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Campbell Soup CEO talks 'positive' acquisition of Sovos Brands

The Campbell Soup Company (CPB) posted its third quarter earnings, revealing a 6% year-over-year increase in net sales that totaled $2.23 billion. The company says the sales were due in part to its acquisition of Sovos Brands. Campbell Soup's results also showed declining sales in its snacks unit.

Yahoo Finance Executive Editor Brian Sozzi sits down with Campbell Soup president and CEO Mark Clouse to discuss the company's performance and its business plans moving forward.

Clouse explains why pasta sauce is a "very important area" for consumers: "It's important to remember, though, that for many consumers in the country, they have been weathering this storm of inflation, of higher interest rates. Really pressure coming from all sides for a relatively extended period of time. I mean, we're talking literally several years. And so that pressure has trained consumers to find a path to still feed and satisfy their family. But to do it in, in a more affordable way. And when you think about affordability, convenience and joy of your family and you put those together, really a spaghetti and pasta sauce dinner, you can't really do better than that."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

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This post was written by Nicholas Jacobino

Video transcript

Campbell's soup out with its latest earnings.

Lots of things to unpack in these results.

Let's bring in Campbell's soup, Ceo Mark Klaus Mark.

Always great to get some time with you.

I just wanna start, let's start on the, the SOS integration.

I mean, this is your big acquisition.

We'll talk about earnings.

But what are you seeing in these early days?

What do you like?

What should investors expect?

Yeah.

Well, I, I, you know, I, I talked about this a lot yesterday and it's great to see you, Brian as always.

Um look, I, I think in the world of having done a lot of integrations and uh a lot of acquisitions over the years, um This, this one literally could not be going better um across the board when I look at the, the elements that and again, fair.

It's early days.

But when you look at the elements that, that indicate um positive um acquisitions in general, you know, you're looking for really affirmation of a lot of the diligence that you've done and across the board, uh We see check marks on everything.

I think what's been a pleasant surprise is that the growth on the business has actually accelerated um from the time of announcement, which you don't always see.

Um, and has been really, really powerful.

And II I think across, across the board, whether you're talking about uh pasta sauce, whether you're talking about uh some of the category extensions, whether it was soup or dry pasta or frozen pizza.

Um These are just tremendous uh positive contributors to growth.

And as, as we laid out a year ago, um we looked at the things or the reasons to believe for why the growth would continue.

And a year later, I can tell you across the board, uh we've checked every box and then finally, I just would say, oh, what a gift to get the members of the SOS team.

Um as part of the Campbell's family, I mean, they, they are, are tremendous.

Um They've done a great job, hit the ground running.

And so really, I gotta say, Brian across the board, we're feeling great.

I've always, I, I've told you this before, but I always view what you sell and what doesn't sell is a great snapshot in the economy.

Now, you just mentioned Reo's pasta sauce that's accelerating Prego pasta sauce that uh was pretty good in the quarter.

Why is pasta sauce resonating with households right now?

Yeah.

So, you know, clearly brand you and I have talked about this before.

Um consumers right now, although there's a lot of reasons to believe in, in recovery and improvement.

It's important to remember though that for many consumers in the country, they have been weathering the storm of inflation of higher interest rates.

Really pressure coming from all sides for a relatively extended period of time.

I mean, we're talking literally several years and so that pressure has, has trained consumers to find a path um to still feed and satisfy their family, but to do it in a more affordable way.

And when you think about affordability, convenience and uh joy of your family and you put those together really a spaghetti and uh pasta sauce dinner.

Uh you can't really do better than that.

And, and I think with the combination of a more affordable, more mainstream brand and Prego and then the addition of a really one of its kind, unique distinctive brand in Rios, um it's really giving us a tremendous 12 punch in this very, very important area uh for consumers right now.

Every time you and I have talked, the one consistent thing has been um the snacks business has gone well, that wasn't necessarily the case in this most recent quarter.

What is happening there and how concerned are you about snacks pulling off really or just slowing down with some really strong growth rates?

Well, Brian, let's first put it into context, right?

So as as I've said many times that that through uh challenging economic environments, snacks historically has been uh among if not the most resilient of categories in all of food.

And I think it's been true uh in this journey we've been on as well.

