The Motley Fool's readers have spoken, and I have heeded your cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first and are generally deserving of praise from investors. For reference, here is last week's selection.
This week, we'll turn our attention to the first female CEO to ever take the helm of food giant Campbell Soup (NYSE: CPB ) , Denise Morrison.
Kudos to you, Ms. Morrison
It's both an exciting and scary time to be a food producer. The exciting part stems from the sheer number of deals we've seen over the past year that are consolidating a generally slow-growth sector. Ketchup maker Heinz (UNKNOWN: HNZ.DL ) agreed to a $23.2 billion buyout last month led by Warren Buffett's Berkshire Hathaway and Brazilian private equity firm 3G Capital. Considering the tight range Heinz had been trading in, and the slow but steady growth experienced by shareholders, the immediate 20% premium was gladly welcomed.
Another great example is Kellogg (NYSE: K ) which picked up the Pringles brand from Procter & Gamble after its sale with Diamond Foods fell through. After lowering its outlook twice in 2012, Kellogg's latest quarterly report demonstrated that Pringles sales kicked in 5% domestic growth and 1% overseas, helping to boost results past Wall Street's expectations.
On the other hand, inflation costs continue to rear their head in nearly every facet of food production. In fruits and vegetables, Dole Food (UNKNOWN: DOLE.DL ) disappointed investors in early January when it offered a full-year EPS forecast that was below the Street's projections. Dole blamed the shortfall on ongoing contract negotiations as well as rising banana costs. Meat producers have shared similar woes, with Tyson Foods (NYSE: TSN ) commenting at the Goldman Sachs annual agribusiness conference that its second quarter has been "challenging." Margin compression from its pork and beef business caused by rising livestock feed prices, compounded with an expected USDA meat inspector furlough, which will slow production as a direct result of federal budget cuts, isn't giving shareholders much to sink their teeth into.
Luckily for Campbell's shareholders, Morrison's company has walked this fine line with success -- relying on its steady cash cow that is the soup business while also conservatively introducing new products to target younger age groups.
Campbell's success lies in the fact that it controls approximately 60% of all soup market share. While a steady business, consumers also don't tend to consume that much more soup each year, leaving cost-cutting, price increases, and overseas expansion as its primary growth driver in the soup arena. In its recently concluded second quarter, Campbell's noted that it was able to grow its U.S. soup business despite lower ad spending thanks to its brand-building efforts over the years. Simply put, Morrison understands that with higher taxes come smaller discretionary budgets, which take big price increases off the table unless you want to completely scare away your primary customer.
Like Kellogg, acquisitions are also playing a big part in Campbell's growth strategy. As an example, Campbell purchased Bolthouse Farms for $1.55 billion in July in order to add to its juice line that already includes V8. With the inclusion of Bolthouse's sales, Campbell is anticipating sales growth of 10%-12% this year, with Bolthouse adding $0.05-$0.07 to bottom line EPS.
Innovation has also been a primary driver for Morrison who has targeted a younger population with new products that include on-the-go microwavable soups, a new cracker brand known as Jingos, and customizable Goldfish crackers that can be ordered online.
A step above her peers
In addition to taking good care of Campbell's bottom line, Morrison has done well for her shareholders, her employees, and the communities Campbell's operates in.
Although Campbell's has no rhyme or reason as to when or why it'll raise its dividend, shareholders can be assured they'll receive a nice chunk of change when all is said and done. Its current annual payout is equal to $1.16 per share, or 2.8%. In addition, Campbell has, in the past, aggressively repurchased its own shares, which builds value on existing shares held by investors. Currently, that repurchase program is suspended because of the cash needed for the Bolthouse Farms purchase. Given the added value to EPS, I'd say shareholders are winners either way you look at it.
Campbell employees aren't being treated too shabbily, either. The perks for working at Campbell include full health-care coverage, free flu shots, cooking lessons, an on-site fitness center, and subsidized meals in the company's cafeteria. As Business Insider noted, perhaps the coolest feature offered by Campbell for parents is an on-site kindergarten program and an after-school program for kids age six to 12.
Also, for the past 60 years, the Campbell Soup Foundation has been giving back to the communities it operates in, specifically Camden, N.J., where its first soup plant was located. Its summer programs help provide activities to some 10,000 Camden youth every summer and, coupled with dollar-for-dollar matching donations between employees and Campbell, it raised $1.7 million for various United Way campaigns last year.
Two thumbs up
Campbell's clearly isn't going to offer investors the most exciting business model or the most innovative product. What it does offer is a leader who understands that success is built upon providing what the customer wants as well as keeping its employees happy and healthy. That's a great formula for long-term investors who like investing in easy-to-understand brand-name products and enjoy being able to sleep at night. Morrison has done a phenomenal job of delivering for shareholders, her employees, and the community; and she's well deserving of two thumbs up from me.
Do you have a CEO you'd like to nominate for this prestigious weekly honor? If so, head on over to the new CEO of the Week board and chime in with your fellow Fools on who deserves some praise. If you don't have a nominee yet, don't worry -- you can still weigh in on other members' selections.
Are food producers the next frontier for Berkshire Hathaway?
Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!