The paragraph is the introduction to the Campbell Soup Company's Third Quarter Fiscal 2025 Earnings Conference Call. Rebecca Gardy, the Chief Investor Relations Officer, introduces herself and the other executives present, including CEO Mick Beekhuizen and CFO Carrie Anderson. The call includes prerecorded remarks followed by a live Q&A session. Presentation materials and a replay will be available on their website. The agenda includes a discussion led by Mick on third-quarter and divisional performance, while Carrie will cover financial results and fiscal year guidance. It also notes the use of Serkana, MULO Plus for in-market data and highlights that forward-looking statements, which may involve risks, will be made during the call.

The company's third-quarter earnings exceeded expectations, mainly due to strong performance in its meals and beverages segment, boosted by favorable shipment timing. However, the snacks business faced challenges due to market softness and increased competition. Consumers are focusing their spending on home-cooked meals and budget-friendly products while being cautious with discretionary snack purchases. This trend benefited the meals and beverages segment but created challenges for snacks. Although the company reaffirms its fiscal 2025 guidance, it anticipates adjusted earnings to be at the lower end of the projected range because of the sluggish recovery in the snacks business.

The paragraph discusses the company's financial performance and strategic focus amidst an uncertain trade environment. The guidance given excludes impacts from potential import tariffs and retaliatory actions. The company emphasizes in-market execution, mitigating tariff effects, and investing in long-term growth. Key highlights from the third quarter include a 1% organic net sales growth driven by volume, marking consistent positive volume for five consecutive quarters. This growth was primarily led by the meals and beverages division, countering challenges in the snacks segment. The acquisition of Sobo's contributed to this growth mid-quarter. Overall, net sales increased by 4%, and while adjusted EBIT rose by 2%, adjusted EPS dropped by 3%. Despite softening consumer sentiment, the contribution of sixteen leadership brands, accounting for 90% of net sales, remained stable, with many brands maintaining or gaining market share.

In the third quarter, there was a noticeable shift towards home-cooked meals, leading to increased demand for cooking ingredients and boosting the meals and beverages segment, which saw a 2% increase in consumption and a 0.4-point growth in dollar share. Despite challenges in discretionary snack categories like crackers and chips, some snack innovations showed positive momentum. Three out of eight snack brands grew or maintained their share, and while overall snack consumption declined by 3%, the company remains optimistic about the long-term potential of its snack brands and is implementing strategies to stabilize market share.

In the quarter, organic net sales rose by 6%, primarily driven by a 7% increase in volume and mix growth, and enhancements in customer shipment timing and SAP ERP system implementation for Sobos Brands. The at-home cooking trend bolstered Campbell's total wet soup and broth categories, resulting in a 0.4-point rise in dollar share for soup and significant growth in broth consumption. Swanson also saw strong growth among millennials, while Pacific maintained double-digit gains. Though the private label recovery has been slower than expected, Campbell's supply chain effectively meets customer demand. Despite increased competition and the discontinuation of the Well Yes brand affecting ready-to-serve consumption, brands like Chunky, Pacific, Rails, and HomeStar gained market share.

The company's condensed portfolio saw continued growth in both dollar share and volume consumption, driven by successful marketing initiatives like the mac and cheese activation. This effort resulted in significant gains in household penetration, particularly among millennials. Despite a slight underperformance in Prego's Q3 dollar consumption due to timing issues with promotions, its year-to-date performance remained competitive within the Italian sauce category. Meanwhile, Rail's growth met category averages but fell short of expectations. The company aims to connect with consumers by highlighting the versatility and affordability of its offerings.

In the third quarter, the lower than expected growth of rail SaaS was due to not repeating certain prior year promotions and increased consumer spending sensitivity along with competitive promotional activities. Despite these challenges, the Rails brand remains strong with opportunities for growth in distribution, household penetration, and awareness. The focus remains on premium positioning and marketing the Italian origin of its ingredients. Meanwhile, in the snacks business, pressures and increased competition led to a 3% decrease in in-market consumption and a 5% decline in organic net sales due to lower volume and mix. The company is focusing on its leadership brands and saw stable performance in the bakery and cookies category via Pepperidge Farm Fresh bakery and cookies.