In fact, if you look at the last three years, the kegger of growth for the snacks businesses uh have been 8%.

I mean, that's higher, well above food, but also much higher even than historical run rates for snacking.

I think what you did see in this quarter was a little bit of the the normalization of that growth line and some building or mounting pressure as it relates to the economy in general.

And so, although we did see a more um uh certainly off the pace quarter, I am not worried structurally at all about the business.

In fact, when I look at the latest four weeks, um so think of the the period really through Memorial Day, which which of course is a big weekend uh for snacking, the results have already begun to stabilize and in many of the categories where where we play uh more of these elevated experience than think kettle potato chips over potato chips or um organic tortilla chips, these categories, all of them moved back into positive territory and generally mid to high single digit growth rate.

So although I do think we'll see a little bit of normalization on growth, I am not worried uh about the long term trajectory and the belief that snacking will continue to be an outsized behavior for consumers mark in our world of finance.

Check out some of the stories that we're tracking here.

So NVIDIA, they make computer chips A I chips.

Uh $3 trillion market cap.

The jobs report might be strong another consecutive month of strong jobs growth.

We're talking about A I and an Apple event.

But you need to tell me we are just at a place in this economy and I think this is something going on going overlooked that a bag of pretzels is a luxury.

Yeah, I mean, I wouldn't describe it as a luxury, but I would say that as consumers are navigating um this backdrop in this environment of a lot of pressure.

And remember, you know, as much positive momentum as we see it, I want to be really clear the path to consumer recovery um in in the world of food has never been clearer than it is right now.

You see higher uh consumer confidence as pricing is normalized, you're seeing volumes begin to recovery, uh recover.

One of the things I look at very closely is the number of categories in food where household penetration is growing.

We're now up over 70% of the categories that are growing.

So there's a lot of reasons to believe.

But nonetheless, if you are a middle or lower income household right now, you're still dealing with high interest rates, higher rent.

Um you probably just took a hit on car insurance, right?

Other than that I did mark my car is through the roof.

It's like double digits.

What the hell is going on here?

Come on.

These are, these are real world um influences on consumer behavior.

And so, although I don't see it as a luxury, what you might see as a consumer being a little more thoughtful, a little more choiceful and maybe willing to try a private label brand or certainly to look for something that may be on promotion uh or deal.

I, I think this will again, you know, when I think about snacking over a longer period of time, the resilience has been astounding.

Um but I do think we're in a moment where you're seeing a little bit of that um consumer behavior that we may have seen on meals and beverages categories, you know, 18 months ago and that, that really is a little bit of the dynamic and why perhaps for people trying to pinpoint this recovery in food, um it doesn't move in a linear way and that makes it a little bit tougher to predict is, is inflation?

Do you still find inflation to be frustrating?

I do, I mean, you know, I think we all wish that we had more of a catalyst of deflation uh to see more relief in pricing.

And I think the reality is is that uh as we look at the world today and, and, and look a little bit forward, um we continue to see somewhat of a mixed bag now, certainly um that inflation level has come down dramatically.

We're not dealing with what we were uh the last several years and, and that is very, very encouraging.

Um But I think this belief of, of cost or prices coming down um in a material way is just not what we're seeing on the horizon.

I think we're gonna be in a period, as I've said before, Brian, where you're gonna have some things that, that are deflationary and you're gonna have some things that are still uh ticking up and the, and the balance of that.

I'm, I'm hopeful uh is a more benign environment for inflation going forward, but certainly not deflationary in nature.

Mark, maybe you could put me on your car insurance.

I'm thinking you pay a little bit of a lower rate than me.

I don't know, Brian, how old are your kids?

So we, we could pass as some former relative.

I mean, we kind of look alike.

I mean, I could see the resemblance.

I mean, the beer, you know, I don't know.

You have to tell me what your driving record is.

Brian, before I do that.

It's stellar.

Just like the phone work together.

I agree with you.

My record is, is stellar.

All right.

Well, Mark Klaus, it's always nice to see you.

Campbell's Soup, Ceo looking forward to that invest coming up.

Right.

And uh absolutely in September, we'll see you there.

All right.

We'll be in touch.

We'll talk to you soon.

Ok, great.

Thanks Brian.