San Francisco — Soup, which sustained a nation through the Great Depression, has itself fallen on hard times in the "Great Recession."
Winter is supposed to be prime soup season. And one might expect that to be even more the case with U.S. unemployment at 10% during one of the snowiest East Coast winters on record.
Soup is a hot meal that's both cheap and quick. But trade data highlight the balancing act name-brand food companies face in this new era of American thriftiness. If it's not on sale, shoppers tend to look elsewhere.
"Value is king these days," said food-retailing consultant Jim Hertel of Willard Bishop in Barrington, Ill.
Exhibit A is Campbell Soup Co., which learned a hard lesson in the timing of promotions.
Campbell's U.S. soup sales dropped 8% from November through January compared with the year-earlier period, punctuated by an 18% decline in ready-to-serve soups such as the Chunky brand. Condensed-soup sales were unchanged, and broth sales rose 1%.
"Campbell has not been that aggressive on promotions," said food-industry consultant Rick Shea, who runs Shea Marketing in Minneapolis.
In a recent conference call with analysts, Campbell Chief Executive Doug Conant downplayed the notion that consumer tastes are changing.
"We have had a hiccup in ready-to-serve soup, with a promotional timing shift," he said on the call. "We see it being very relevant. It's still the No. 2 item at lunch. It is still in the top 10 at dinner."
Campbell's ready-to-serve soups sold via promotional discounts fell 4.2% over the last three months and dropped 16.8% in January alone, Citigroup said, citing figures from Nielsen Co., which collects data from most food retailers.
As a retail category, soup has been a laggard. For the 12 weeks that ended Jan. 23, soup sales fell 6.7% and slid 3.3% for the 52-week period, Citigroup said, again citing Nielsen data.
This isn't just hurting Campbell. General Mills Inc., which makes Progresso, and ConAgra Foods Inc., home to Healthy Choice, is also under pressure.
General Mills' soup sales fell 12.6% in the three-month period that ended Jan. 23. ConAgra's soup sales fell 14.1% in that period, according to Nielsen data. Unlike Campbell, however, General Mills and ConAgra are far less reliant on soup sales to drive overall profits.
Fortunately for these big-name companies, private-label soup isn't stealing much market share.
Camden, N.J.-based Campbell, which claims 48% of the U.S. soup market, has vowed to ramp up promotions in response to intense price cutting in so-called simple meals. This should help draw price-conscious consumers, who analysts believe are shifting to other cheap and easy meals such as macaroni and cheese and frozen pizza.
Deutsche Bank analyst Eric Katzman said in a Feb. 22 research note that the ready-to-serve soup category was being "pitted more directly against simple meals" than ever before. This could require more spending to win back consumers, he added.
In addition, Campbell, which on Feb. 17 cut its fiscal 2010 sales forecast, is launching a new marketing campaign to highlight the affordability of condensed soups.
Ketchup maker H.J. Heinz Co., for one, is taking note.
Through its "consumer value program," the Pittsburgh company is running more promotions and offering more coupons to support key brands. The program was recently used for its ketchup. Now it will include other U.S. brands such as Smart Ones, Ore-Ida frozen potatoes and frozen T.G.I. Friday's meals.
Andrejczak writes for MarketWatch.com/ McClatchy.