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  • ​Smaller Players Turn Up The Heat In Soup Market, Soup Giant Loses 1 comment
    May 30, 2014 2:53 PM | about stocks: SOUP

    May has been a volatile month for the soup market and the worst may still not be over, as competition continues to heat up due to smaller niche players.

    Major U.S. soup manufacturer Campbell's Soup Co. (NYSE: CPB) is still a "no-buy" this month, if not for the entire quarter, which CNBC's Cramer's Mad Dash host Jim Cramer referred to as a "horrendous quarter."

    The company's stocks have been fluctuating throughout the week, trading between $44.56 and $44.90, based on latest market data from Yahoo! Finance. The same is true for the movement of its stocks the past three months, which closed at $43.31 in March, peaked in April at $45.68, then swiftly plunged to 44.06 in mid-May.

    "It's too quizzical for me. It's too 'now you hate it now you don't'-- it's not worthy of that," said Cramer in a syndicated video posted by Yahoo! Finance. Cramer gave Goldman Sach's call that CPB was a buy last week a thumbs down.

    Declining Shares

    Reuters said CPB's downdraft translated to a seven percent decline on Monday. Revenues were also lackluster for the company-Motley Fool reported that CPB posted an insignificant revenue increase this quarter of $10 million, with earnings reaching $1.97 billion this year as compared with the $1.96 billion it earned in Q3 of last year.

    Seasonality also didn't work well for CPB. Reuters said the company's soup sales was disappointing in winter, when soup sales were expected to get a boost.

    Reuters added that the company's bid in the U.S. soup market has significantly decreased by 10 percent in a decade to 47 percent last year from 57 percent in 2003. Utilizing data from Euromonitor, the news agency said that this was due to increased competition with private labels and smaller soup makers "offering healthier options" and premium soups.

    Campbell's soup products were apparently high in sodium, sources like Motley Fool and TheStreet noted.

    "Young people don't want to buy canned products with a lot of sodium," Cramer said. "They want to buy all-natural foods, much like what Hain Celestial Group has to offer," he added.

    Meanwhile, Hain Celestial Group (Nasdaq: HAIN), one of Campbell's rivals, is on a roll, increasing its earnings by 22 percent to $557.4 million this year. The same goes for its adjusted earnings per share which increased by 22 percent to $0.88.

    General Mills, Inc. (NYSE: GIS), maker of CPB's biggest rival, Progresso, too seemed profitable this quarter. Cramer said he'd buy into GIS than invest in Campbell's. "I'd better go with General Mills. They got soup and they got better management than Campbell's," he said.

    GIS. has been recovering the past few weeks from two disappointing quarters, as compared to CPB. GIS shares dipped to $46.86 in November, but has since been on a steady increase. Its stocks closed at $54.24 on Wednesday.

    Cramer is not giving up entirely on CPB though; the Action Alerts PLUS co-manager told TheStreet he'll buy CPB when its yields rise by 3 percent. CPB expects to see a 3 percent increase in revenues in July.

    Smaller Niche Players Win

    There is definitely money to be made in the other end of the spectrum as smaller private labels and publicly-traded companies continue to capture a sophisticated soup market. Reuters pointed out that smaller niche players such as Pacific of Oregon, Harris Foods Co. and Amy's Kitchen are soup companies to watch for right now.

    Another smaller player, Soupman, Inc. (OT​CBB: SOUP), maker of iconic soup line The ​OriginalSoupman, is also heating up the soup aisles despite edging lower this week on the stock market. The "small cap with a blue-chip brand name" is pretty big on healthy, organic and gluten-free soups, which is consistent with the market's health-focused preference.

    The company is also continuously expanding its line of heat-and-serve soups, introducing three new flavors-Jambalaya, Chicken Gumbo, and Crab and Corn Chowder- to its line in March. The has also switched to Tetra Pak's shelf-stable Tetra Recart cartons-which are a healthier and safer packaging choice than tin cans-early this year to augment its distribution channels.

    Additionally, the company has also diversified into offering new franchise models-a new restaurant model called Al's Famous New York Delicatessen and Restaurant, which has opened in a few Mohegan Resorts Casino branches, and a Soup Mobile model-to tap more customers.

    Dealer's Choice

    In related news, retailers are also playing a bigger role in influencing the sales and profitability of niche soup players. Retail Leader notes that retailers are increasing the shelf space of fresh soups in soup aisles across the country as more discerning shoppers increasingly prefer taking home fresh and organic soups from the chilled section of supermarkets.

    "Obviously there's a fresh factor. More people when they try our soups the first time think it's homemade. That's what we're going for," Greg Powers, chief operating officer of Boulder Soup Works told Retail Leader. Colorado-based Boulder Soup Works has been selling fresh and gluten-free soups at Whole Foods Market since 2009.

    Boulder Soup Works is continuously gaining from the fresh soup trend, which has boosted its sales from 115 percent to 120 percent annually since 2009. The company sees an even faster growth rate through 2015, Powers said.

    Retailers are also leaning towards offering "exotic" soup varieties to customers. Chilled soup maker Kettle Cuisine from Chelsea, Massachusetts is one company that has successfully capitalized on this trend. The soup maker offers curious flavors such as Thai Curry Chicken, Moroccan Lamb, Mediterranean Eggplant, and Yankee Bean, among many.

    "We do a lot of innovation because retailers are looking for those products that are on the periphery that they can bring in to keep loyal shoppers coming back by always having something new and different," Kettle Cuisine's vice president of marketing Levon Kurkjian told Retail Leader.

    The canned/ambient soup segment is worth three-fourths of the overall value of the US soup market, an independent market research from Reportbuyer.com stated. Out of this share, private label has the highest volume, especially in the Chilled Soup category, with 25 percent.

    The report notes that while the private label companies still haven't established solid footing in the US, they could "become a serious threat" to national brands moving forward.

    To prevent losing shares to private labels, Reportbuyer.com advises big-name brands to beef up campaigns in retaining consumers or targeting new ones.

    "Not only do a large proportion of US consumers, in certain categories at least, highlight that specific consumer trends have an influence on their consumption, this translates into a significant proportion of actual value being directly influenced as well," the report stated.

    "Consumers are therefore acting on these trends enough to ensure that targeting them, in the right categories, is essential to success," the report added.

    Stocks: SOUP
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    Great update. I agree, if they want to keep people buying their soup they need to follow the trend of what people want--and that's natural ingredients
    31 May 2014, 06:48 PM Reply Like
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