The paragraph discusses the company's performance and strategies in its snack categories. Pretzel consumption grew with the success of the Snack Factory's new products, although Snyder's of Hanover faced competitive pressures. The company's cracker segment experienced a decline in consumer sentiment, particularly affecting the Goldfish brand, but there are efforts to revitalize it through marketing and promotions. Meanwhile, the chip portfolio showed resilience against competitive pressures by focusing on product innovation and healthier options, leading to increased household penetration.

In the article paragraph, the company outlines strategies to enhance volume growth through improved distribution, promotion, and limited edition innovations, particularly focusing on the summer chip season. They report significant Q3 growth in their Pepperidge Farm brand, with the Farmhouse Brioche platform and Milano Cookies contributing to increased volume and dollar share. New launches, like Milano white chocolate and limited edition varieties, are attracting younger demographics and boosting core brand growth. The company expresses optimism about further innovation opportunities for their bakery and cookies portfolio. While meals and beverages see strong performance due to rising home cooking demand, their snacks division faces challenges due to competitive pressures. The paragraph concludes with the acknowledgment that improved market execution is essential for continued growth.

In the fourth quarter, the company plans to focus on market execution and mitigating tariff impacts, prioritizing customer needs for long-term growth. They are enhancing efficiency and effectiveness to support growth through a newly created growth office that will improve consumer insights, brand activation, innovation, and revenue growth management. A Chief Digital and Technology Officer has been appointed to boost digital capabilities. The underlying aim is to invest in brand growth through disciplined short-term execution. Carrie Anderson reports that their third-quarter performance exceeded expectations, mainly due to the meals and beverages division, with a reported 4% net sales increase driven by SOVOS brands. Organic net sales grew by 1%, as strong performance in meals and beverages compensated for challenges in the snacks business.

In the paragraph, the company reports on its financial performance following the anniversary of an acquisition on March 12, 2024. Adjusted EBIT increased by 2%, primarily due to the positive impact of the acquisition, despite weaker base business performance. Adjusted EBIT margin decreased by 30 basis points, with minimal impact from tariffs, and adjusted EPS, though down 3% from the previous year, exceeded expectations at $0.73. Organic net sales for the third quarter rose by 1%, driven by favorable volume and mix, while reported net sales increased by 4%, benefiting from acquisitions, despite some offset from divestitures. The adjusted gross profit margin saw a decline due to various cost pressures, though these were partially offset by productivity improvements and cost savings. By the end of the third quarter, the company had achieved $110 million in cost savings as part of a $250 million cost-saving initiative announced in September 2024.

The paragraph discusses Campbell Soup Company's financial performance, highlighting a slight increase in combined marketing, selling, and administrative expenses due to the integration of SOVOS, although these expenses have improved as a percentage of net sales. Marketing expenses rose by 3% following the SOBOS acquisition, whereas administrative expenses dropped by 4% due to cost-saving measures, particularly from integrating SOVOS. The transition of Sobeys into Campbell's ERP system is expected to yield further savings. Adjusted EBIT grew by 2%, attributed to reduced administrative expenses and higher gross profit, while adjusted EPS declined by 3% due to increased debt and interest rates. Meals and beverages saw a 15% increase in net sales with a strong organic growth of 6%, mainly in U.S. Soup, Rails, and Canada, offset by a decrease in net price realization.

In the third quarter, Campbell Soup Company's organic growth was driven by increases in condensed, broth, ready-to-serve soups, and Rao's sauces due to a shift towards at-home meals. Additional growth resulted from the timing of customer shipments related to the integration of SOVOS into Campbell's ERP system. Operating earnings in the Meals and Beverages division rose by 8%, despite a 100 basis point drop in operating margin due to lower net prices and the partial integration of SOVOS. Higher costs, including inflation and supply chain expenses, were balanced by favorable volume, mix, productivity improvements, and reduced administrative costs. Meanwhile, Snacks division net sales fell by 8%, or 5% organically after adjusting for a divestiture, due to lower sales of Goldfish crackers, pretzels, and other items. This decline was attributed to promotional shifts and previous product launches.

The paragraph discusses the financial performance and strategic initiatives of a company's snacks division in the third quarter. Operating earnings declined 13% due to lower gross profits influenced by lower volume, inflation, and supply chain costs, although these were partially offset by productivity gains and cost savings. The operating margin decreased by 90 basis points to 14.3% due to increased selling expenses and reduced gross profit but improved sequentially by 300 basis points from Q2 due to better supply chain costs. The company generated $872 million in operating cash flow, slightly down from the previous year due to working capital changes, and invested $296 million in capital expenditures for various business enhancements. The firm returned $343 million to shareholders through dividends and $60 million in share repurchases. The net debt to adjusted EBITDA leverage ratio improved to 3.0, with cash on hand of $143 million and $1.5 billion available in credit. Fiscal 2025 guidance remains unchanged, but adjusted earnings are expected to be at the low end due to slower recovery in the Saks business.

The company anticipates a net incremental headwind from tariff-related costs of $0.03 to $0.05 per share affecting the fiscal 2025 adjusted EPS, though this isn't included in the guidance due to trade uncertainties. They assume current tariffs will remain and are taking measures like inventory management and alternative sourcing to mitigate impacts. Fiscal 2025 includes 53 weeks, benefiting net sales, EBIT, and EPS by about two points and $0.05 respectively. Core inflation is expected to increase moderately but will be offset by productivity improvements and projected cost savings, which have been raised from $120 million to $130 million. Capital expenditures are projected at 4.5% of net sales, slightly lower than previous guidance. The company notes strong Q3 performance, especially from the Meals and Beverages division.

The paragraph discusses the challenges faced by the Campbell Soup Company's Saks division and its efforts to regain momentum by delivering high-quality food and enhancing productivity and cost savings. The company emphasizes its strong supply chain and commitment to long-term growth and shareholder value. During the Q&A session, Andrew Lazar from Barclays inquires about the pressure in the company's snacks segment. Mick Beekhuizen explains that the pressure is due to deteriorating consumer confidence and increased consumer focus on value and indulgence. He notes a decline in in-market consumption from Q2 to Q3, while outlining the company's focus on controlling what it can without engaging in aggressive pricing strategies.

The paragraph discusses the company's performance, highlighting that while overall performance was affected by aggregate category declines, some areas like Pepperidge Farm Bakery, Cookies, and pretzels performed well due to innovation. The company plans to continue focusing on innovation to meet consumer needs, especially as they spend intentionally. In the chips category, the company sees its brands positioned well despite increased competition, working on in-market execution, distribution, and introducing limited-time offers (LTOs). Additionally, instead of relying solely on promotions, the company is focusing on price pack architecture. Multipacks in chips have been successful. Lastly, there are challenges with the Goldfish brand, with some declines attributed to category issues and the previous Goldfish Crisps launch.

The paragraph outlines a company's strategy to enhance its market presence by focusing on key areas such as advertising, limited-time offers, and providing consumer value. They aim to allocate promotional efforts where they yield the best return on investment and set appropriate price points. The discussion also touches on expanding distribution and display for specific products like Goldfish grab bags and possibly introducing multipacks. Andrew Lazar inquires about the company's outlook for fiscal 2026 and the need for reinvestment in the snack space. Mick Beekhuizen responds by indicating it's too early for specific fiscal 2026 guidance but expects the snacking business to recover throughout the year, ending relatively flat, with more progress needed in the fourth quarter.

In the article's paragraph 19, a financial outlook is given, predicting recovery will occur in fiscal 2026, with a focus on investing in brands. There's a current low marketing spend, but an increase is expected next year to support brand presence. Additionally, the incentive compensation is acknowledged to present a slight challenge moving forward. Ken Goldman from JPMorgan asks about the sustainability of the positive trend in at-home cooking and dining, to which Mick Beekhuizen replies that meals and beverages have been strong within their portfolio, showing six consecutive quarters of growth. However, recent results were slightly influenced by shipment timing, and a three-point headwind is anticipated for meals and beverages in the fourth quarter.

The paragraph discusses the success of the company's diverse food and beverage portfolio in the current market, where consumers are increasingly cooking at home. The portfolio includes both mainstream and premium products, such as Prego, Rails, Swanson, Pacific, and V8. These products are well-positioned to meet consumer demands for value, quality, and convenience. The company highlights the strong performance of its broth brands during high demand and supply pressures, and mentions initiatives to promote everyday use of condensed products like mac and cheese. The V8 brand has stabilized and achieved growth, particularly in V8 energy. Overall, the company is optimistic about its meals and beverages segment, given market trends favoring home cooking.

The article discusses the company's outlook on promotional activities as they transition out of the soup season. Mick Beekhuizen highlights that while promotional activities were previously increasing, they are now stabilizing, with a focus on timing promotions during key periods like Easter to maximize impact. He emphasizes ensuring that the promotional presence is strategically aligned with important retail moments and maintaining appropriate starting price points in the market, especially in the snack segment.

In the paragraph, the discussion focuses on the snacks category's performance and promotional strategies. The speaker mentions efforts such as adjusting price pack architecture and multipack initiatives, providing an effective approach rather than increasing promotional spending. Peter Galbo from Bank of America raises a question about the snacks category being a drag on performance, especially with the anticipated peak demand season. He seeks insight into what changes are needed in the category to improve demand and consumer perception over the next year. Mick Beekhuizen begins to address this by attempting to provide a framework for understanding the situation.

The paragraph discusses the impact of deteriorating consumer confidence on the snacks category, highlighting that this is due to its discretionary nature. It emphasizes the need to improve consumer confidence and mentions the focus on providing value and experiences through intentional snacking options. The paragraph notes the success of innovative products like the Milano white chocolate cookies from Pepperidge Farm, which boosted the brand and met consumer needs. The broader Consumer Packaged Goods (CPG) industry is recognized for successfully adapting to consumer demands, and the focus remains on evolving brands to align with these needs.

The paragraph discusses the impact of tariffs on a company's financials, specifically the three to five cents per share effect expected in Q4. Carrie Anderson explains that this impact is due to several factors: the ongoing Canada wave one retaliatory tariffs affecting Canadian exports of their soup business, the phase-in of section 232 tariffs impacting tin plate and aluminum used for soup and beverage cans, and reciprocal trade actions affecting their RAYOS portfolio from Italy. Anderson advises against annualizing the three to five cents impact, as the trade landscape is rapidly changing and it's too early to predict the fiscal 2026 impact. They are actively working on mitigating these impacts through strategic inventory management and collaboration with suppliers.

The paragraph discusses the growth expectations for RAYOS, a product within a company's portfolio, in response to a question from Megan Clap of Morgan Stanley. Mick Beekhuizen expresses optimism about RAYOS, noting its contribution to the overall growth of the meals and beverage division, especially in light of current consumer trends. Although in-market consumption saw a 10% increase year-to-date, the most recent quarter's growth was at 2%, which was below expectations but in line with the overall category. Despite this, Beekhuizen expects high single-digit growth for RAYOS in fiscal 2025 and expresses confidence in the brand's growth trajectory due to effective in-market execution and understanding of the growth drivers.

In the paragraph, the discussion revolves around the performance and expectations for certain products and the company's strategy moving forward. It highlights the positive growth of the RAYOS brand, with sauce sales up 9% and the overall brand up 11% over the last four weeks. Carrie Anderson mentions that despite slower than expected recovery in the snacks business affecting earnings guidance, there was a 300 basis point improvement in snacks margins from Q2 to Q3. The company is now expecting snacks margins to be 13% for the full year. They are focusing on margin improvement through network initiatives like DSD warehouse and route optimization while maintaining competitiveness and supporting long-term brand value.

In the paragraph, Jim Solera from Stephens asks Mick Beekhuizen about the "better-for-you" and "splurge-worthy" components of their portfolio, specifically in the meals, beverages, and snacks segments. Jim inquires whether the company's growth will be driven by focusing on these areas and whether innovation should target these categories. He also asks if rebuilding consumer confidence is a priority before focusing on portfolio adjustments. During the discussion, the call briefly faces technical difficulties due to a power loss, but it resumes shortly after. Mick confirms he understands the question and prepares to respond.

The paragraph discusses the impact of declining consumer confidence on discretionary categories and highlights the importance of maintaining focus on controllable factors. It emphasizes the potential benefits of improving consumer confidence and the significance of innovation in maintaining brand health and expanding the snacking portfolio. The speaker highlights different successful strategies, such as focusing on core brands like Snyder of Hanover and innovative products like Snack Factory pretzels. It also mentions the growth in healthier snack segments and expresses confidence in the brand's unique offerings, like Goldfish, to positively influence their market trajectory.

The paragraph discusses strategic efforts to mitigate the impact of import tariffs on the Rails brand. Carrie Anderson outlines various strategies, including possible production shifts to Alma, strategic inventory management, supplier partnerships, and product cost optimization. These steps aim to reduce tariff-related costs while maintaining the effectiveness of their operations. The paragraph concludes with the operator announcing the end of the conference call.

This summary was generated with AI and may contain some inaccuracies.