CAMPBELL SOUP CO SEC 10-K Report

Campbell Soup Company, a renowned manufacturer and marketer of high-quality, branded food and beverage products, has released its Form 10-K report for the fiscal year 2024. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in a competitive market environment. Headquartered in Camden, New Jersey, Campbell Soup Company continues to build on its rich heritage dating back to 1869, navigating through a dynamic industry landscape.

Financial Highlights

• Net sales: $9,636 million, increased 3% in 2024 primarily due to a 5-point benefit from the acquisition of Sovos Brands and favorable net price realization, partially offset by unfavorable volume/mix.
• Gross profit: $2,971 million, as a percent of sales, decreased to 30.8% in 2024 from 31.2% a year ago. The decrease was primarily due to higher cost inflation and other supply chain costs, the impact of the acquisition and mark-to-market adjustments on outstanding undesignated commodity hedges, partially offset by the benefits from supply chain productivity improvements and favorable net price realization.
• Earnings before interest and taxes: $1,000 million, decreased from $1,312 million in 2023.
• Net earnings attributable to Campbell Soup Company: $567 million, decreased from $858 million in 2023.
• Net earnings per share — Basic: $1.90, decreased from $2.87 in 2023.
• Net earnings per share — Assuming Dilution: $1.89, decreased from $2.85 in 2023.

Business Highlights

• Company Overview: Campbell Soup Company, organized under the laws of New Jersey in 1922, traces its heritage back to 1869 and is headquartered in Camden, New Jersey.
• Acquisition of Sovos Brands: On March 12, 2024, Campbell Soup Company completed the acquisition of Sovos Brands, Inc. for $2.899 billion, adding Rao's pasta sauces, dry pasta, frozen entrées, frozen pizza, soups, Michael Angelo's frozen entrées and pasta sauces, and noosa yogurts to its portfolio.
• Divestiture of Pop Secret: On August 26, 2024, Campbell Soup Company completed the sale of its Pop Secret popcorn business.
• Reportable Segments: The company operates through two main segments: Meals & Beverages and Snacks. Meals & Beverages include products like Campbell’s soups, Swanson broth, Pacific Foods products, Prego pasta sauces, and V8 beverages. The Snacks segment includes brands like Pepperidge Farm, Goldfish, Snyder’s of Hanover, Lance, Cape Cod, Kettle Brand, Late July, and Snack Factory.
• Ingredients and Packaging: The company sources ingredients and packaging materials primarily from North America. In 2024, Campbell experienced moderately elevated commodity and supply chain costs, including labor, raw materials, energy, and packaging materials.
• Customer Base: The five largest customers accounted for approximately 47% of consolidated net sales in 2024, with Wal-Mart Stores, Inc. and its affiliates being the largest customer, accounting for approximately 22% of net sales.
• Trademarks and Technology: As of September 11, 2024, Campbell owned over 3,000 trademark registrations and applications in over 150 countries. Key trademarks include Campbell's, Cape Cod, Chunky, Goldfish, Kettle Brand, Lance, Late July, Milano, Pace, Pacific Foods, Pepperidge Farm, Prego, Rao's, Snack Factory, Snyder's of Hanover, Spaghettios, Swanson, and V8.
• Competition: Campbell operates in a highly competitive industry, facing competition from numerous branded and private label food and beverage manufacturers. Key competitive factors include brand recognition, taste, nutritional value, price, promotion, innovation, shelf space, and customer service.
• Capital Expenditures: In 2024, Campbell's capital expenditures were $517 million, with plans to spend approximately $530 million in 2025. Major projects include network optimization for Meals & Beverages, capacity projects for Snacks, enhancements to the Camden headquarters, and wastewater treatment facility upgrades.
• Government Regulation: The company is subject to extensive regulation by various U.S. federal agencies and similar agencies outside the U.S. Campbell believes it is in compliance with current laws and regulations in all material respects.
• Environmental Matters: In 2024, Campbell spent approximately $15 million on compliance with environmental laws and regulations. The company anticipates spending approximately $25 million on wastewater treatment facility upgrades and $10 million on environmental compliance in 2025.
• Seasonality: Demand for soup products is seasonal, with higher sales in the fall and winter months. Other product demand is generally evenly distributed throughout the year.
• Human Capital Management: As of July 28, 2024, Campbell had approximately 14,400 full-time and part-time employees. The company focuses on attracting, developing, and retaining diverse talent and creating an inclusive culture. Key initiatives include training and development programs, employee engagement surveys, and the Campbell’s Way of Leadership program.
• Inclusion and Diversity: Campbell's I&D efforts focus on capabilities, advocacy, and accountability. The company aims to build a pipeline of diverse talent through expanded recruitment efforts, I&D learning opportunities, and leveraging employee resource groups.
• Wellness and Safety: Campbell prioritizes employee health, safety, and well-being through comprehensive health, safety, and environment management policies. The company offers wellness education opportunities and a hybrid work policy for office-based employees.
• Total Rewards: Campbell provides competitive compensation, a robust benefits package, and resources for retirement planning. Performance discussions and individual development plans are conducted throughout the year.
• Websites: Campbell's primary corporate website is www.campbellsoupcompany.com, where it makes available all reports filed or furnished pursuant to the Securities Exchange Act of 1934.

