Mmm Mmm Good 2nd Quarter. Is Campbell's Beating General Mills and Kellogg?

With a stabilizing quarter in the rear view, is Campbell Soup moving ahead of competitors like General Mills and Kellogg?

Feb 18, 2014 at 10:00AM

Last week, I previewed Campbell Soup's (NYSE:CPB) critical second-quarter earnings report.

What made this quarter more critical than others? Well, while many packaged food companies have stalled recently, Campbell's first-quarter earnings declined a whopping 30%. In comparison, competitors like General Mills (NYSE:GIS) and Kellogg (NYSE:K) showed modest declines; General Mills earnings dropped 3.5%, and Kellogg saw sales slip 2%, so Campbell's woes were in a different league.

This quarter was worth watching to make sure that Campbell's business wasn't systemically declining. Here's where Campbell stacks up against General Mills and Kellogg today.

Pressreleases Header

Image courtesy of Campbell Soup

Controlled marketing costs lead the way to a solid Q2
One of the most troubling aspects of Campbell's first quarter was the fact that marketing costs rose 14%, even as sales slipped. The company was definitely able to turn the quarter in both respects. Not only did Campbell beat EPS expectations handily, sales for the quarter increased 6%, and most importantly, marketing costs actually declined 3%.

Whenever you listen to a call after a poor earnings report, it's tough to determine if executives are making excuses or just telling the truth! Campbell's management team told us in Q1 that the increased marketing costs were due to investments in Plum Organics and Bolthouse Farms, rather than any products losing appeal. 

With a quarter of strong (3%) organic sales growth in the books along with a drop in marketing costs, that story is a bit easier to digest. 


Image courtesy of Campbell Soup

Cold weather's impact on soup sales? Mmm Mmm Good.
One thing I was definitely watching for this quarter was a rebound in soup sales. Campbell's soup and simple meals had been in a rut, and it looks like the "polar vortex" that has swept most of the U.S. was just what they needed.

U.S. simple meals sales (of which soup is 35%) jumped 7% thanks, in-part, to frosty weather in North America. While Progresso Soup maker General Mills has not yet reported, the impression was that the cold weather drove soup sales, thus it's difficult to buy Campbell over General Mills now on these results alone.

For current shareholders of Campbell however, this rebound was a good sign. 

Good signs for acquisitions, investments, and snacking
Campbell's acquisition of organic food Plum Organics finally paid off in the second-quarter. After a recall hampered Q1 results, Plum contributed to 2% of the growth in the simple meals division, and 8% of the gains in the sauce division. Further, Campbell saw continued strides from new veggie brand Bolthouse Farms, and its acquisition of the international snack food brand Kelsen Group paid enormous dividends this quarter. Kelsen added 16% to the snacking division growth, which saw its sales soar 14% overall.

Campbell's snacking division and its "healthy" brands are starting to seem like two decent reasons to buy this stock over its competitors. 

Neither Kellogg nor General Mills, for instance, have made the organic or veggie investments that Campbell has. With organic retail penetration growing at nearly 20%, even as it makes up less than 5% of current grocery sales, this could be a huge area of growth for Campbell. As for snacks, it appears Campbell is simply executing better than the competition.

In Kellogg's most recent quarter, sales were a drag on earnings, yet they've been Campbell's biggest bright spot for two straight quarters.

So should you buy Campbell Soup?
It's really tough to evaluate large conglomerates like Campbell Soup, Kellogg, or General Mills. At any given time, something is going wrong within their businesses, because they're simply so big.

Here's an example. Campbell knocked it out of the park this quarter, earnings grew 19% and it fixed almost every "ill" of its previous (bad) quarter, yet a new issue arose as beverage sales declined 3% on weakness in V8. The safety that is provided in brand diversification also makes it very difficult for these companies to grow "together" measurably. 

I said I'd be watching for Campbell's organics and acquisitions to pay-off, marketing costs to decline, and soup to rebound, it did all of that. With the stabilization in soup and marketing costs, the dividend should be safe, and that should keep many investors on board. 

I don't think this is a "buy at any price" business. Yet with growth catalysts in Plum Organics and Kelsen, I think Campbell has the most upside of this group. I'm worried about Kellogg's cereal and snaking slump, despite its low P/E, I'd skip it. Even though they're "pricier" I still like Campbell and General Mills for your watch list. 

Choose Campbell (on a pull back) if you want a little more spice, General Mills if you like it bland, and put Kellogg back on the shelf for now.

Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Adem Tahiri has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers