Recession-Proof Campbell Soup Has the Right Recipe for Hard Times
Bloomberg in Greensboro 22 November 2008
Looking for a tasty recession-proof stock? Campbell Soup has a proven track record of outperforming at times when investors are running for the exits.
Judging by Dayna Neumann’s pantry, Campbell Soup may turn the United States recession into rising sales, as it did in the past two crises.
Ms Neumann’s family was bracing “for a rough road ahead”, the working mother said. After her husband, Nick, substituted US$1.75 Campbell Chunky soup for restaurant lunches in September, she started buying up to 15 cans at a time.
Janney Montgomery Scott analyst Mitchell Pinheiro said the recession would make next year “the year of condensed soup, driven by the backdrop of severe economic pressure on the consumer”.
The appeal of a cheap meal is turning the world’s largest soupmaker, which says it sells to 85 per cent of US households, into an outperformer in hard times.
The shares led the 12-company Standard & Poor’s Packaged Foods Index over the past three months, and their 0.87 per cent loss this year beat the S&P 500 Index by almost 48 percentage points.
Campbell was known as a way to beat recession, said Edgar Roesch, a Soleil Securities Corp analyst.
The company has survived 28 recessions, two world wars and the Depression over its 139-year existence.
“Historically, Campbell’s soup sales have done well during tough times as consumers look for value,” spokesman Anthony Sanzio said.
Campbell’s US soup sales rose 6 per cent in the 12 months to July 2001, a period that included part of a recession running from March to November of that year, according to the National Bureau of Economic Research.
Soup sales rose 7 per cent in the year to July 1990 and 5 per cent in the next 12 months, overlapping the contraction from July 1990 to March 1991.
As the economy has slowed this year, the company’s soup sales in Wal-Mart Stores have climbed 12 per cent to 14 per cent since late August, according to Alton Stump, an analyst at Longbow Research.
Harry Balzer, who has studied US eating habits for more than 30 years for NPD Group, said: “There will not be a recession in eating. There will only be winners and losers.”
Rising home foreclosures and unemployment that pushed consumer confidence to its lowest level last month triggered “a shift to value”, Mr. Balzer said.
About 57 per cent of households were serving leftovers for dinner, against a historic mean of 55 per cent, he said. US workers took an average of 42 homemade meals to work in the 12 months to February, the most since 1995.
The recession would give an advantage to suppliers who helped consumers “moderate food costs without cooking more”, Mr. Balzer said.
Campbell controls about 70 per cent of the US$5 billion-a-year US soup market and is offering two-cans-for-US$1 deals recently to maintain the lead.
Sales of the iconic red-and-white cans of condensed soup, which must be mixed with water, advanced 6 per cent in the quarter to August 3, the company said. Ready-to-serve varieties increased 5 per cent as Americans ate at home more.
Campbell is expected to report quarterly earnings on Monday. Analysts expect it to lift profit to 77 US cents a share from 70 US cents a year earlier.
Measured by shipments to retailers, Campbell’s volume would increase an estimated 3.5 per cent this year and 3.9 per cent next year, JP Morgan Chase analyst Terry Bivens said. He projects decelerating shipments for General Mills, cereal maker Kellogg and Sara Lee Corp.
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Recession-Proof Campbell Soup Has the Right Recipe for Hard Times
Bloomberg in Greensboro
22 November 2008
Looking for a tasty recession-proof stock? Campbell Soup has a proven track record of outperforming at times when investors are running for the exits.
Judging by Dayna Neumann’s pantry, Campbell Soup may turn the United States recession into rising sales, as it did in the past two crises.
Ms Neumann’s family was bracing “for a rough road ahead”, the working mother said. After her husband, Nick, substituted US$1.75 Campbell Chunky soup for restaurant lunches in September, she started buying up to 15 cans at a time.
Janney Montgomery Scott analyst Mitchell Pinheiro said the recession would make next year “the year of condensed soup, driven by the backdrop of severe economic pressure on the consumer”.
The appeal of a cheap meal is turning the world’s largest soupmaker, which says it sells to 85 per cent of US households, into an outperformer in hard times.
The shares led the 12-company Standard & Poor’s Packaged Foods Index over the past three months, and their 0.87 per cent loss this year beat the S&P 500 Index by almost 48 percentage points.
Campbell was known as a way to beat recession, said Edgar Roesch, a Soleil Securities Corp analyst.
The company has survived 28 recessions, two world wars and the Depression over its 139-year existence.
“Historically, Campbell’s soup sales have done well during tough times as consumers look for value,” spokesman Anthony Sanzio said.
Campbell’s US soup sales rose 6 per cent in the 12 months to July 2001, a period that included part of a recession running from March to November of that year, according to the National Bureau of Economic Research.
Soup sales rose 7 per cent in the year to July 1990 and 5 per cent in the next 12 months, overlapping the contraction from July 1990 to March 1991.
As the economy has slowed this year, the company’s soup sales in Wal-Mart Stores have climbed 12 per cent to 14 per cent since late August, according to Alton Stump, an analyst at Longbow Research.
Harry Balzer, who has studied US eating habits for more than 30 years for NPD Group, said: “There will not be a recession in eating. There will only be winners and losers.”
Rising home foreclosures and unemployment that pushed consumer confidence to its lowest level last month triggered “a shift to value”, Mr. Balzer said.
About 57 per cent of households were serving leftovers for dinner, against a historic mean of 55 per cent, he said. US workers took an average of 42 homemade meals to work in the 12 months to February, the most since 1995.
The recession would give an advantage to suppliers who helped consumers “moderate food costs without cooking more”, Mr. Balzer said.
Campbell controls about 70 per cent of the US$5 billion-a-year US soup market and is offering two-cans-for-US$1 deals recently to maintain the lead.
Sales of the iconic red-and-white cans of condensed soup, which must be mixed with water, advanced 6 per cent in the quarter to August 3, the company said. Ready-to-serve varieties increased 5 per cent as Americans ate at home more.
Campbell is expected to report quarterly earnings on Monday. Analysts expect it to lift profit to 77 US cents a share from 70 US cents a year earlier.
Measured by shipments to retailers, Campbell’s volume would increase an estimated 3.5 per cent this year and 3.9 per cent next year, JP Morgan Chase analyst Terry Bivens said. He projects decelerating shipments for General Mills, cereal maker Kellogg and Sara Lee Corp.
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