Strategic Initiatives

• Key Strategic Initiatives: In 2024, Campbell Soup Company continued to advance its key strategic initiatives despite a challenging environment. The company completed the acquisition of Sovos Brands, Inc., which has brought incremental growth to its Meals & Beverages segment and supports the continued transformation of its advantaged portfolio. The company also announced plans to implement new cost savings initiatives beginning in 2025, targeting annual savings of approximately $250 million by the end of 2028. Additionally, Campbell Soup Company pursued a new initiative to improve the effectiveness of its Snacks direct-store-delivery route-to-market network, with expenses of up to approximately $115 million expected through 2029.
• Capital Management: Campbell Soup Company engaged in several capital management activities in 2024. The company repurchased 1.6 million shares at a cost of $67 million under its June 2021 anti-dilutive share repurchase program. As of July 28, 2024, approximately $37 million remained available under the June 2021 program, and approximately $301 million remained under the September 2021 strategic share repurchase program. In September 2024, the Board authorized a new anti-dilutive share repurchase program of up to $250 million. The company also issued senior unsecured notes totaling $2.5 billion to repay the $2 billion of outstanding borrowings under the 2024 DDTL Credit Agreement used to fund the Sovos Brands acquisition. Dividend payments were $445 million in 2024, with annual dividends declared at $1.48 per share. Capital expenditures were $517 million in 2024, with expectations to total approximately $530 million in 2025.
• Future Outlook: Looking ahead, Campbell Soup Company expects to continue its cost savings initiatives and further optimize its supply chain and manufacturing network. The company plans to invest approximately $235 million in capital expenditures related to these new initiatives, which are expected to generate annual ongoing savings of approximately $250 million by the end of 2028. Additionally, the company anticipates continued supply chain productivity and previously implemented pricing actions to mitigate inflationary pressures in 2025. The company also plans to repay and/or refinance $1.15 billion of senior notes maturing in March 2025 using available sources, which may include cash on hand, accessing the capital markets, commercial paper, and/or revolving credit facilities.

Challenges and Risks

• Inflationary Pressures: The company faces significant risks from inflationary pressures on costs such as raw and packaging materials, labor, and distribution. The inability to fully offset these costs through price increases or productivity initiatives could adversely affect business results and financial condition.
• Supply Chain Disruptions: Disruptions in the supply chain due to factors like climate change, natural disasters, geopolitical conflicts, and pandemics could impair the company's ability to manufacture and sell products. Specific risks include the reliance on single suppliers for key products, such as Rao’s tomato-based sauce products.
• Acquisition Integration Risks: The integration of Sovos Brands presents challenges, including potential disruptions, higher costs, and the risk of not achieving anticipated benefits. The complexity and expense of integration could adversely affect operations and financial results.
• Macroeconomic Conditions: Deterioration in global macroeconomic conditions, including inflation, recession, and geopolitical conflicts, could impact consumer spending and demand for products. This includes higher commodity prices, supply chain disruptions, and increased borrowing costs.
• Intellectual Property Risks: The company's intellectual property rights are valuable, and any inability to protect them could reduce the value of products and brands. Competing intellectual property claims could also arise unexpectedly, leading to costly and time-consuming litigation.
• Brand Perception: Maintaining favorable consumer perception of the company's brands is critical. Negative publicity, product recalls, or failure to meet consumer expectations could damage brand value and adversely impact sales.
• Cybersecurity Threats: The company is at risk of cybersecurity breaches, which could disrupt operations, lead to reputational damage, and result in significant costs. The increasing frequency and sophistication of cyber threats, including those from geopolitical conflicts, heighten this risk.
• Labor Market Challenges: The company faces challenges in attracting and retaining skilled labor, particularly in a competitive labor market. Labor shortages or increased turnover could lead to higher costs and operational inefficiencies.
• Regulatory Compliance: Compliance with extensive regulations governing food safety, labeling, environmental policies, and data protection is critical. Changes in these regulations could lead to increased costs and operational disruptions.
• Climate Change: Climate change and related regulatory measures could negatively impact agricultural productivity, leading to higher costs for raw materials and disruptions in the supply chain. Legal and regulatory initiatives to address climate change could also increase operational costs.
• Sustainability Goals: The company’s ability to achieve its sustainability goals is subject to numerous factors, including evolving regulatory requirements and technological changes. Failure to meet these goals could negatively affect consumer and investor confidence.
• Geopolitical Conflicts: Ongoing geopolitical conflicts, such as those between Russia and Ukraine, the Middle East, and rising tensions between China and Taiwan, could lead to supply disruptions, increased costs, and lower consumer demand.

SEC Filing: CAMPBELL SOUP CO [ CPB ] - 10-K - Sep. 19, 2024