USA – Campbell Soup Company, has announced significant actions to sell its international fresh food businesses to focus and improve the company’s portfolio, and that the proceeds will be used to significantly reduce debt.
According to the company, it is selling its non-core businesses as part of its Board-led strategy and portfolio review to improve performance and drive shareholder value.
Campbell has engaged Goldman Sachs and Centerview Partners to commence a process to divest its Campbell International and Campbell Fresh businesses in a manner that maximizes value.
Campbell Fresh includes Bolthouse Farms, Garden Fresh Gourmet and the company’s refrigerated soup business. Fiscal 2018 net sales of these businesses totaled approximately US$2.1 billion.
Proceeds from the divestitures will be used to significantly reduce debt.
The company adds that it is focusing on two distinct businesses, Campbell Snacks and Campbell Meals and Beverages, in its core North American market, to increase its cost savings target to US$945 million by FY2022, including the expected Snyder’s-Lance savings.
“Campbell’s Board of Directors considered a full slate of strategic options, including optimizing the portfolio, divesting businesses, splitting the company, and pursuing a sale.
The Board concluded that, at this time, 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,” said Campbell’s interim President and CEO Keith McLoughlin.
Building focus on North American market
Campbell added that it will continue to provide consumers with great tasting, high-quality real food.
Across the portfolio, the company’s brands will leverage consumer insights and trends to drive relevance, including health and well-being, snacking and convenience. Each of Campbell’s brands will be managed within a focused and disciplined framework of two differentiated portfolio roles.
These roles include; Drive for Profitable Growth, where the powerful and exciting brands will be managed to grow disproportionately relative to the categories in which they compete.
These include leading brands such as Cape Cod, Goldfish, Kettle Brand, Lance, Late July, Pace, Pacific, Pepperidge Farm Farmhouse and Milano cookies, Prego and Snyder’s of Hanover.
The company’s second role is to Maximize Margin & Cash Flow, to which these at-scale brands will be managed to generate consistent profit and cash flow.
These include leading brands such as Campbell’s soup, Pepperidge Farm fresh bakery, SpaghettiOs and V8.
These brands will be managed with disciplined focus and aligned investments to support their strong market positions, to optimize operating margins and cash flow and to fulfill their equally important role in Campbell’s portfolio.
“Our plan will build upon our existing strengths. 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,” added Keith.
“The Board and 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.”
The company added that as a result of this more focused portfolio, Campbell is increasing its cost savings target by US$150 million.
The company plans to achieve these additional savings by streamlining its organizational structure, expanding its zero-based budgeting efforts and continuing to optimize its manufacturing network.
These savings are in addition to the company’s prior target of US$500 million and the previously announced US$295 million in target synergies and run-rate cost savings from Campbell’s integration of Snyder’s-Lance.
Combined, these programs will bring Campbell’s total cost savings target to US$945 million by the end of fiscal 2022.