Campbell to Discuss Plans to Redesign Enterprise Structure, Drive Approximately $200 Million in Annual Cost Savings and Streamline Organization Structure
Campbell Soup Company (NYSE:CPB) will provide additional information today at the Consumer Analyst Group of New York (CAGNY) Conference in Boca Raton, Florida, on its plans to implement the new enterprise structure that the company announced on Jan. 29, 2015. The company will also discuss a major new cost reduction initiative and a significant initiative to simplify its organization structure in order to improve its agility in the marketplace. Campbell expects these steps to generate annual cost savings of at least $200 million over a three-year period.
Campbell President and Chief Executive Officer Denise Morrison and Senior Vice President – Chief Financial Officer Anthony DiSilvestro will present at 10:30 a.m. EST today. Campbell’s presentations will be webcast live at investor.campbellsoupcompany.com.
“The changes now underway at Campbell have far-reaching implications for the conduct of our business and the future of our company,” said Morrison. “Our new enterprise design will align our structure directly with our core growth strategies and enable us to invest more of our resources in the areas of our business that can deliver the greatest growth. Through our critical new cost management initiative, we will generate significant additional funds for growth and margin expansion. And through our organization redesign, we will unleash the power of our people by reducing complexity, driving faster commercialization and delivering more rapid deployment of our talent against our largest opportunities.
“Since 2011, we have had a clear and consistent strategic framework for driving our company’s growth by strengthening our core business and expanding into faster-growing spaces,” Morrison continued. “We remain fully committed to this dual mandate. The important transitions we are implementing now represent changes not in the ‘what,’ but in the ‘how.’ They are transformational steps to unlock the potential of our assets, advance our growth agenda and create value for our shareholders.”
Under the new enterprise design announced last month, Campbell’s businesses will be organized in three new divisions structured mainly by product categories rather than by geographies or brand groups. Each division will have meaningful scale, a clearly defined role in the company’s portfolio, and appropriate targets for growth.
- Americas Simple Meals and Beverages, the largest division, will include Campbell’s current U.S. Retail and foodservice businesses, Plum Organics, and the company’s simple meals and shelf-stable beverage businesses in Canada, Mexico and Latin America. With aggregate net sales of approximately $4.5 billion, the businesses that will comprise this new division represented 55% of total company sales and generated about 70% of total operating earnings in fiscal 2014.
- Global Biscuits and Snacks will unify the Pepperidge Farm, Arnott’s and Kelsen businesses into a fully integrated global biscuits and snacks portfolio. The company’s simple meals and beverage businesses in Asia Pacific and Asia, including its soup and broth business in Hong Kong and China, and Pepperidge Farm’s U.S. bakery business, will also be operated within this division. With approximately $2.8 billion in net sales, the businesses that will be part of this new division generated about 33% of company sales and 25% of operating earnings in fiscal 2014.
- Packaged Fresh will focus on building scale and accelerating growth in rapidly expanding packaged fresh categories across the retail perimeter. It will include Bolthouse Farms’ portfolio of fresh carrots, super-premium beverages and salad dressings, as well as Campbell’s retail refrigerated soup business. These businesses accounted for approximately $1 billion of net sales – about 11% of company sales – and generated 5% of company operating earnings in fiscal 2014.
The division operating earnings above exclude unallocated corporate expenses and items impacting comparability, and are based on historical expense allocations (see the non-GAAP reconciliation attached to the end of this press release).
As part of its planning for the new enterprise structure, Campbell has also been rigorously re-examining its cost structure and organization design. Based on this analysis, the company believes it has identified opportunities to reduce its annual overhead expenses over time by at least $200 million, or 2-3% of its annual sales, over and above the savings delivered through its longstanding annual productivity program.
Campbell will begin to capture these opportunities in fiscal 2016 through a zero-based budgeting process that will target cost savings in specific budget categories. The company is also developing plans to simplify and streamline its organization structure by eliminating excess layers of management and suboptimal spans of control, standardizing common processes across the business divisions, and implementing an integrated global services organization that will leverage the company’s scale and improve its capabilities through dedicated centers of excellence. Campbell expects that full execution of the organization redesign and the new cost reduction initiative will require about three years. The company does not expect to deliver significant savings from this initiative in the current fiscal year.
Today’s presentation will be archived on investor.campbellsoupcompany.com and available for replay beginning approximately two hours after the conclusion of the presentation.
About Campbell Soup Company
Campbell (NYSE:CPB) is driven and inspired by our Purpose, “Real food that matters for life’s moments.” The Company makes a range of products from high-quality soups and simple meals to snacks and healthy beverages. For generations, people have trusted Campbell to provide authentic, flavorful and readily available foods and beverages that connect them to each other, to warm memories, and to what’s important today. Led by its iconic Campbell’s brand, the company’s portfolio includes Pepperidge Farm, Goldfish, Bolthouse Farms, V8, Swanson, Prego, Pace, Plum Organics, Arnott’s, Tim Tam, Royal Dansk and Kjeldsens. Founded in 1869, Campbell has a heritage of giving back and acting as a good steward of the planet’s natural resources. The company is a member of the Standard & Poor’s 500 and the Dow Jones Sustainability Indexes. For more information, visit www.campbellsoupcompany.com or follow company news on Twitter via @CampbellSoupCo.
This release contains “forward-looking statements” that reflect the company’s current expectations about the impact of its future plans and performance on the company’s business or financial results. These forward-looking statements include statements made regarding the company’s new enterprise structure and cost reduction initiative. Forward-looking statements rely on a number of assumptions and estimates that could be inaccurate and which are subject to risks and uncertainties. The factors that could cause the company’s actual results to vary materially from those anticipated or expressed in any forward-looking statement include (1) the company’s ability to manage organizational change effectively; (2) the company’s ability to realize projected benefits and cost savings from the new structure; (3) the impact of strong competitive responses to the company’s efforts to leverage its brand power in the market; (4) the impact of changes in consumer demand for the company’s products; (5) the risks associated with trade and consumer acceptance of the company’s initiatives, including its trade and promotional programs; (6) the practices and increased significance of certain of the company’s key trade customers; (7) the impact of fluctuations in the supply or costs of energy and raw and packaging materials; (8) the impact of portfolio changes; (9) the uncertainties of litigation; (10) the impact of changes in currency exchange rates, tax rates, interest rates, debt and equity markets, inflation rates, economic conditions and other external factors; (11) the impact of unforeseen business disruptions in one or more of the company’s markets due to political instability, civil disobedience, armed hostilities, natural disasters or other calamities; and (12) other factors described in the company’s most recent Form 10-K and subsequent Securities and Exchange Commission filings. The company disclaims any obligation or intent to update the forward-looking statements in order to reflect events or circumstances after the date of this release.
Reconciliation of GAAP to Non-GAAP Financial Measures
2014 Operating Earnings
|Campbell Soup Company uses certain non-GAAP financial measures as defined by the Securities and Exchange Commission in certain communications. These non-GAAP financial measures are measures of performance not defined by accounting principles generally accepted in the United States and should be considered in addition to, not in lieu of, GAAP reported measures.|
|Continuing Operations||Year Ended|
|($ millions)||August 3, 2014|
|Earnings before interest and taxes, as reported||$||1,192|
|Add: Unallocated corporate expenses||149|
|Add: Restructuring charges||55|
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