Campbell Soup stated on Thursday that it is selling its international and fresh food businesses as the 149-year-old condensed soup maker flounders to regain its financial footing and refocus on its signature packaged foods.
The company is unwinding efforts by former CEO Denise Morrison to branch into healthier and more fresh foods to double down on product lines it knows well, such as snacks, meals, and beverages. Morrison’s unexpected departure was announced in May when the company said it was conducting a top-to-bottom review of its holdings after releasing what the executives called “unacceptable” earnings.
The board is considered a “full slate of strategic option, including optimizing the portfolio, divesting businesses, splitting the company, and pursuing a sale,” said Keith McLoughlin, the company’s interim chief executive officer, in a statement.
The board concluded that the “best path forward” is to “focus the company on two core businesses in the North American market.”
Executives also said that the company was chasing too many initiatives at once and they had little reason or justification to get into fresh food, where it had had minimum experience and zero reputation.
“We depended too much on M&A to shape our business strategy,” said McLoughlin on Thursday during an extended 90-minute conference call to discuss its plans.
Its legacy businesses, however, are challenged and mature. The sales in Campbell’s US soup business during its fiscal fourth quarter finished July 29 slipped 14 percent. It no longer was able to simply raise prices to counter shrinking demand, the company said in its earnings release on Thursday.
After it has sold off the units, Campbell’s expected earnings of $2.45 a share to $2.53, a nominal increase from $2.40 a share to $2.50 without those sales.
Against this situation, McLoughlin emphasized several times on the call that the company is continuing the evaluation of all options as it moves forward. In the process, he had hinted for a potential sale in the future.
Campbell has been under pressure from activist shareholder Third Point, which has previously called a sale the sole justifiable outcome of the review. When the company announced its review last May, it also triggered speculation the process could end in a sale.
Warren Buffet, the CEO of Berkshire Hathaway, slugged speculations that Kraft Heinz would make a play for Campbell Soup, stating on Thursday it is “very hard” to offer a premium for a packaged food company.
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