had expected due to sluggish gasoline and electronic goods purchases. Meanwhile, U.S. foreclosure activity in April jumped to a record high, further pressuring home prices and making a recovery tougher.
Fashion company Liz Claiborne posted a deeper-than-expected quarterly loss as retail sales remained weak in the recession. The owner of Juicy Couture, Kate Spade, Lucky Brand and Mexx labels is cutting jobs, scaling back expansion and offering more lower priced items to combat the slowdown.
Meanwhile, General Growth chose a company to provide its bankruptcy financing. The No. 2 U.S. mall owner filed for bankruptcy in April when it could not refinance its maturing loans due to tightness in the credit markets.
Even overseas, retailers in emerging economies are opening special shops for the poor as the recession squeezes the fledgling middle classes.
Some companies are benefiting from the consumer cutbacks, however, as General Mills, a maker of cereal, yogurt and soup, said it expects consumers who have been eating more meals at home to keep doing it even after the economy recovers.
And consumers obviously love their soft drinks as Dr Pepper Snapple reported a higher-than-expected quarterly profit on demand for value-priced drinks.
Check Out Line: Tale of two trends for General Mills
Check Out quarterly results at General Mills.
The maker of Progresso soups, Hamburger Helper and Green Giant frozen vegetables posted a disappointing profit for its fiscal third quarter. Even its slightly higher full-year outlook is below Wall Street’s expectations.
But here’s an interesting twist — the company saw strong sales of cereals, soups, frozen vegetables and refrigerated dough during the quarter, in a continuing trend whereby consumers are eating more meals at home to save some money in the recession. But while that helped sales in the U.S. retail segment, the bakery and food service segment languished, as consumer thrift led to fewer trips to restaurants and cafeterias.
Still, the company is working to capitalize on consumers’ new habits. Later this year, General Mills will unveil new items across categories as it tries to entice shoppers to buy its brands, CEO Ken Powell said in an interview.
* Today’s speakers at the Reuters Food and Agriculture Summit 2009 include Panera Bread Co-Chief Operating Officer William Moreton, Constellation Brands CEO Robert Sands, and Monsanto executives Brett Begemann and David Stark.
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Check Out Line: Food makers surprise Wall St on the upside
Check out those higher prices at the grocery store helping General Mills and ConAgra to post quarterly results above Wall Street expectations.
Both food makers reported lower profits on a net basis.
But excluding various items, their earnings were stronger than analysts were expecting.
General Mills, the maker of Progresso soup and Cheerios cereal, has benefited along with other food companies as consumers buy more soup, cake mixes and yogurt to save money by eating at home more often.
It raised its full-year forecast.
ConAgra was helped by strong results at its commercial foods business, which sells specialty potatoes, seasonings and other items.
But while General Mills was able to raise prices and sell more retail food in the United States, ConAgra saw sales volume fall in its consumer good business, hurt by weakness at its Banquet frozen dinner and Wesson cooking oil brands.
Check Out Line: Bad jobs data follows bad sales data
Check out more bad news for retailers headed into the holiday season.
On Friday, fresh data showed the U.S. economy shed 240,000 jobs in October, worse than the 200,000 decline that was forecast. The Labor Department said the national unemployment rate shot up to 6.5 percent from 6.1 percent in September — the highest since March 1994.
That disappointing report came a day after U.S. retail chains reported their worst October sales results in 35 years.
“October was a disaster of epic proportions for most of the retailing community, as continued economic negatives resulted in a ‘shopping strike’ by consumers and led to material misses by a number of key players and a decidedly more cautious outlook from virtually every player in the apparel sector,” wrote Eric Beder, a retail analyst for Brean Murray, Carret & Co.
Meanwhile, a new Consumer Reports holiday shopping poll found that 76 percent of Americans plan to cut back on spending on holiday expenses like gifts, travel, entertaining and decorations. Among the holiday spending cutbacks, 59 percent said they will be giving fewer gifts, and nearly half said they will be cutting their travel plans.
The weak reports are all darkening the outlook for holiday sales, which were never expected to be great. Now consumers can expect retailers to roll out a plethora of deals and discounts to grab whatever portion of a shopper’s wallet they can get this holiday.
On Friday, Wal-Mart’s Sams’ Club said that starting Nov. 14, non-members who sign up in any location nationwide before Nov. 26 will receive a $10 Sam’s Club gift card. The gift card is good for purchases in its clubs starting Nov. 28, the day after Thanksgiving, when Sam’s Club will open at 5 a.m. and provide a free breakfast through 8 a.m.
Darkening the outlook of sales, of course. The bubble of inflation finally bursted and everyone is scrambling for a solution. Just like a ballon, you can only repair it so many times before you have to throw it away and start on a new one. That is why Obama got elected. People are hoping that the fresh new look will start something new and create growth. I tend to agree.The problem is that companies have gotten so greedy that they no longer care about the jobs americans need to survive. Make the product in China and sell it here. Make the product in Mexico and sell it here. Am I mad that GM wants to close its doors after it has jacked people for all these years at those dealerships? I wont even get into AIG.You want to stimulate the economy? Bring the manufacturing plants back to the US, burn something other than crude oil, and help the unfortunate in this market by wiping their credit slate clean.
Check Out Line: General Mills Cheers Investors
Check out rising profit at General Mills
The maker of Cheerios cereal, Green Giant vegetables and Yoplait yogurt said cost cuts and worldwide demand aided results in its third quarter. Sales rose 16 percent in both its snacks and baking products divisions and 14 percent for Yoplait.
Still, not all is rosy in this challenging economic environment. General Mills expects higher input costs in the current quarter and said it plans to invest in consumer marketing to help drive sales.
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(Photo: General Mills image library)
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